WNO reports that the economics of mining uranium involves consideration of several aspects, starting with the country where an orebody is located, then the grade and nature of the ore, its depth, and also infrastructure issues. Countries have different degrees of sovereign risk affecting their attractiveness for mining investment, different royalty and tax regimes, and different availability of skilled workers. These factors will already have influenced the mineral exploration which has led to the identification of an orebody before any question of mining has arisen.
The quantity and nature of the ore is fundamental. The quantity, geological character and grade, along with its hardness and depth, determine what sort of capital investment is required. The mineral characteristics of the ore determine what sort of processing is required, and affect the cost of both capital and operation. Infrastructure issues include engineering and workforce. A mine at a remote site costs more. Breaking down this set of considerations into conventional categories:
Capital costs include the cost of site preparation, construction, manufacture of plant, commissioning and financing both mine and mill. Building a large-scale mine takes many workers, large amounts of steel and concrete, thousands of components, and systems to provide electricity, ventilation (if underground), information, control and communication. Exploration expenditure up to committing to a mine project may or may not be capitalised. Capital costs may be reported with the financing costs included or excluded. If financing costs are included then the capital costs change materially in proportion to construction time of the project and with the interest rate and/or mode of financing employed. Both upfront capital expenditure and some ongoing capital expenditure to sustain the operation are involved in the long term.
Operating costs include the costs of removing the ore from the ground, concentrating it for sale, the reagents, energy, labour, environmental management, administration, freight, marketing, and a provision for funding the eventual decommissioning and disposal of wastes. Royalty payments to the owner of the minerals (usually the state) are normally included. Normally these costs are expressed relative to a unit of output (for example, US dollars per pound of U3O8, $ per kgU). The ongoing costs of production, both variable and fixed, but excluding depreciation, are sometimes reported as the “cash cost” of an operation per unit of output.
Indirect costs include depreciation and amortisation of the assets, interest on loans, extraordinary costs and possibly the sustaining costs of related exploration and mine development if these are not capitalised. Indirect costs may be hard to quantify for reporting, since they can include non-cash items and servicing capital over the life-of-mine. While the cash cost of production is a short-term metric, including the indirect costs gives a life-of-mine perspective. Taking all these into account, several escalating categories of cost reporting metrics can be distinguished:
C1: Cash operating cost, see Figure in Article.
C2: Total production cost, including depreciation
AISC: All-in sustaining cost, including development and related costs to sustain future production
C3: Fully allocated cost, including all costs of the business.
TradeTech has compared the cost profiles of a number of uranium mines for reporting their C3 operating costs per unit of output. In particular the comparison between open pit and in situ leach (ISL) operations is interesting. It shows that for ISL mines, almost half the C3 cost is capital in setting up the operation, another quarter is sustaining it, and only just over one quarter is the basic C1 cash cost.* With open pit mines the basic C1 operating cost is a much higher proportion – about 70% – and only 20% is capital in setting up the operation, plus a bit more in sustaining it.
* The 2017 WNA Nuclear Fuel Report notes that ISL mines “require continuing investment in wellfield development in order to maintain capacity.“
This comparison This comparison underlines the need to be aware of what is included in any quoted production cost figures, though comparing C1 costs for very similar projects may be useful. Ultimately, the economic viability of any mine depends on the C3 figures, but the difficulty in quantifying this at any point during operation means that a more realistic comparative metric is AISC.
Original working URL: http://www.world-nuclear.org/information-library/nuclear-fuel-cycle/mining-of-uranium/uranium-mining-overview.aspx#ECSArticleLink6
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