Investing in Kazakhstan's Uranium

StockInterview: What makes you respect the Kazakhs with regards to ISL mining in their country?

Fletcher Newton: First of all, they have a tremendous amount of experience with this. Kazakhstan and Uzbekistan have been doing ISL mining of uranium longer than anybody in the world. The Kazakhs, in particular KazAtomProm, have over the last 30 years, maybe more, developed an incredible amount of expertise in how to recover uranium effectively, inexpensively. They are extremely environmentally sensitive. Kazakhstan, to my knowledge, has had none of the environmental issues with ISL recovery of uranium that, for example, we’ve had in this country. They have gone to great lengths to be sensitive to the interests of people in local communities, who are obviously always concerned about groundwater. But, the bottom line is they are extremely competent in their ability to mine uranium. They are among the very best, if not the best.

StockInterview: Why do you call them among the very best?

Fletcher Newton: I think it’s a couple of things. They have an extremely well educated work force. These are guys with PhDs in hydrology, ground water chemistry and metallurgy. This is a legacy of the old Soviet educational system. You have got a lot of very bright people. Moukhtar Dzhakishev is a PhD in physics, the head of KazAtomProm. Every one of his people have advanced degrees in science and engineering, finance or business. They all speak two or three languages. They are urbane. They travel. That’s the current generation.

StockInterview: What makes the Kazakh ISL activities among the best?

Fletcher Newton: The Soviet system was incredibly thorough. When they went out and drilled an exploration well, they logged the entire hole, top to bottom. And they’ve kept all that data. They spent a lot of time and money in uranium production in Central Asia. And in the course of doing it, they learned how to do it better than just about anyone else in the world.

StockInterview: If the Kazakhs are among the best, why do they need Cameco?

Fletcher Newton: When we went over there to invest, what they needed was not so much our expertise, but our support. They’ve got plenty of their own expertise. And that’s an important point to make. This was in the late 1990s and the price of uranium was near an all-time low. The country of Kazakhstan was just broken off from the Soviet Union. Was it going to be independent? It wasn’t clear yet, and there was absolutely no interest in uranium mining. And so, we were able to meet that need, as was Cogema, at a time when they needed to attract foreign investment. It was very much a question of fortuitous timing.

StockInterview: So Kazakhstan needed the money then, but now they don’t?

Fletcher Newton: I do not think they need the money now. That’s true. They certainly needed it then. We brought maybe different ideas about how to mine uranium. Not better, but just different. One of the things I admire about the Kazakhs so much is they are willing to learn, willing to look at a different system and say, ‘Hmmm, ok let’s try that.’ Whereas in the United States, for example, I can tell you that getting people to change is very difficult. Again, this is one of the reasons why Kazakhstan has been so impressive. They are willing to embrace change. Moukhtar is a guy who is more than willing to say, ‘Hey, if you show me that something like this can be better, you bet, we’ll try it.’

StockInterview: Why is ISL mining different in Kazakhstan aside from the use of sulphuric acid?

Fletcher Newton: You generally use all the same equipment: the same pumps, pipes, all of that. Generally speaking, the difference is that the deposits in Kazakhstan are much bigger. They are much more uniform. As a result of that, your recoveries are a lot better.

StockInterview: Reportedly, you can get 80-percent recovery in Kazakhstan, compared to 70-percent or less in the United States.

Fletcher Newton: You have to be careful when you talk about the 80-percent recovery. The reason is you never know exactly how much uranium is down there to begin with. When you measure uranium with a logging truck, you don’t actually measure the uranium directly. What you measure is the concentration of bismuth-214, which is a daughter product of uranium. You can then extrapolate back from that to calculate how much uranium is there. There can be problems with something called disequilibrium. One of the results of that is your calculations can then be off. Your geologists will come up with what they think is a reasonable amount of uranium there. Sometimes, you’ll recover 80 percent of that. Sometimes you’ll recover 120 percent or 50 percent. The great thing about the uranium in Kazakhstan, at least in our experience is that it is readily leachable. It’s just right there in the sand.

StockInterview: How would you describe the environmental climate toward uranium mining in Kazakhstan?

Fletcher Newton: They have a very favorable and understanding regulatory environment. They have a government that supports uranium mining. At the same time, they are very sensitive to social issues, and to making sure they pursue sustainable development in everything they do. They understand that people are naturally afraid of radioactivity. They understand that people are afraid of anybody who says ‘I’m going to do something with ground water.’ Even if it’s ground water you could never drink or do something with. They go to a lot of efforts to educate people, to explain what they are doing, to protect people, and to make absolutely certain that there is never a threat to health and public safety. And they go a very good job of this.

StockInterview: During your presentation at the Platts Nuclear Fuel Strategies Conference in Washington, D.C. you had talked about the ‘challenging’ part of mining uranium in Kazakhstan.

Fletcher Newton: No. When I said ‘challenging,’ I didn’t mean that in a pejorative sense. We have the same challenges in the United States: regulatory, infrastructure, human resources. I think you would have them in any country. Remember this industry has been on its back for twenty-five years. Suddenly, in the space of four years, the price has gone from $7 to $54. Well, that makes it a challenge for everybody. Not just Kazakhstan.

StockInterview: How do you compare doing business in Kazakhstan with your operations in the United States?

Fletcher Newton: My experience is limited to just the uranium business. We are exceptionally pleased with our partner, with the relations we have with our partner KazAtomProm and with our experience there. They are an excellent partner. They are extremely technically capable and sophisticated. We learned a tremendous amount from them. They’ve taught us a lot, and it’s been a very good relationship. We do not have the horror stories you’ve heard from other people. We have not experienced that at all.