The Australian Prime Minister, Julia Gillard, has announced her intention to support the reversal of current Australian Labor Party (ALP) policy, by allowing uranium exports to India.
This reversal comes as welcome news to Australian mining companies that are currently restricted by the policy. It will see an increase in uranium export markets, as well as opportunities for foreign direct investment and increased capital for Australian uranium projects.
Australian uranium explorers and producers would benefit from India's increasing use of nuclear energy, which is expected to grow from 3 per cent to 40 per cent of total domestic electricity consumption by 2050.
ALP policy currently bans the export of uranium to nation-states that are not signatories to the Nuclear Non-Proliferation Treaty (NPT), including India, North-Korea, Taiwan, Israel and Pakistan, as a means to prevent the proliferation of nuclear weapons.
The proposed ALP policy change outlined by the Prime Minister and led by Federal Minister for Resources and Energy, Martin Ferguson, is expected to be successfully passed at the ALP National Conference commencing 2 December 2011 in Sydney, subject to minority internal opposition. Commodity sales require that an export permit must signed by the Federal Minister for Resources and Energy, which means that legislation is not required for the ALP's policy reversal to become effective.
This change will present new opportunities for explorers seeking to develop new uranium mines, as well as existing producers such as BHP Billiton, which has recently received Federal Government approval for its A$30 billion expansion of the copper and uranium reserves at South Australia's Olympic Dam project.
Uranium exploration and mining are currently permitted only in South Australia, Northern Territory and Western Australia, while exploration (but not mining) is permitted in Queensland. For more information on the Australian uranium industry please click here.
Lifting the ban could also see interest from Indian and other foreign private and state-owned enterprises (SOEs) looking for uranium exploration and development opportunities in Australia. The Australian Government recently refined the Foreign Investment Review Board (FIRB) policy for foreign SOEs investing in uranium exploration and development (See FIRB policy section below).
Prime Minister Gillard has stressed that any exports of uranium to India could only be carried out within an appropriate international framework to be negotiated by the Australian Government, which could take more than twelve months following a successful policy change.
This framework would need to include strict adherence to the International Atomic Energy Agency (IAEA) safeguards and safety framework, strong bilateral agreements and ongoing transparency measures to ensure that Australian uranium will only be used for peaceful purposes.
Australia is currently the world's third largest uranium exporter, supplying countries such as the US, Japan and China. Uranium exports contribute approximately A$750 million to the economy each year and the industry employs approximately 4,200 people.
The US has had a nuclear alliance with India in place since 2008, when the former Rudd Government reversed plans by the Howard Government to open up uranium exports to India. The IAEA has previously given its support to nuclear trade agreements by the US and Canada with India.
Lifting the ban would end a diplomatic impasse between Australia and India, as well as potentially lead to a trilateral economic and security agreement with India and the US, or a quadrilateral agreement with Japan.
FIRB policy regarding foreign SOE investment into uranium exploration and development
The Australian Foreign Investment Review Board (FIRB) is now applying a two staged approvals process for the exploration and development of uranium in Australia by foreign state-owned enterprises (SOEs) or state-controlled entities (SOE Controlled Entity).
Here is a brief overview of FIRB's current policy:
- All foreign direct investment (FDI) proposals in a uranium resource, regardless of value or type, by an SOE controlled entity should be notified to FIRB for approval.
- If an SOE controlled entity holds an exploration tenement for uranium and wants to convert to a production or development tenement (in order to commence uranium mining), this will be regarded as a new FDI proposal and will need to be notified to FIRB for approval.
- Regardless of the merits or other national interest considerations of the FDI proposal, if the uranium mining development is in a State/Territory that does not at the time of the proposal support uranium mining, then FIRB will not approve the proposal. If however it is in a State or Territory that supports uranium mining (e.g. WA, NT and SA) then assuming there are no other adverse national interest considerations, FIRB will approve the proposal.
In relation to non-SOEs, conversion of exploration tenements to development tenements for non-SOEs are exempt under section 12A(7) of the Foreign Acquisitions & Takeovers Act.
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