March 16, 2011 / 8:45 PM / 9 years ago

RPT-Q+A-How Japan nuclear crisis may play out for Australia uranium sector

(Repeats story first published March 16)

By James Regan

SYDNEY, March 16 (Reuters) - The nuclear disaster unfolding in Japan after a huge earthquake crippled several reactors is raising questions on how Australia’s uranium companies would fare, with shares partially rebounding on Wednesday after several days of heavy falls.

Rio Tinto , BHP Billiton and Paladin Energy account for nearly a quarter of the world’s uranium oxide output from mines across Australia and Namibia.

Below are questions and answers on the link between Japan’s nuclear power industry and Australia’s uranium mining sector.

Q. How important is Japan to Australian uranium miners?

A. Japan is the No. 3 market for Australian uranium after North America and the European Union.

Japan bought about 1,500 tonnes a year, or 15 percent of total Australian output, last year.

Q. Given Japan has little indigenous uranium, why doesn’t it buy more Australian uranium?

A. Japan has historically developed different supply relationships around the world to ensure it doesn’t run out.

Q. Will Japan stop buying Australian uranium as a result of the disaster?

A. Unlikely, according to the Australian Uranium Association and independent analysts. Most of Japan’s existing reactors are operating safely and generate around a quarter of the country’s electricity and require fresh supplies of uranium to continue to do so.

Q. Does Japan represent a growth market for Australian uranium?

A. No. Sales to Japan have been relatively stagnant over the past few years. Growth is seen in countries like China and India, which are planning to build bigger reactors. Unlike in Japan, the drivers there are to greatly expand base load electricity generation capacity via nuclear power.

Australia and China ratified a uranium sales agreement in 2007 and Australian Prime Minister Julia Gillard is under pressure to allow sales to India.

BHP Billiton, Cameco , Rio Tinto and others are taking steps to dig new mines and expand old ones in hopes of capturing a worldwide forecast 20 percent leap in yellowcake consumption by 2015.

BHP also owns the Olympic Dam mine in South Australia, where it is planning a massive expansion to 19,000 tonnes a year from 4,000 tonnes now, but cannot say when that will proceed or how much it will cost.

Helping propel the heady forecasts for global uranium needs is the expiration in 2013 of the megatons for megawatts program that converts Russian nuclear warheads into reactor fuel.

When that occurs, secondary supply lines from Russian and U.S. uranium stocks, which currently supply 40 percent of world needs, may fall to as low as 5 percent.

Nuclear reactors use uranium as a fuel to boil water. The steam that is produced spins a turbine to make electricity.

Q. How have Australian mining stocks reacted since the disaster?

A. In the days since the deadly quake, fears over the worst nuclear accident since the 1986 Chernobyl disaster have battered share prices. Most staged recoveries on Wednesday but are still off from the start of the week.

Paladin Energy closed 13.5 percent up on Wednesday versus a 17.5 percent loss on Tuesday and a 16.5 percent fall on Monday.

Rio Tinto’s majority-owned Energy Resources of Australia , the world’s fourth-largest uranium producer, ended 10.3 percent higher. ERA stock sank 12.2 percent on Monday and fell a further 14.3 percent on Tuesday. (Editing by Ed Davies)

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