West Slope uranium rush

Skyrocketing price of metal prompts resurgence of digging

Gargi Chakrabarty, Rocky Mountain News

Wednesday, December 6, 2006

Colorado's vast stores of uranium are once again causing an unprecedented rush of investors, hedge funds and prospectors toting Geiger counters and stake poles.

After three decades on hiatus, thousands of prospectors are back on the Western Slope, staking claims and seeking permits, bent on tapping the region's rich uranium reserves.

And with uranium prices hitting record highs, they are ready to cash in before everyone else.

The price of the metal used as raw material inside nuclear reactors has jumped nearly 100 percent during the past year, buoyed by demand from energy-hungry nations such as China and India that are embracing nuclear-fired electricity to power their galloping economies.

Uranium is selling at more than $60 a pound, up from $7 in 2000 and about $30 last year, and many believe the price could top $70 early next year - given strong demand.

"This is like a gold rush," said Vince Matthews, director of the Colorado Geological Survey.

Uranium claims on Colorado's federal lands, mostly in Montrose and Mesa counties, have jumped threefold during the past couple of years to 3,800 so far this year, up from 1,200 in 2004, the Bureau of Land Management said.

That compares with a mere handful of claims staked in the previous 30 years. In fact, two-thirds of all claims on BLM lands in Colorado this year were uranium. The remaining were gold, copper and other metals.

"People are always looking to find that mother lode of minerals that will give them retirement," said Bill Patterson, chairman of the Montrose County Board of Commissioners. "Everybody wants to make money, but the reality is the first people tend to make more than the others that come along later."

Investors and hedge funds have bought more than 8 million pounds of uranium this year, or nearly one-third the spot market.

David Noble, managing director of Cornerstone Energy Ventures in Denver, said his firm was "kicking the tires" on uranium investment.

"Investors are becoming aware," Noble said. "Look at nuclear-power technology today - it doesn't emit greenhouses gases and they can make smaller plants instead of the giant ones like before, which make a lot of sense. But nuclear-waste disposal is an issue."

Nucla resident Clifford Chiles, along with his father and two brothers, holds more than 50 uranium claims in Montrose and Mesa counties. They sold dozens more to eager mining companies.

The Chileses pay the BLM an annual fee of $135 per claim, or thousands of dollars each year, to hold on to their claims. A family of miners, the Chileses hope to begin mining some of their claims along the Colorado- Utah border as soon as they get the BLM's approval.

"We can't afford to have all those claims and not be mining," said Clifford Chiles, 48, who works in a coal mine.

A nuclear-weapons race triggered the previous uranium boom in the 1950s. After touching more than $50 a pound in the 1970s, prices slid during the past two decades.

The end of the Cold War stopped the nuclear-arms race, and cheap imports from Russia's decommissioned nuclear arms flooded the market.

A meltdown at the Three Mile Island reactor in Middletown, Pa., in 1979 and the 1986 explosion at the Chernobyl plant in the Ukraine stunted growth of reactors and led to further price declines.

Today, uranium is back in business, thanks to skyrocketing oil and gas prices that are driving nations to nuclear power as a source of energy.

"As long as demand for electricity increases, nuclear will be a part of the resource mix," said Stuart Sanderson of the Colorado Mining Association. "Colorado is rich in uranium reserves, and the state may play an important role as a nuclear-energy producer."

Some doubt the voracity of the latest rush. They don't think all the claims will progress to actual mining for the metal. Case in point: There's no operating mill in the state to process the uranium.

Cotter Corp. shuttered Colorado's only uranium mill in Cañon City in September 2005. The company is looking at the economics of restarting the mill, a move that could cost millions of dollars.

There is talk of Energy Fuels Inc. building a mill in Montrose.

"There is no doubt an increase in staking claims and opening previously closed mines, but there is no place to take the ore other than stockpile, so I couldn't compare it to the gold rush of the 19th century," said Melodie Lloyd of BLM's Grand Junction office.

Also, it takes months, if not years, to advance from staking claims to actual mining. Prospectors have to submit a development plan to the BLM, detailing the method of mining and the impact to the surface and environment, before getting a mining permit.

"The telltale indicator (of mining) is when we start getting plans of development, and we haven't seen a lot of those lately," said Jim Edwards at the BLM's Denver office.

Dan Hancock of the Southwest Research and Information Center in New Mexico said he has been watching the surge in claims "with interest." His group backs Navajo landowners who have banned uranium mining on their land in Arizona, New Mexico and Utah.

"The uranium bubble is a worldwide bubble, and we need to turn it into a bust on various levels," Hancock said. "We are very concerned about the kind of health and environmental damage that happens if uranium gets restarted."