Nuclear Fuel Cycle Royal Commissionnuclearrc.sa.gov.au/app/uploads/2016/03/Chamber-of... · Nuclear...

Submission August 2015

Nuclear Fuel Cycle Royal Commission

Government of South Australia


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Contents

About CME ............................................................................................................................. 3

Recommendations ................................................................................................................ 3

Context ................................................................................................................................... 5

Nuclear Fuel Cycle Royal Commission ............................................................................... 5

The nature of CME’s submission ........................................................................................ 5

A Sensible, Consultative, Community-wide Discussion on an Expanded Nuclear Industry in Australia is Well Overdue ................................................................................. 6

Affordable energy is a cornerstone of our way of life, but is has costs................................ 6

Nuclear energy has and will continue to play an important role in addressing key costs associated with demand for energy ..................................................................................... 7

Australia’s nuclear policy position is a global anomaly ........................................................ 9

South Australia is the Logical Centre for an Expanded Australian Nuclear Industry .. 10

South Australia needs growth and the minerals sector can provide it ............................... 11

Current uranium resources and production base .............................................................. 12

Uranium export capacity .................................................................................................... 15

Potential radioactive waste and spent fuel storage sites ................................................... 15

Access to the energy market ............................................................................................. 18

A receptive community ...................................................................................................... 23

Domestic Nuclear Industry beyond the Borders of South Australia .............................. 24

The Western Australian minerals sector ........................................................................... 24

Current uranium resources and advanced projects .......................................................... 26

Uranium export capacity .................................................................................................... 31

Potential waste disposal sites ........................................................................................... 31

Energy Markets in Western Australia ................................................................................ 32

A receptive community ...................................................................................................... 37

An Australian Nuclear Industry ......................................................................................... 38

Need for efficient and effective regulation ......................................................................... 38

Uranium production ........................................................................................................... 41

Uranium exports ................................................................................................................ 42

Nuclear fuel production in Australia ................................................................................... 43

Nuclear generation as part of the domestic energy mix .................................................... 44

A radioactive waste storage sector ................................................................................... 44

Domestic capability ........................................................................................................... 45

Community and economic benefits ................................................................................... 45

Conclusion .......................................................................................................................... 46


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About CME

The Chamber of Minerals and Energy of Western Australia (CME) is the peak resources sector representative body in Western Australia. CME is funded by its member companies, which generate 95 per cent of the value of all mineral and energy production and employ 80 per cent of the resources sector workforce in the state.

The Western Australian resources sector is diverse and complex, covering exploration, processing, downstream value adding and refining of over 50 different types of mineral and energy resources.

In 2014, the value of Western Australia’s mineral and petroleum production was $114.1 billion. Iron ore accounted for approximately $65.1 billion of production value to be the state’s most valuable commodity. Petroleum products (including LNG, crude oil and condensate) followed at $25.1 billion, with gold third at $8.7 billion.4

Notwithstanding the recent decline in the price of several export commodities, the estimated value of royalty receipts the state received from the resources sector still composed almost 20 per cent of estimated total state revenue in 2014-15, or around $5.34 billion.5

As at March 2015, there was approximately $179 billion in resources sector projects committed or under construction in Western Australia and a further $118 billion in proposed or possible projects.6

Recommendations

The Royal Commission should recommend the Government of South Australia pursue, through the Council of Australian Governments, the:

o commencement of a sustained, evidence-based, transparent, community-wide discussion on Australia’s participation in the nuclear fuel cycle beyond mining and milling of uranium and export of U3O8, consistent with the directions the Australian Government has already outlined in its Energy White Paper; and

o development of an enabling Commonwealth legislative and regulatory regime to facilitate (in the event appropriate planning and environmental approvals are met):

‒ expansion of uranium mining and milling activities, and waste processing, disposal and storage services; and

‒ future development of a domestic nuclear energy sector, and uranium processing and fabrication sector, should there be a business case for a proponent to do so.

As part of establishing the enabling legislative and regulatory regime:

o the activities of mining and milling of uranium should be removed from the ‘nuclear actions’ definition in the Environmental Protection and Biodiversity Conservation Act 1999 (Cth) as these activities do not present any risks that are additional to the mining and milling of other mineral commodities;

4 Department of Mines and Petroleum (DMP), 2015, Mineral and Petroleum Industry 2014 Review,

www.dmp.wa.gov.au/1525.aspx 5 Government of Western Australia, 2015, 2015-16 Budget, Budget Paper No. 2 Volume 2,

www.ourstatebudget.wa.gov.au/Budget-Papers 6 DMP, 2015


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o the prohibition on nuclear energy under the Australian Radiation Protection and Nuclear Safety Act 1998 (Cth) should be removed, supported by improved community understanding and confidence in government decisions made with respect to Australia’s future energy security, and the role of a safely regulated domestic nuclear energy industry as part of the generation mix;

o the Australia Government should task the Productivity Commission with inquiring into the economics and potential application of emerging, small scale reactor technology;

o the Australian Government should revisit plans to capitalise on the nation’s natural advantage in the storage of radioactive waste and spent nuclear fuel, through discussions with major uranium trading partners leading to changes to multilateral arrangements regarding the processing of domestic radioactive waste and spent fuel, and subsequently through amendments to the Customs (Prohibited Imports) Regulations 1956 (Cth) to allow the importation of radioactive waste in Australia; and

o the Australian Government should ensure the current process to identify a site suitable to host a national radioactive waste facility, ultimately identifies a site(s) capable of hosting scalable surface and deep geological storage facilities such that there are future options (including options for future nuclear generations) to expand Australia’s radioactive waste and spent fuel storage capabilities, either for domestic purposes or to service international markets.


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Context


The Royal Commission has been put into effect by the Governor of South Australia, the Hon. Hieu Van Le AO, at the request of the Government of South Australia. Rear Admiral the Hon. Kevin Scarce AC CSC RAN (Rtd), a former Governor of South Australia, is the Royal Commissioner for the Royal Commission.

The terms of reference direct the Royal Commission to inquire into whether there is any potential for expansion of the current level of exploration, extraction or milling of minerals containing radioactive materials in South Australia, and the feasibility of the state becoming involved in:

o further processing of minerals, and the processing and manufacture of materials containing radioactive and nuclear substances (but not for, or from, military use) including conversion, enrichment, fabrication or re-processing in South Australia;

o generation of electricity from nuclear fuels; and

o management, storage and disposal of non-military nuclear and radioactive waste.

The terms of reference specifically requires the Royal Commission, when inquiring into the risks and opportunities associated with these matters, to consider, where appropriate, their impact upon the economy, the environment and the community (including regional, remote and Aboriginal communities).

Four issues papers set the context and propose a series of specific questions under each of the terms of reference.

The final output from the Royal Commission will be a report, including recommendations, to the Governor of South Australia.

The nature of CME’s submission

Given the Royal Commission has been commissioned at the request of the Government of South Australia, both the terms of reference and questions raised in the issues papers are specific to issues associated with the development of an expanded uranium and/or nuclear sector within South Australia.

While CME’s advocacy efforts are targeted at Western Australian and national issues impacting its members, CME and its members have a significant direct and indirect interest in the Royal Commission process, its outcomes, and a future nuclear energy industry in South Australia, and ultimately across the nation, because:

o Many of CME’s members have direct interests (including operating) in assets in South Australia, as well as Western Australia;

o Western Australia is highly prospective for uranium and has a number of projects currently at different stages of investigation and development, which may be exported through South Australia;

o Like South Australia, Western Australia has areas of land that could potentially be suitable sites to host radioactive waste disposal facilities; and

o In the longer term there is potentially a role for nuclear energy generation in Western Australia’s energy mix.


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In light of these interests, CME’s submission seeks to provide valuable context to the Royal Commission’s inquiries by:

o supporting South Australia’s leadership in progressing a sensible, community wide debate on the future of a nuclear industry in South Australia, and ultimately Australia more widely;

o acknowledging and making the case that South Australia is the logical state in which the genesis of a nuclear industry in Australia should take place;

o presenting what CME considers is, in due course, Western Australia’s role in growing a nuclear industry beyond the borders of South Australia;

o articulating the elements of a ‘best practice’ Australian nuclear industry that could eventually develop; and

o recommending policy efforts to ensure the outcomes of the Royal Commission are progressed.

At the outset of this submission, CME would like to take the opportunity to congratulate the Government of South Australia for its leadership in this important debate.

A Sensible, Consultative, Community-wide Discussion on an Expanded Nuclear Industry in Australia is Well Overdue

The quality of life those in the developed world enjoy, as well as the pathway to prosperity for developing nations, is in the most fundamental way underpinned by energy security. The critical role energy generation technologies based on fossil fuels have played in delivering this energy security must be positively recognised.

From the perspective of electricity generation, global policy responses aimed at reducing emissions have been multifaceted, but designed to transition the generation profile from one heavily dependent on fossil fuels and traditional generation technologies, to one dependent on lower or non-emitting fuels and emerging, cleaner generation technologies including lower emissions intensive use of fossil fuels. The main challenge in achieving this is developing a portfolio that can still deliver energy security in terms of service guarantee and affordability for both industry and retail customers.

By virtue of its merits in providing electricity baseload and dispatchability, relatively low direct and whole-of-lifecycle emissions, small energy sourcing and generation facility footprint, strong occupational health and safety record, and competitive cost, nuclear energy has played, and will continue to play, an important role in the generation mix of many economies well into the future. However, Australia is one of only a few developed nations not to have, or be considering, the use of nuclear produced electricity in its domestic generation mix.

Nonetheless, Australia is well entrenched in the nuclear fuel cycle globally by virtue of its extensive uranium resources, of which it is a major exporter for the nuclear energy sector abroad. Australia would also have a natural advantage for an expanded role in the storage of radioactive waste.

As such, the time to have a sensible, consultative community-wide discussion on an expanded nuclear industry in Australia is therefore well overdue.

Affordable energy is a cornerstone of our way of life, but is has costs

Since the industrial revolution the world has become an ever-expanding consumer of energy. This has been sourced primarily through various technologies that harness the energy contained in long-chain hydrocarbons (fossil fuels) through a process of combustion.


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This has fundamentally transformed the standard of living and wellbeing of the developed world. These benefits are now flowing to the developing world as these economies develop industry and urbanise. The impact of this transition on energy consumption is dramatic. The countries comprising the Organisation for Economic Cooperation and Development (OECD) share of global generation has decreased from approximately 70 per cent in 1971 to less than 50 per cent today.7

The benefits the industrial revolution has delivered to the developed world, and will deliver to the developing world, is not without cost. From the perspective of whole-of-biosphere impact, the most significant of these result from human induced emissions from the combustion of fossil fuels, which currently provide approximately 80 per cent of the energy necessary to give effect to this transformation.

Nuclear energy has and will continue to play an important role in addressing key costs associated with demand for energy

In Australia, as is the case for most developed nations, the electricity generation sector is one of the largest primary sources of GHGs.8 Global policy responses to reducing emissions from electricity generation have been multifaceted, but have revolved around the implementation of policy instruments designed to achieve the ultimate medium to long term objective of transitioning from higher emitting fuels and installed generation capacity to some combination of lower emitting fuels (e.g. natural gas), non-emitting fuels (e.g. nuclear), renewable generation technologies (e.g. hydroelectric, wind and solar), and emerging, innovative technologies that allow for less emissions intensive use of traditional fossil fuels (e.g. geosequestration). Globally, non-fossil fuel sources currently account for approximately 30 per cent of electricity generation capacity.9

Nuclear energy has played an important role as a non-emitting fuel source for electricity generation. There are around 435 operational nuclear reactors producing electricity across 29 countries at present, representing a total of approximately 380,000 megawatts (MW) of installed capacity. Three countries with nuclear energy capacity are dependent on it for over 50 per cent of generation (including France, which is dependent on it for over 75 per cent of generation), around 10 depend on it for between 20 and 50 per cent of generation, and six for between 10 and 20 per cent of generation.

Numerous countries without domestic nuclear generation capacity import nuclear generated electricity from neighbouring countries. There are also 67 reactors currently under construction across 14 countries with a total combined capacity of around 70,000 MW.10

BP forecasts nuclear energy to grow by 1.8 per cent per annum through to 2035, with much of the growth driven by China, which is forecast to expand at 11 per cent per annum over the forecast period.11

7 International Energy Agency (IEA), 2014, Key World Energy Statistics

8 Beeton, R., Buckley, K., Jones, G., Morgan, D., Reichelt, R., & Trewin, D., 2006, Independent Report to the

Australian Government Minister for the Environment and Heritage, Australian State of the Environment Committee

9 IEA, 2013, World Energy Outlook 2013

10 World Nuclear Association, 2015, World Nuclear Power Reactors & Uranium Requirements, http://www.world-nuclear.org/info/Facts-and-Figures/World-Nuclear-Power-Reactors-and-Uranium-Requirements

11 BP, 2015, BP Energy Outlook 2015, February 2015


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However, decisions pertaining to the development and maintenance of electricity generation portfolios are based on a range of strategic, operational, financial, social, environmental and emissions criteria, including:

o Market needs and structure

The nature of electricity demand in terms of factors such as baseload and peak demand, the number and type of end customers, and the physical structure of the distribution system and downstream market in terms of competition between electricity wholesalers and retailers in servicing end customers.

o Legacy grid infrastructure

Most current electrical grid infrastructure was designed to move electricity out from large baseload generation assets to demand centres, usually in cities. Despite a radical change in technologies over the past 15 years, there are practical limits on the deployment of new generation sources because of the legacy of planning decisions made decades ago.

o Baseload Requirements

The amount of continuous generation capacity required to meet the minimum level of demand over a 24 hour period.

o Dispatchability requirements

The degree to which the generation portfolio can respond to demand above the baseload as demand varies (mid-merit and peaking capability).

o Cost

Different technologies in different jurisdictions present different unit costs of the electricity generated. Elasticity of demand for electricity in a jurisdiction will depend on the nature of the industry and prosperity of the society it services.

o Lifecycle GHG emissions

In addition to the GHG emissions produced directly by the process of generating electricity, all electricity generation technologies have a whole-of-lifecycle emissions profile, which includes emissions associated with the manufacture, installation, commissioning, operation and decommission of the facility and the components that comprise the facility.

o Energy sourcing environmental footprint and impact

All generation technologies convert energy embedded in another form into electricity. In the case of fossil fuels, nuclear and hydro technologies, the process of sourcing this embedded energy has an environmental footprint and impact.

o Generation facility environmental footprint and impact

All generation technologies occupy areas of land for which there are alternative and sometimes conflicting uses, and all produce negative externalities in the form of waste streams, noise and aesthetics.

o Occupational health and safety

The process of sourcing fuel, constructing facilities, operating facilities and decommissioning facilities are different across the various generation technologies, involve different degrees of automation and therefore present a different nature and degree of occupational health and safety risk.

While there have been significant breakthroughs in renewable energy technology and its application, the current status of development of renewable energy technology, combined with the need of a generation portfolio to address the criteria listed above, means the


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likelihood of achieving a global generation profile based entirely on renewables within decades is highly questionable.

Numerous studies comparing various fossil fuel and renewable generation technologies clearly demonstrate the compelling proposition of nuclear energy within a generation profile. For example:

o Direct and lifecycle embodied emissions for nuclear generation are a fraction of those associated with traditional fossil fuel generation technologies, and equivalent to those of renewable energy technologies;

o Together with hydro, nuclear is the only non-fossil fuel generation technology that can provide baseload and is the only non-fossil fuel technology that can guarantee delivery of electricity on demand (even hydroelectricity generation is subject to drought);

o The generation and fuel sourcing footprint of nuclear is the lowest of all contemporary electricity generation solutions; and

o The nuclear energy industry has a very strong safety record.12

In any event, diversity of energy supply sources is an important consideration in maintaining energy security. The focus in the short to medium term is one of transition, whereby over time high emitting fuels and traditional technology is replaced with lower or non-emitting fuels and emerging technology. Nuclear energy will continue to play a key role in this paradigm and will likely remain an important component of the global generation portfolio for the long term.

Australia’s nuclear policy position is a global anomaly

The nuclear industry in Australia is currently limited to:

o legislatively constrained exploration for, and mining of, ore containing uranium (U);

o processing of ore into uranium oxide (U3O8);

o export of U3O8 to countries with which Australia has safeguard agreements in place for the purpose of use in civic application (i.e. electricity generation and manufacture of industrial, medical and research radionuclide products); and

o the domestic manufacture of various radionuclide products for application in the relatively small domestic industrial, medical and research markets for such products.

In light of the following particular aspects of the nation, Australia’s limited engagement with the nuclear industry is somewhat nonsensical:

o Australia has adopted GHG emissions reduction policies

By virtue of its energy intensive industrial base and existing electricity generation profile, nuclear energy is an obvious part of the emissions reduction response in accordance with the Australian Government’s policy objectives.

o Australia has expansive in situ uranium resources

As at 1 January 2013, Australia’s Reasonably Assured Resources (RAR) of uranium were equivalent to approximately 1.2 million tonnes.13 This accounts for approximately 30 per cent of the world’s RAR of uranium and is more than three times the next largest resource, Canada.

12 Brook, B. & Bradshaw, C., 2015, ‘Key role for nuclear energy in global biodiversity conservation’, Conservation Biology, 29, 3, p. 702-712

13 OECD and International Atomic Energy Agency (IAEA), 2013, cited in: MCA, 2015, Uranium Natural Energy


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o Australia is already a large supplier of feedstock to the global nuclear energy industry

In 2014, uranium mines in Australia produced and exported 5,900 tonnes of U3O8, accounting for approximately 11 per cent of global supply. This made it the world’s third largest producer behind Kazakhstan, which accounts for approximately 38 per cent of global supply, and Canada, at around 16 per cent of global supply.14 In this sense, Australia is already a significant participant in the global nuclear fuel cycle.

o Australia is one of only a few developed nations, and nations overall with uranium resources not to have a nuclear energy sector

Australia is one of only a few OECD nations not to have nuclear produced electricity as part of its energy mix. Of the 10 countries that produce 95 per cent of the world’s uranium, Australia is one of only five, and the only developed nation among those, not to have a domestic nuclear generation sector.

o Australia has a natural advantage in radioactive waste storage

By virtue of its vast landscape, population concentration in coastal cities and stable geology, Australia has a natural advantage in the safe and environmentally compatible, surface and deep geological storage of radioactive waste products from the nuclear industry.

o Australia has world class mining and nuclear capabilities

The technical, management and regulatory capabilities pertaining to Australia’s mining industry are world class. While in the absence of a downstream nuclear industry Australia is deficient in operational skills, the scientific expertise residing in organisations such as the Australian Nuclear Science and Technology Organisation is also globally renowned.

For these reasons, the efforts of the Government of South Australia and the Royal Commission are warranted in progressing a community wide transparent and consultative process to consider horizontal and vertical expansion of a nuclear industry in Australia.

An expanded industry may include the economically, socially and environmentally sustainable and safe:

o delineation of a larger in situ uranium resource in Australia;

o increased production and export of uranium oxide;

o participation in downstream processes including conversion, enrichment and fuel fabrication, resulting in domestic supply for a potential nuclear generation sector and value added exports;

o domestic and imported nuclear waste handling and storage sector; and/or

o domestic nuclear generation sector.

South Australia is the Logical Centre for an Expanded Australian

Nuclear Industry

With 26 per cent of the global uranium resource, a significant future opportunity in South Australia’s minerals sector resides in potential growth of the uranium sector and nuclear fuel cycle more broadly.

Despite not having a nuclear energy industry, Australia has, primarily through manufacture of radioactive isotope products for the domestic industrial, medical and research market,

14 MCA, 2015


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generated low and intermediate level waste that is currently stored in over 100 licensed sites across Australia on an interim basis.

There is a need to establish permanent waste storage facilities for existing and new waste. Australia’s natural advantage in long term waste storage potentially provides an opportunity to offer a fuel lifecycle management product, with suitable sites identified in South Australia, as well as the Northern Territory, Western Australia and Queensland.

Electricity generation facilities in South Australia are interconnected to the National Electricity Market (NEM) and while new capacity is not forecast to be required for the next decade, nuclear generation in South Australia could play an important role in diversifying energy supply sources and replacing ageing generators in South Australia, Victoria and New South Wales as these are retired in the future.

By virtue of having a uranium industry for over half a century, the South Australian community appears more receptive to an expanded domestic nuclear energy industry than some other parts of Australia.

South Australia needs growth and the minerals sector can provide it

In 2013-14, the South Australian economy produced Gross State Product (GSP) of $97 billion, representing approximately six per cent of the Gross National Product (GNP), equal to GSP per capita of $57,821, compared to national GDP per capita of $67,932.15 GSP and GSP per capita in South Australia grew at approximately half the rate of the national average over the previous year.16 In the same year the state exported goods and services to the value of $14.7 billion, representing 4.6 per cent of national exports.17 Unemployment in South Australia is the highest in the nation at around 7.1 per cent.18

South Australia needs new opportunities and this could reside, at least in part, in an expansion of its minerals sector. It has a relatively small, but rapidly growing minerals sector. Over the past 14 years, both private exploration expenditure and new capital expenditure associated with the South Australian minerals sector has grown approximately four-fold, from $30 million to $116 million in the case of exploration expenditure, and from $245 million to $1 billion in the case of new capital expenditure.

This has driven an increase in the mine-gate value of production from approximately $1.3 billion to $5.6 billion and exports from $1.1 billion to $4.8 billion over the same period. Royalty receipts have grown from $41 million in 2000-01 to $125 million in 2013-14, representing approximately 3 per cent of taxation revenue and 0.8 per cent of total revenue for the State Government in 2013-14.19

South Australia produces a range of mineral commodities including copper, iron ore (hematite and magnetite), gold, coal, silver, zinc, a range of industrial and construction minerals, and uranium. The value of mine-gate production from the industry in 2013-14 was $5.6 billion, or 6.2 per cent of GSP. In addition to minerals production, the value of net offsite refining of minerals in South Australia was approximately $950 million in 2013-14.20 Mineral commodities is the largest export sector, with total mineral exports of $4.8 billion representing 39 per cent of South Australia’s merchandise exports in 2013-14.

15 Australian Bureau of Statistics (ABS), 2014, Australian National Accounts: State Accounts, 2013-14, cat. no. 5220.0, Australian Government, Canberra

16 ABS, 2014, Australian National Accounts: State Accounts 2013-14, cat. no. 5330.0

17 ABS, 2014, Australian National Accounts: State Accounts, 2013-14, cat. no. 5220.0

18 Department of Employment, 2015, Labour Force Region – Unemployment Rate by State and Territory, Australian Government, Canberra

19 Department of Treasury, 2015, 2014-15 Budget Paper No.3, Government of South Australia, Adelaide

20 Department of State Development, 2015, Minerals Score Card 2013-14, Government of South Australia, Adelaide


Uranium production currently accounts for only six per cent of the value of South Australian minerals production (see Figure 1 ).21 The total mine-gate value of uranium produced in South Australia was exported, representing seven per cent of the value of the state's merchandise exports in 2013-14.22 Despite accounting for only six per cent of the mine-gate value of production, the $16.5 million of royalties paid to the State Government by the uranium industry accounted for 13 per cent of all minerals royalties. 23

Figure 1: Sector contribution to the value of South Australian minerals production ($million, % of total)

Uranium Oxide, $350.6%

Industrial Minerals, $529.9%

Gold, $464 , 8%

Iron Ore (Magnetite), $394.7%

Iron Ore (Hematite), $1,543.28%

Copper, $2,058 , 37%

In light of recent lower iron ore prices, further diversification of the commodities produced would reduce exposure to commodity prices, for which South Australia , like other jurisdictions, is a price taker in global markets. Similarly, a significant portion of the value of the minerals sector is dependent on copper production and there is an important correlation between copper and uranium production in South Australia, as most of the state's uranium is produced as a co-product from the copper intensive, polymetallic, BHP Billiton operated Olympic Dam operation.

Current uranium resources and production base

Uranium resources

South Australia is a major global centre for uranium production and there is considerable scope for uranium production in South Australia to grow. With RAR24 of 1,174 kilotonnes of U30 8 , Australian resources of uranium are by far the largest in the world, representing 32 per cent of known global resources (see Figure 2)?5

21 Ibid. 22 Ibid. 23 Ibid. 24 Reasonably Assured Resources (RAR) recoverable at <US$130/kg or US$59/Ib 25 Geoscience Australia, 2013, Australia's Identified Mineral Resources, Australian Government, Canberra

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Figure 2: Distribution of RAR of contained U30s at December 2012 (tonnes, %of global)

Australia, 1,17 4 , 32%

Canada, 358, 10%

Niger, 325 , 9%

other, 241,6% Ukraine, 85 , 2"A>

Mongolia, 108 , 3%

China. 120 , 3%

Soutn Africa, 175 , 5%

United States, 207 . 5%

Russian Federation, 217' 6%

Namibia, 248 , 7%

Kazakhstan, 286 , 8%

Approximately 80 per cent of Australia's RAR of uranium and total resources of uranium are located in South Australia, which alone accounts for approximately 26 per cent of global RAR (see Figure 3)?6

Figure 3: Distribution of Australian uranium resources

1,600

--. 1.400 C/) Q) c 1,200 c § g 1,000 E ::J 800 ·c: ro .... ::J

600 al c

19 c 400

-0 ()

200

South Australia Northern Territory Western Australia Queensland

• RAR recoverable at <US$130/kg • Inferred Resources recoverable at <US$130/kg

Production

Despite hosting approximately 32 per cent of the world's RAR of uranium, Australia only produces around 11 per cent of global uranium supply. Over the past eight years, uranium production in Australia has averaged approximately 8,300 tonnes of U30 8 per annum.

26 Geoscience Australia, 201 3

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Over that time, approximately, 52 per cent has been produced from operations in South Australia and 48 per cent by a single operation in the Northern Territory, the Energy Resources Australia Ranger project. However, as a result of a dramatic recent decline in production from the Ranger mine, South Australia now accounts for close to 80 per cent of production from the Australian uranium sector (see Figure 4 ).

Figure 4: Australian uranium production

12,000

10,000

., 0

M

8,000 :::> 0 6,000 (/) Q) c c 0 1- 4,000

2,000

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

- Northern Territory (t U308) - south Australia (t U308)

90%

80%;? ~

70%£ 0 ·o

60% .g e 50% Q.

iii 40% .§

iU 30% c

0 20% ~

11)

10% c75

0%

- south Australia(% of National Production) - Northern Territory(% of National Production)

Over the past eight years, approximately 80 per cent of production from South Australia has come from the Olympic Dam project, approximately 12 per cent from the Heathgate Resources operated Beverley mine and the balance from the Quasar Resources operated Four Mile and Uranium One operated Honeymoon projects (see Figure 5).

Figure 5: South Australian uranium production

6,000

5,000

0 4,000

:S 0 3,000 (/) Q) c c 0 1- 2,000

1,000

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2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

• Olympic Dam • Beverley • Four Mile • Honeymoon

Q cME


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Olympic Dam

The vast majority of South Australia’s (and Australia’s) known uranium resource is associated with Olympic Dam. The importance of this project to the South Australian uranium industry cannot be understated. In 2014, Olympic Dam produced four kilotonnes of U3O8, accounting for approximately 60 per cent of Australia’s total uranium production.

Olympic Dam is a polymetallic deposit currently producing copper cathode and U3O8, as well as refined gold and silver bullion from an open pit and underground mining operation and downstream integrated metallurgical processing plant. It hosts the largest known resource of uranium in the world, a resource equivalent to approximately one million tonnes of U3O8.

Olympic Dam was acquired by BHP Billiton as part of its acquisition of Western Mining Corporation in 2005. Capital expenditure associated with the project to date is approximately $1.9 billion and the operation is considered by BHP Billiton to be a component of its global core asset base, producing revenues in 2014 of approximately US$1.8 billion.27 It is a technology intensive operation including an underground automated train and trucking network and a future proposal to trial a less capital intensive heap leaching recovery process.

The project has a reserve life of approximately 47 years and is currently the subject of a pre-feasibility study exploring a full range of development path alternatives.

The U3O8 produced from Olympic Dam is sold to electricity generating utilities, principally in Western Europe, North America and East Asia under a mix of long and short term contracts.28

Uranium export capacity

Mined uranium ore is processed at the mine site to produce U3O8 concentrate (or ‘yellowcake’). The U3O8 concentrate is packaged into 200 litre sealed steel drums, which are secured together with Kevlar straps and packed into shipping containers that are locked, sealed and secured at the mine site. These containers are then transported by road or rail to accredited uranium export ports, where they are exported.

The transportation of radioactive materials in Australia is subject to both state and federal regulations, with states primarily responsible for the transportation of radioactive materials within their borders.

Ultimate control over the exportation of uranium resides with the Australian Government under the export licensing powers it exercises through the Customs Act 1901 (Cth) and associated prohibited export regulations, as well regulations pertaining to marine safety that are overseen by the Australian Marine Safety Authority.

Currently only South Australia and the Northern Territory permit the export of uranium through their ports, Port Adelaide and Port of Darwin, respectively.

Potential radioactive waste and spent fuel storage sites

Spent fuel and radioactive waste is generated from the generation of nuclear energy and other activities and can comprise a wide range of concentrations of radionuclides and a variety of physical and chemical forms. In Australia, radioactive waste is categorised according to the six classes (see Table 1).29

27 BHP Billiton Limited, 2014, Annual Report

28 Ibid.

29 Australian Radiation Protection and Nuclear Safety Agency (ARPANSA), 2010, Classification of Radioactive Waste, Australian Government, Canberra


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Table 1: Classification of radioactive waste

Type of radioactive waste Description

Exempt waste Waste that contains such small concentrations of radionuclides it does not require provisions for radiation protection, irrespective of whether the waste is disposed in conventional landfills or recycled. Exempt waste is exempted from regulatory control.

Very short lived waste Waste that contains only radionuclides of very short half-life with activity concentrations above the exemption levels. Such waste can be stored until the activity has fallen beneath the level for exemption, allowing for the waste to be managed as conventional waste.

Very low level waste Waste that does not meet the criteria of exempt waste, but only to the extent it requires a moderate level of containment and isolation and is therefore suitable for disposal in a near surface, industrial or commercial, landfill type facility with limited regulatory control.

Low level waste Waste that is above the exemption levels, but contains limited amounts of long lived radionuclides. Such waste requires robust isolation and containment for periods up to a few hundred years and is suitable for disposal in engineered near surface facilities.

Intermediate level waste Waste that contains particularly a higher concentration of long lived radionuclides and as such requires containment and isolation greater than that which can be provided by a near surface facility. However, intermediate level waste needs little or no provision for heat dissipation during its storage or disposal. It requires disposal at depths of between tens of metres to a few hundred metres.

High level waste

(including potentially reusable spent fuel designated as waste)

Waste with activity concentration levels adequately high to generate significant quantities of heat by the radioactive decay process or waste with large amounts of long lived radionuclides that need to be considered in the design of a disposal facility. High level waste generally requires disposal in deep, stable geological formations usually several hundred metres or more below the surface.

There is considerable potential for some forms of high level waste, including spent fuel, to be used as fuel in new reactor technology currently under development.30 A storage facility whereby high level waste can be accessed in the future for reuse would potentially become a significant strategic asset and economic opportunity.

Domestic radioactive waste

By virtue of not having a nuclear generation sector, Australia currently produces very little radioactive waste. Approximately 45 m3 of radioactive waste is produced per annum as a result of radioisotope products used in industrial, medical and research processes in Australia. Over the years this has accumulated into approximately 6,000 m3 of low level waste (including Australian Government waste of 4,048.3 m3 and state and territory government waste) and 551.5 m3 of intermediate level waste (see Table 2).31

30 Brinton, S., 2015, ‘The advanced nuclear industry’, Third Way

31 CSIRO, Department of Resources, Energy and Tourism, Australian Nuclear Science and Technology Organisation (ANSTO) and Department of Defence, as cited in: Jacobs, S.K.M., 2014, Long Term Management of Australia’s Radioactive Waste: Initial Business Case, Department of Industry, Australian Government, Canberra


Page 17 of 46

Table 2: Australian Government radioactive waste inventory

Waste type Description Approximate inventory

Low level waste Lightly contaminated laboratory items, operational waste from the research reactor, contaminated items from production of radio-pharmaceuticals, research reactor decontamination waste and lightly contaminated soil.

Operational waste held at ANSTO, Lucas Heights: 1,936 m

3

Lightly contaminated soil from ore-processing research held by the CSIRO at Woomera: 2,100 m

3

Waste held at ARPANSA Yallambie: 0.28 m3

Waste held by Department of Defence: 12 m3

Total: 4,048.3 m3

Intermediate level waste

Higher activity operational waste from ANSTO and concentrates from mineral sands production.

Operational waste, thorium and uranium residues from mineral sands processing and liquid waste from production of Molybdenum-99 for radiopharmaceuticals: 451 m

3

Waste held by CSIRO: 4 m3

Waste held by ARPANSA: 6.5 m3

Waste held by Department of Defence: 90 m3

Total: 551.5 m3

This waste, as well as radioactive waste produced by state organisations, is currently stored across over 100 sites licensed to store radioactive waste on an interim basis across the Australian continent.

A process to identify suitable locations for the storage of low and short-lived intermediate level waste has been underway since the late 1970s. There has also been consideration of the need for a long-lived intermediate level waste storage facility, primarily for the storage of intermediate level waste that will be returned to Australia following the reprocessing of used fuel from Lucas Heights.

In 2003, the Australian Government identified a site near Woomera in South Australia as a suitable site for a national low level waste repository and it was subsequently determined that a building suitable for the storage of intermediate level waste would also be constructed at the site. In 2004, these plans were abandoned, with the Australian Government advising the states to each set up their own storage facilities in accordance with international standards.

A study considered by the Australian Government in early 2014 found current storage arrangements are inefficient, expensive and pose avoidable risks to the ongoing operation of the nuclear science and medicine sectors in Australia.32 The Australian Government is currently running a consultative process for site selection, expected to result in the identification of a site(s) in around 2017, with construction of suitable facilities around 2020.

If Australia developed a nuclear energy sector in the future, the capacity of any waste disposal facility would need to expand. A typical 1,000 MW light water reactor generates approximately 200 to 350 m3 of low and intermediate level waste per annum. In addition, it will discharge approximately 20 m3 of used fuel per annum, which including encapsulation corresponds to approximately 75 m3 disposal volume. If the fuel is reprocessed, only 3 m3 of vitrified waste is produced. When encapsulated in disposal canisters, this has a disposal volume equivalent to 28 m3.33

Deployment of emerging, small scale reactor technology in Australia, should it prove commercially viable, would see substantially less waste produced than traditional reactors.

32 Jacobs, S.K.M., 2014, Long Term Management of Australia’s Radioactive Waste: Initial Business Case, Department of Industry, Australian Government, Canberra

33 World Nuclear Organisation, 2015, Radioactive Waste Management


Page 18 of 46

A spent fuel and radioactive waste storage industry

Each year the world’s nuclear energy generation facilities produce approximately 200,000 m3 of low and intermediate level waste and 10,000 m3 of high level waste, including fuel that has been designated as waste.34

The Customs (Prohibited Imports) Regulations 1956 (Cth) prohibits the importation of radioactive waste in Australia. Australia does not accept radioactive waste produced by other countries, as all countries benefiting from radioactive materials and nuclear energy are obliged to make arrangements to safely manage and dispose of their own radioactive waste.

Regardless, as the result of dense populations, unsuitable geology/hydrogeology and/or tectonic instability, locations suitable for long term storage of radioactive waste are rare in some countries.

The cost of waste management and disposal accounts for approximately five per cent of the cost of producing nuclear energy.35 In most jurisdictions, generation facilities are required to set aside funds to provide for storage of waste. This is often accumulated as an additional charge levied on the customer. In the United States this charge is 0.1 cents per kilowatt hour, with consumers having committed approximately US$28 billion for this purpose to date.36

Various sites in South Australia, by virtue of their remoteness, tectonic stability, suitable geology and hydrology and limited alternative uses, have been identified as being suitable for an engineered surface radioactive waste storage facility and potentially deep geological storage facility.

An Australian nuclear industry able to supply uranium and take-back equivalent end of fuel cycle waste from those customers for safe long term storage would be a lucrative industry for South Australia. If this were put into effect under a fuel leasing model, Australian industry could also benefit from the financing arrangements underpinning the model. Furthermore, the storage of spent fuel that may have application as fuel in new reactor designs currently under development could become a strategic asset and significant economic opportunity.

Access to the energy market

The electricity network in South Australia is connected to the NEM, which also interconnects the networks in Victoria, Tasmania, New South Wales, Australian Capital Territory and Queensland. At 10 times the installed generation capacity of the next largest electricity network, the South West Interconnected System (SWIS) in Western Australia, it is by far the largest electricity network in the nation (see Table 3).37

34 IAEA, 2015, Managing Radioactive Waste: Making a Difference with Nuclear Technology

35 World Nuclear Organisation, 2015

36 Ibid.

37 Australian Energy Regulator (AER), 2014, State of the Energy Market 2014, Australian Government, Melbourne


Page 19 of 46

Table 3: Characteristics of the NEM

Characteristics National Electricity Market

Geographical coverage South Australia, Victoria, Tasmania, New South Wales, Australian Capital Territory, Queensland

Installed capacity 47,779 MW

Number of registered generators 322

Number of customers 9.5 million

Turnover 2013-14 $10.8 billion

Total energy generated 194 TWh

Maximum winter demand 30,114 MW

Maximum summer demand 33,610 MW

A substantial share of generation capacity in the NEM is coal fired, with 25,527 MW or 53 per cent of installed capacity, which accounted for 74 per cent of electricity output in the NEM in 2013-14 (see Table 4).38

Table 4: Coal fired generation capacity (MW) in the NEM

South Australia Victoria New South Wales Queensland

Facility Capacity Facility Capacity Facility Capacity Facility Capacity

Northern 544 Loy Yang A 2,210 Bayswater 2,640 Stanwell 1,460

Loy Yang B 953 Liddell 2,000 Tarong 1,400

Hazelwood 1,542 Eraring 2,880 Tarong North 443

Yallourn 1,480 Mt Piper 1,400 Callide A&B 820

Angelsea 150 Vales Point 1,320 Callide C 810

EnergyBrix 195 Gladstone 1,680

Millmerran 850

Kogan Creek 750

Total 544 6,530 10,240 8,213

Notwithstanding the interconnectedness of the network, many of the NEM jurisdictions are reliant on a single, or few, fuel sources for baseload generation. New South Wales and Queensland are heavily dependent on black coal, Victoria on brown coal, Tasmania on hydro and South Australia on gas, although it also imports approximately 14 per cent of its requirements from Victoria.39

The fundamental purpose of the NEM is to allow electricity to be traded between jurisdictions in the market for optimal resource allocations and general trading trends have emerged in trading practices (see Table 5Error! Reference source not found.).40

38 Ibid.

39 Australian Energy Market Operator (AEMO), 2014, South Australian Electricity Report: South Australian Advisory Functions, Australian Government, Sydney

40 Adapted from AER, 2014


Page 20 of 46

Table 5: Net electricity trade flows in the NEM

Region Net import/export

Reason

Victoria Exporter Low cost coal production is imported by NSW and SA, albeit exports to these two regions have been offset by hydro generation imports from Tasmania

Queensland Exporter Surplus capacity and low fuel prices

NSW Importer Relatively high fuel costs

South Australia Importer Relatively high gas fired capacity compared to Victoria’s low cost coal capacity and exports wind energy in high demand periods

Tasmania Volatile Drought affects hydro capacity

Interaction with emissions abatement policy

Electricity generation is one of the primary sources of emissions in Australia. This makes generation one of the key targets for emissions abatement policy responses to deliver on successive Australian Governments’ commitments to reduce emissions by five per cent of 2000 levels by 2020.41

The key policy instruments to curb GHG emissions have been the Renewable Energy Target, the carbon pricing mechanism, and the Direct Action Plan. These policies, and more recent changes in the dynamics of the eastern states gas market, have driven changes in the generation portfolio and dynamics of the NEM and saw approximately 2,000 MW of capacity shut down or periodically taken offline under the carbon pricing mechanism.42

Change in the dynamic of the eastern states domestic gas market

There is currently 10,132 MW of gas fired generation capacity in the NEM (see Table 6).

Table 6: Gas fired generation capacity (MW) in the NEM

South Australia Victoria Tasmania New South Wales Queensland

Facility MW Facility MW Facility MW Facility MW Facility MW

Torrens Island

1,280 Somerton 150 Tamar Valley

210 Hunter Valley

50 Darling Downs

630

Pelican Point

479 Laverton North

320 Bell Bay 345 Uranquinty 640 Roma 74

Dry Creek 156 Valley Power

300 Colongra 667 Braemar 2 450

Mintaro 90 Longford 31 Tallawarra 435 Braemar 1 502

Quarantine 210 Jeeralang A and B

450 Smithfield 162 Oakey 332

Ladbroke Grove

80 Newport 510 Yabulu 220

Hallet 180 Mortlake 550 Yarwun 160

Osborne 180 Bairnsdale 94 Condamine 140

Barcaldine 55

Total 2,655 2,405 555 1,954 2,563

41 Department of the Environment, 2014, Emissions Reduction Fund White Paper, Australian Government, Canberra

42 AER, 2014


Page 21 of 46

Gas for these facilities is sourced from 11 separate basins in the eastern states and total approximately 51,000 petajoules of natural gas, around 85 per cent of which is in the form of coal seam gas.43 Gas produced from operations located on these basins is traded across state boundaries via a pipeline network comprised of 11 separate gas transmission pipelines.

Until recently, there has been no trade link between Australia’s east coast gas market and global gas markets, as there has been no means by which domestic gas suppliers have been able to divert supply from lower priced domestic markets to attractive international export markets.44 As a result, domestic wholesale contract prices have been stable and low by international standards.

However, delineation of significant coal seam gas reserves, combined with the prospect of higher LNG export prices, has underwritten substantial investment in the development of three LNG export projects (see Table 7).

Table 7: Eastern states LNG projects

Project Proponents LNG train capacity (mtpa)

Initial number of

trains

Project size (mtpa)

Gas per annum (PJ)

Scheduled start-up

Asia Pacific LNG

Origin, Sinopec, ConocoPhillips

4.5 2 18.0 540 Q2 – 2015

Gladstone LNG

Santos, Kogas, Petronas, Total

3.9 2 12.0 464 Q1 – 2015

Queensland Curtin LNG

QGC, CNOOC, Tokyo Gas

4.25 2 13.5 510 Q2 – 2014

While new fields have been developed to service the LNG market, other fields servicing the domestic gas market are connected to the network that services the LNG facilities. This provides for the potential for domestic gas production to be diverted to the LNG market to capitalise on higher prices, which could potentially drive higher domestic gas prices.

The tightening of supply conditions from generator shutdowns led to an upswing in generation investment from 2008 to 2010, with over 4,000 MW of new capacity, primarily gas fired capacity in New South Wales and Queensland, added in those years.45

Current NEM market dynamics

Electricity consumption has decreased on the NEM from a peak of around 210 terawatt-hours (TWh) in 2008-09 to its currently level of 194 TWh. Between December 1998 and June 2014, new investment added over 14,400 MW of registered generation capacity (an average of 1,000 MW per annum), with additional investment having been made in generation not connected to the transmission grid, including investment in solar photovoltaic installations.

This reduction in demand, combined with investment in capacity, is resulting in a widening oversupply, with the Australian Energy Market Operator projecting no NEM region will require additional capacity to maintain supply-demand adequacy for the next 10 years.46

43 Intelligent Energy Systems, 2013, Study on the Australian Domestic Gas Market, Department of Industry, and Bureau of Resources and Energy Economics

44 Wood, T. & Carter, L., 2013, Getting Gas Right: Australia’s Energy Challenge, Grattan Institute

45 AER, 2014


Of the 2,600 MW of capacity added over the four years to 30 June 2014, 63 per cent was in wind generation, subsidised by the Renewable Energy Target. The balance of investment over the past four years was in gas fired plant in Victoria, South Australia and Queensland. The only investment in coal fired generation related to upgrades of the Era ring Power Station in New South Wales.47 Much of the baseload generation fleet in the NEM is therefore ageing.

While the date of first commissioning of installed capacity does not necessarily take into account subsequent expansion and refurbishment of facilities, approximately 58 per cent of coal fired, 24 per cent of gas fired and 95 per cent of hydroelectric baseload capacity in the NEM was first commissioned more than 30 years ago (see Figure 6). Some large utilities with assets in the NEM have indicated their intention not to expand their conventional coal fired generation capacity and to retire existing capacity in the future.48

Figure 6: First commission ing date of operational baseload capacity in the NEM

8,000

7,000

§' 6,000 6 ;:::. 5,000 ·o C1! ~ 4,000

"0 3,000 .E! s

I t/) 2,000 .E

1,000 I I

• Coal (Mwe) • Gas (Mwe) • Hydro (MWe)

As at July 2014, the NEM had around 650 MW of committed new wind and commercial solar projects, approximately 70 per cent of which are located in New South Wales. As a result of these trends, the NEM is understood to have approximately 7,600 to 9,000 MW of surplus capacity, with approximately 90 per cent in New South Wales, Queensland and Victoria.

In addition, there was approximately 20,000 MW of proposed but uncommitted new capacity across the NEM as at July 2014, comprised of wind (59.8 per cent), gas (24.6 per cent), coal (1 0.5 per cent), solar (2.6 per cent), geothermal (0.3 per cent) and others (2.2 per cent).49

46 AEMO, 2015, Electricity Statement of Opportunities, Australian Government, Sydney 47 AER, 2014 48 AGL Energy, 2015, Greenhouse Gas Policy,

www.agl.com.au/- /media/AGL/About%20AGL/Documents/Media%20Center/Corporate%20Governance%20Po licies%20Charter/1 704015 GHG Policy Final.pdf

49 AER, 2014

Page 22 of46 Q cME


Page 23 of 46

Role for nuclear energy

Given the decline of large energy users in manufacturing, the adoption of renewable energy technology developments, and other technology changes (including battery storage and electric vehicles), it is challenging to forecast demand patterns on the NEM into the future.

While it is currently forecast investment in new baseload capacity will not be required in the NEM for the foreseeable future, the retirement of existing, ageing generators means there will be a need for investments in baseload generation at some stage beyond the forecast decade.

Nuclear generation capacity in South Australia could meet the need for future generation capacity in replacing retired generators, provide a third baseload generation fuel option to diversify energy sources and underpin energy security in the NEM, and have a substantial impact on reducing Australia’s GHG emissions.

While this nuclear generation could be conventional, large scale baseload capacity reactors, emerging, small scale reactor technology currently in development could also provide more flexible options for smaller capacity shortfalls in the NEM and compete with or complement other emerging technologies in renewable energy, grid infrastructure, energy storage and technologies providing cleaner generation from fossil fuels.

In any event, a domestic nuclear generation sector would be expected to have a lead time of at least a decade to develop in Australia and planning for the regulations and protocols to enable the sector should accordingly begin well in advance of any forecast shortage in installed capacity.

A receptive community

South Australians have lived with a uranium industry for over half a century. Since the production of uranium as a by-product of radium mining at Radium Hill and Mount Painter in the 1930s and mining specifically targeting uranium in the 1950s,50 the community has lived with uranium exploration, mining, processing to U3O8 and transportation of U3O8 without any significant incidents. This has resulted in a higher level of acceptance of the industry than is the case in some other parts of Australia.

Indeed, surveys indicate the vast majority of South Australian residents are either supportive or neutral on the growth of the uranium industry or expansion into other elements of the nuclear industry. For example, in one recent survey:51

o 74 per cent of respondents either supported or were neutral toward uranium mining in South Australia;

o 54 per cent supported expanded uranium mining and 18 per cent were undecided as to whether there should be expanded uranium mining in South Australia;

o 68 per cent of respondents supported or were neutral toward the development of nuclear energy;

o 64 per cent of respondents either believed or were neutral toward the notion of nuclear energy being a sustainable and environmentally sound power alternative;

o 77 per cent of respondents believed nuclear energy was either an important contributor to reducing Australia’s GHG emissions, an alternative to be considered or were undecided as to nuclear energy’s role in Australia’s response to managing climate change; and

50 MCA, 2015

51 South Australian Chamber of Mines and Energy, 2014, South Australian Attitudes on Uranium and Nuclear Power


Page 24 of 46

o 76 per cent of respondents either agreed or were neutral as to whether nuclear energy will eventually form part of Australia’s energy mix.

Domestic Nuclear Industry beyond the Borders of South Australia

Western Australia hosts one of the largest and most sophisticated export oriented minerals sectors in the world, providing a solid foundation for the growth of uranium production in the state and a potential source to meet future demand for nuclear energy.

Western Australia is highly prospective but underexplored for uranium resources. There are at least 16 projects with JORC compliant uranium resources, including five advanced uranium projects: Kintyre, Manyingee, Mulga Rock, Wiluna and Yeelirrie.

Western Australia’s eight state operated industrial ports are experienced in exporting a range of mineral commodities, although market conditions, lack of export accreditation, and State Government policy currently prohibit U3O8 exports.

Western Australia also hosts several sites deemed suitable locations for a permanent radioactive waste storage facility.

Deployment of nuclear energy generation in the SWIS would displace ageing generation and diversify from gas and coal fired generation. Emerging, small scale reactor technologies could also play a future role in displacing costly off-grid distillate fired generation, particularly in regional and remote locations hosting resources sector operations.

Like South Australia, the Western Australian community is more receptive to an expanded nuclear sector than some other parts of Australia.

The Western Australian minerals sector

In 2013-14, Western Australia produced GSP of approximately $214 billion, equivalent to 14 per cent of GNP. This represents GSP per capita of $82,660.52 The current unemployment rate in Western Australia is 5.1 per cent.53 In 2013-14, Western Australia exported merchandise with a value of $125.3 billion, representing just under half the value of the nation’s merchandise exports.54

In addition to Western Australia’s rapidly expanding LNG and gas industry, the state’s world class and diverse minerals sector has been the major driver of strong economic performance, particularly over the past decade. In 2013-14, the state’s minerals sector production value was approximately $86.5 billion (see Figure 7).55

As at May 2015, Western Australia’s resources sector directly employed approximately 96,200 people across a wide range of management, professional, technician, trade, semi-

52 ABS, 2014, Australian National Accounts: State Accounts, 2013-14, cat. no. 5220.0

53 Department of Employment (2015), Labour Force Region – Unemployment Rate by State and Territory, Australian Government, Canberra

54 DMP, 2015, Western Australian Mineral and Petroleum Statistics Digest 2014

55 Ibid.

skilled and

Nid<el, 3,614 , 4%

Alumina, 4,559 , 5% __ _

Gol<l, 8,715 , 10%

Figure 8).56,57,58

labourer Copper, 1.435 . 2%


roles (see

other, 2,160 . 3%

Iron Ore, 66,057 , 76%

Supporting the Western Australian resources sector at every stage of the value chain is a diverse and competitive mining services sector, a vocational education and training sector and higher education and research sector providing the industry with a robust supply of expertise and skills.

This sets a strong foundation for the accelerated development of a uranium sector in Western Australia when price signals are right, as well as a source of demand for future nuclear energy.

56 ABS, 2015, Labour Force Quarterly, February 2015, cat. no. 6291.0 57 Lowry, D., Molloy, S. & Tan, Y., 2006, The Labour Force Outlook in the Minerals Resources Sector 2005-2015,

National Institute of Labour Studies, Flinders University, Adelaide 58 DMP, 2015

Page 25 of46 Q cME


Figure 7: Commodity contribution to Western Australian minerals sector, 2013-14 ($million,% of total)

Nicl<el, 3,614 . 4% Copper, 1,435. 2%

other, 2,160 . 3%

Alumina, 4,559 • 5% __ _

Gold. 8,715 . 10%

Iron Ore, 66,057 • 76%

Figure 8: Employment by commodity in the Western Australian minerals sector (number, % of total)

Coal, 896 . 1% Salt, 1,012. 1% Diamonds, 1,365 . 1% Mineral Sands, 2,343.

Manganese, 541 • 1% -----...:::::::~

Iron Ore. 60.844 • 57%

Current uranium resources and advanced projects

Western Australian uranium resources

2%

Other, 6,749 . 6%

Bauxite Alumina, 7,531 ,7%

Western Australia is considered highly prospective but relatively underexplored for uranium resources. Known uranium resources in Western Australia are hosted in one of three59 types of mineralisation:

59 Uranium is also known to be associated with mineral sands and rare earth deposits in Western Australia

Page 26 of46 Q cME


Page 27 of 46

o Surficial calcrete

Surficial calcrete occurs where calcium carbonate (CaO3) is predominant in a hard surface crust that has formed, usually in arid climates, as a result of prolonged evaporation. Where the bedrock contains high levels of uranium, the calcrete is locally uraniferous and may constitute an economic ore. In addition to Western Australia, such deposits are also found in Namibia.

o Roll-front sandstone

Sandstone is a sedimentary rock type formed of lithified sand, comprising grains between 63-1,000 µm in size, bound together with a mud matrix and mineral cement formed during burial. The mechanism for deposit formation is dissolution of uranium from the formation or nearby strata and the transport of this soluble uranium into the host unit. When the fluids change redox state, generally in contact with carbon-rich organic matter, uranium precipitates to form a front.

o Unconformity vein type

Vein type is an ore body confined within a sheet-like structure as a result of magmatic activity or deposition from circulating ground water. They occur in proximity to major unconformities between relatively quartz rich sandstones of relatively undeformed sedimentary basins and deformed metamorphic basement rocks.

Currently there are at least 16 projects in Western Australia with JORC compliant uranium resources. Collectively, this resource equates to 290.2 million pounds of contained U3O8 in measured or indicated resources and 159.1 million pounds of contained U3O8 in inferred resources (see Table 8).

Table 8: Western Australian uranium projects

Project Owner Mineralisation Likely mine type

Contained U3O8

(measured or indicated,

million lbs)

Contained U3O8

(inferred, million

lbs)

Yeelirie Cameco Surficial calcrete Open cut 127.3

Mulga Rock Vimy Resources Roll-front related and sandstone

Open cut 23.5 49.2

Kintyre Cameco & Mitsubishi

Unconformity related and vein type

Open cut 55.2 9.6

Wiluna60

Toro Energy Surficial calcrete Open cut 61.2 15.3

Manyingee Paladin Energy Roll-front related and sandstone

In situ recovery

15.7 10.2

Ponton Manhattan Corporation

Roll-front related and sandstone

Open cut 17.2

Thatcher Soak

Magnis Resources

Surficial calcrete Open cut 10.8

Carley Bore Paladin Energy Roll-front related and sandstone

In situ recovery

5.0 10.6

Yanrey Cauldron Energy


In situ recovery

5.5

60 The Wiluna project incorporates the Centipede, Millipede, Lake Maitland, Lake Way, Dawson Hinkler and Nowthanna deposits


Page 28 of 46

Project Owner Mineralisation Likely mine type

Contained U3O8

(measured or indicated,

million lbs)

Contained U3O8

(inferred, million

lbs)

Hillview Encounter Resources and Avoca

Surficial calcrete Open cut 10.6

Anketell Energy Metals Surficial calcrete Open cut 6.0

Lake Raeside-Mopoke Well

Energy Metals Surficial calcrete Open cut 3.6

Lake Mason Energy Metals Surficial calcrete Open cut 2.3 1.4

Yilgarn-Avon JV

Mindax and Quasar Resources


Open cut 3.2

Wondinong Aura Energy Surficial calcrete Open cut 2.6

Lakeside-Lake Austin

Energy Metals Surficial calcrete Open cut 2.8

Total 290.2 159.1

There are also a number of pre-resource definition projects with significant uranium exploration targets, including Paladin Energy’s Oobagooma project and Toro Energy’s Theseus project.

Advanced Western Australian uranium projects

In terms of resource and project development, the most advanced of these projects are the Wiluna, Yeelirrie, Kintyre, Mulga Rocks and Manyingee projects (see Figure 9, Figure 10 and Table 9).61

61 Most recently released JORC compliant resource statements for each company as at July 2015


Figure 9: Measured or indicated resource of advanced Western Australian uranium projects

"' Q) c: c:

60

50

40

B 30 c: ~ ~ 20

10

0 Yeelirrie

(Cameco) Mulga Rock

(Vi my Resources)

•

• Kintyre (Cameco)

Wiluna (Toro Energy)

• Tonnes e Grade

Manyingee (Paladin Energy)

0.7

0.6

0.5 -0 0.4 :5'

<F. .._..

0.3 ~ ~

<.9 0.2

0.1

0

Table 9: Owners and operators of advanced Western Australian uranium projects

Company Description

Cameco

Mitsubishi Development

Paladin Energy

Toro Energy

Vimy Resources

Page 29 of46

Cameco is one of the world's largest producers of uranium, supplying approximately 16 per cent of global supply from operations in Canada, United States and Kazakhstan. It is an integrated nuclear fuel manufacturer, supplying much of the world's current reactor fleet. It is the owner-operator of Yeelirrie and the operator and an owner of Kintyre.

Mitsubishi Development is a subsidiary of the Japanese trading and investment company, Mitsubishi Corporation. Various fully-owned subsidiaries of Mitsubishi Corporation hold interests in iron ore, coal and gas production in Australia. Mitsubishi Development holds a 30 per cent interest in the Cameco operated Kintyre project.

Paladin Energy is an Australian uranium company with producing assets in Africa and projects under development in Western Australia, the Northern Territory and Queensland. Paladin is the owner-operator of the Manyingee project.

Toro Energy is a Western Australian based company focused on the development of a portfolio of uranium projects in Western Australia and the Northern Territory. Toro Energy is the owner-operator of the Wiluna project.

Vimy Resources is a Western Australian based company focused on the development of a single uranium project, the Mulga Rocks project.

Q cME


Figure 10: Location of advanced Western Australian uranium projects

e Reslonal centres with resources Industry Infrastructure

Port Hedland Karratha • •

Onslow•

M eekatharra •

Geraldton •

Derby•

Broome e

• Newman

w l II:., • •

' •

e Kalgoorlie

• Esperance

Wyndham • Kununurra e

Halls Creek •

The current status of the advanced Western Australian uranium projects is as follows:

o Kintyre

The Kintyre project is located around 80 kilometres south of Telfer and 260 kilometres northeast of Newman. In 2008, Cameco acquired Rio Tinto's 70 per cent interest in Kintyre for US$346 million. In 2012, Cameco completed a pre-feasibility study for the project based on an open pit mining methodology and executed an Indigenous Land Use Agreement with the Traditional Owners of the country on which the project is located, the Martu People. In 2014, Western Australian's Environmental Protection Authority recommended conditional approval of the Environmental Review and Management Program for the project and Australian Government environmental approval was granted in April2015.

o Manyingee

The Manyingee project is located around 85 kilometres east of Onslow. Paladin Energy acquired the project in 1998 and its previous owners had completed over 400 drill holes to establish the extent and continuity of the mineralisation hosting the resource and the suitability of the resource to in situ recovery. A proposal is currently being prepared to conduct a field leach trial.

o Mulga Rock

The Mulga Rock Project is operated by Vimy Resources and is located 240 kilometres east-northeast of Kalgoorlie. The project shares access infrastructure with the AngloAshanti Australia operated Tropicana gold mine. The 900 square kilometres

Page 30 of46 Q cME


Page 31 of 46

of tenements that comprise the project are prospective for multiple mineral commodities and includes a defined uranium resource. Vimy expects to commence a pre-feasibility study for the project in the third quarter of 2015.

o Wiluna

The Wiluna project is located around 30 kilometres south of the town of Wiluna and is comprised of the Centipede, Millipede, Lake Maitland, Lake Way, Dawson Hinkler and Nowthanna deposits. Wiluna is on track to become Western Australia’s first uranium mine. Final approval from the Environmental Protection Authority was granted in October 2012 and from the Australian Government in April 2013. In 2014, an independent mining scoping study was completed.

o Yeelirrie

The Yeelirrie Project is located around 420 kilometres north of Kalgoorlie, 70 kilometres southwest of Wiluna and 110 kilometres northwest of Leinster. First discovered in 1972 by Western Mining Corporation, Yeelirrie was subsequently absorbed into BHP Billiton as part of its acquisition of Western Mining Corporation and then was acquired by Cameco in 2012 for US$430 million. Today it is the world’s largest surficial uranium deposit. The resource is well defined with over 10,000 drill holes having been completed since 1972. In 2014, Cameco commenced the environmental approvals process for the project while technical and financial studies for the project continue.

Uranium export capacity

There are eight state operated industrial ports located along the Western Australian coastline, operated by five state Port Authorities. In addition, there are several privately operated ports. The vast majority of these ports have substantial experience in exporting a range of mineral commodities. However, no ports in Western Australia are accredited to export U3O8.

Further, shipping U3O8 through Western Australia’s ports remains prohibited by State Government policy. It must instead be exported through Port of Darwin or Port Adelaide, despite clearly carrying no inherent additional risk compared to exporting through ports in South Australia or the Northern Territory, from which Australian U3O8 has been exported for over 30 years without any reported transport incidents.62

The most likely production scenario for the advanced projects is that until there is adequate production to justify an investment in establishing accredited port facilities, and until any changes in State Government policy are secured, those projects would seek to export product through the accredited facilities at Port Adelaide or the Port of Darwin.

Potential waste disposal sites

As is the case for South Australia, studies designed to identify suitable sites to construct a surface or geological storage facility have identified sites in Western Australia that by virtue of their remoteness, limited alternative land uses, tectonic stability and suitable geology and hydrology are suitable.63

62 DMP, 2013. Guide to Uranium in Western Australia

63 National Resource Information Centre, 1994, A Radioactive Waste Repository for Australia: Site Selection Study, Department of Primary Industries and Energy, Commonwealth of Australia, Canberra


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Energy Markets in Western Australia

Western Australia’s nuclear energy history

There have been periods in Western Australia’s history when it was considered nuclear energy would inevitably be a future generation option. From as early as 1955, nuclear energy was first considered in the ‘Plan for the Metropolitan Region’ and the State Energy Commission (SECWA) began examining nuclear energy options from the early 1970s. With an expectation of high demand growth for electricity use and an ambition to create more value adding for local resources, in mid-1978 then Premier Sir Charles Court announced Western Australia would need nuclear energy by 1995.

During the 1980s, with the legacy of Three Mile Island and Chernobyl, public opinion shifted. Nuclear energy eventually went from a future option to being considered not suitable for Western Australia. However, with around 15 years of earlier planning work, there were a number of institutional and administrative actions undertaken to lay the foundations for the industry. For example, on 15 June, 1979, the State Government announced SECWA had identified sites near Guilderton (an hour north of Perth) that would be suitable for a future nuclear plant. The State Government gazetted 234 hectares of land at Breton Bay and undertook development studies. The land was acquired by SECWA in 1981 and preparatory work continued until 1983. The option was in place until May 2006 when Western Power, the successor to SECWA, was disaggregated and the land transferred to the state’s Department of Regional Development and Lands.

As recently as 2008, the then Western Australian Nationals Leader and Minister for Regional Development, Brendon Grylls, confirmed the site was acquired and reserved for the purpose of a ‘power station site’.64

South West Interconnected System

The SWIS is the second largest interconnected electricity market in Australia, albeit a fraction of the size of the NEM. Around 90 per cent of Western Australian’s population of around 2.6 million people reside within the 261,000 square kilometre area delivered electricity by the SWIS (see Figure 11).65 Summer peak demand on the SWIS is approximately 4,000 MW.66

Figure 11: Geographical coverage of the SWIS

64 John Phaceas, 2010, “For Some, Nuclear Option Remains a Part of the National Political Power Play”, WA Business News, January 28, p. 6-7

65 Economic Regulatory Authority, 2015, www.erawa.com.au

66 Independent Market Operator (IMO), 2015, About IMO, www.imowa.com.au/home/about-IMO


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Coal and gas fired generation capacity has consistently accounted for at least 85 per cent of capacity on the SWIS. Dual fuelled generation capacity has declined over the past six years from over a third to 22 per cent of capacity, primarily as a result of the gradual retirement of the Kwinana Power Station.67 Fuel type is strongly correlated with type of generation capacity. For example, relatively inexpensive fuels such as coal and gas are typically used for baseload generation (see Table 10) and mid-merit generation, while diesel is typically used for peaking generation.

Table 10: Baseload capacity (MW) in the SWIS

Coal Gas Coal, gas or oil Gas or coal Gas or distillate

Facility MW Facility MW Facility MW Facility MW Facility MW

Collie 340 Cockburn 240 Kwinana68

420 Worsley 120 West Kalgoorlie

60

Bluewaters 416 Kemerton 310 Geraldton 21

Muja (A, B, C & D)

1,094 Pinjar 584 Wagerup 380

Munjara 112

Pinjarra 285

Total 1,850 1,531 420 120 461

Similarly to the NEM, the SWIS is currently an oversupplied market with approximately 5,860 MW of certified capacity in 2014-15 (expected to decline to 5,680 MW in 2015-16) to serve an expected capacity requirement in 2015-16 of approximately 4,520 MW. Almost half of the new generation capacity commissioned in the SWIS since 2007 is coal fired generation and approximately one third is gas fired. The remaining new capacity comprised a combination of demand side management, renewable and diesel generation.69

Since the market mechanism enabling independent power producer participation in the SWIS was established in the mid-2000s, the generation portfolio of the state owned generator, Synergy, is substantially older than most facilities operated by independent power producers. Despite the recent retirement of a number of 45 year old generators at the Kwinana Power Station, the average age of Synergy’s facilities will exceed 30 years by 2023-24 and Vinalco Energy’s70 recently refurbished Muja AB generators are 50 years old.71

Assuming no generators in the current portfolio are retired in the next decade, by 2025 approximately 26 per cent, or 1,265 MW of existing baseload and mid-merit capacity in the SWIS, will exceed 30 years of age. By 2035, the proportion of baseload and mid-merit plant exceeding 30 years will extend to approximately 35 per cent, or 2,700 MW.

Off-SWIS generation

Generation capacity also exists in Western Australia’s North West Interconnected System (NWIS) and off-grid.

67 IMO, 2015, Electricity Statement of Opportunities – June 2015

68 Scheduled to retire in 2015


70 Vinalco Energy is a 50:50 joint venture between state owned utility, Synergy, and Inalco Energy, a private sector market participant

71 Ibid.


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North West Interconnected System

The NWIS is located in the state’s Pilbara region and is operated by several private and state owned companies. Approximately 80 per cent of electricity sent out on the NWIS and other connected networks is consumed by 16 resources sector projects, with approximately 20 per cent consumed by the retail market in connected towns.72

By virtue of its proximity to the Carnarvon Basin and associated domestic gas facilities, gas accounts for 98 per cent of the 993 MW of generation capacity on the NWIS and connected systems, with liquid fuels accounting for a further 1.6 per cent, and solar for 0.4 per cent.73

Off-grid

Western Australia has by far the largest off-grid generation capacity in Australia (see Figure 12).74 Gas accounts for approximately 78 per cent of off-grid generation capacity in Western Australia, primarily as a result of the proximity of many resources sector projects, which have substantial energy needs, to the state’s gas distribution infrastructure and the increasing use of trucked LNG to remote generation facilities distant from the pipeline infrastructure. Liquid fuel accounts for an additional 20 per cent of off-grid generation capacity, with the balance provided by a small amount of wind, solar, hydro and other renewable capacity.

Resources sector projects account for approximately 91 per cent of off-grid electricity use. The other main source of off-grid demand is residential load associated with remote centres across Western Australia, which accounts for approximately eight per cent of the off-grid usage.75 Total off-grid capacity in Western Australia is approximately 2,169 MW.76

Figure 12: Off-grid generation capacity

The 3,372 MW of capacity not connected to the SWIS (i.e. NWIS and connected systems, and off-grid) is comprised of approximately 140 individual generation facilities. These range in capacity from 450 MW to a large number of sub-1 MW facilities. Included in this generation portfolio are 44 gas fired facilities ranging in capacity from one to 450 MW.

72 ACIL Allen Consulting, 2013, cited in: Bureau of Resources and Energy Economics, 2013, Beyond the NEM and SWIS: 2012-12 Regional and Remote Electricity in Australia, Australian Government, Canberra

73 Ibid.

74 Bureau of Resources and Energy Economics (2013)

75 ACIL Allen Consulting, 2013

76 Ibid.

-

500

1,000

1,500

2,000

2,500

WesternAustralia

NorthernTerritory

Queensland South Australia Tasmania

Capacity (

MW

)


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However, there are also 73 liquid fuel generation facilities ranging in capacity from less than one to 58 MW, including 17 facilities with capacity of greater than 10 MW, all of which are associated with minerals projects.77

Case for nuclear energy in the SWIS

Energy security

Western Australia’s heavy reliance on gas for electricity generation presents a critical energy security risk for the state. Gas accounts for just under half of electricity generation within the SWIS and approximately 70 per cent of generation across Western Australia.

The vast majority of supply is concentrated across a few large suppliers, and demand is similarly concentrated across eight large energy generation and industrial customers, accounting for over 90 per cent of Western Australia’s natural gas demand.78 All but a very small amount of the gas supplied to these customers via the state’s pipeline infrastructure is supplied under medium to long term bilateral contracts, with relatively thin short term or spot markets.79

The terms of supply in medium and long term bilateral contracts accounting for the majority of the domestic gas market are variable and confidential. The combination of concentrated supply and demand, long term contracting under confidential terms and conditions and a thin short term market, has resulted in a relatively illiquid and short term inelastic Western Australian domestic gas market.80

The State Government’s domestic gas reservation policy requires producers of gas in Western Australia to supply a portion of production to the domestic market, with the price at which the gas is supplied determined by market forces. While improvements to market transparency and liquidity will foster further competition and price discovery, gas supplied above the reserved amount potentially competes with regional demand for LNG and new domestic contracts are expected to be higher than historical prices.

The presence of nuclear generation would potentially alleviate some uncertainty in energy generation created by the state’s dependency on natural gas.

Capacity mix

Similarly to the dynamic in the NEM, the capacity dynamic in the SWIS has been driven by the reduction in consumer demand (primarily as a result of the uptake of residential scale renewables, improving energy efficiency in technology and buildings, and price increases), entry of non-generation (demand side) capacity and the unanticipated refurbishment of retired coal fired capacity.

The portfolio of baseload and mid-merit capacity is ageing and there is a relative shortage of mid-merit capacity, therefore some mid-merit load is being satisfied with peaking or baseload generation, representing an inefficient use of capacity, potentially leading to higher costs. As ageing plant is retired it needs to be replaced with a capacity mix, driven by the appropriate market investment signals, to reflect the load characteristics of the market.

Diversity of fuel types in generation capacity is critical to mitigating against the risk of failure or restrictions in the supply of a particular fuel type. Access to coal fired, distillate fired and dual fuelled generation capacity was fundamental to containing the impact of the Varanus Island gas supply disruption in June 2008. The impact of the February 2011 gas supply

77 Bureau of Resources and Energy Economics, 2013

78 Intelligent Energy Systems, 2013

79 Ibid.

80 Ibid.


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disruption from Varanus Island due to Tropical Cyclone Carlos was also mitigated by fuel diversity and the contribution of demand side management.81

However, dual fuelled capacity in the SWIS has declined significantly and now represents approximately 20 per cent of certified capacity. There are no incentives in the market to attract investment in new dual fuel generation capacity. Coal is currently the only alternative baseload fuel in the SWIS; however, several of the coal fired plants have experienced outages for prolonged periods of time (e.g. Muja AB generator 1 for 46 per cent of the 2014 capacity year).

In the event of another major gas supply disruption, the SWIS would be largely reliant upon available coal generation capacity and distillate supplies given the comparatively small capacities and limitations in dispatching renewable energy and demand side management. Distillate generators source fuel stocks directly from oil companies that typically carry limited stocks for 10 to 15 days of refinery consumption. Prolonged use of diesel for energy generation is highly likely to place strains on the supply chain.

Emergency distillate supplies were required to be sourced from Singapore in order to respond to the Varanus Island incident in 2008. Concerns have since been raised in Western Australia’s Wholesale Energy Market regarding the likely impact of any future gas disruption if it were to extend beyond a few weeks, leading to a significant risk rolling blackouts could occur.

Nuclear generators typically have a long technical life and can fulfil both baseload and mid-merit generation, providing a reliable and efficient alternative to gas or coal. Nuclear generation capacity would provide an alternative energy source in the capacity mix and reduce dependency on distillate and/or coal in the event of major outages or supply disruption.

Advances in emerging, small scale nuclear technology could be well suited to deployment in the SWIS on account of the network’s comparatively small size and the inherent mismatch in replacing retired generators (typically in the vicinity of 250 to 600 MW in the SWIS at present, see Table 10) with traditional, large scale reactor technology, which benefits from economies of scale and generally must be greater than 1,000 MW installed capacity.

As with deployment on the NEM, emerging reactor technology could compete with or complement other emerging technologies in renewable energy, grid infrastructure, energy storage and technologies providing cleaner generation from fossil fuels.

Emissions reduction

In November 2014, the Carbon Farming Initiative Amendment Act 2014 (Cth) was passed, establishing the Emissions Reduction Fund, which will provide financial incentives through funding of approximately $2.55 billion, to households, businesses and local and state governments to reduce carbon emissions.82

Nuclear energy generation contributes nearly zero direct greenhouse gas emissions and low whole-of-lifecycle emissions, similar to renewable technologies such as wind and solar and a fraction of traditional fossil fuel generation technologies.

Case for nuclear energy in the NWIS and off-grid

While emerging reactor technology could play a role in the SWIS it may be especially well suited to off-grid application in Western Australia, given the regional and remote locations of many load centres, lack of diversity in fuel supply options and reliance on costly liquid fuel fired generation as the primary, and only, fuel source in many circumstances.


82 Department of the Environment, 2014


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As grades decrease and mining and processing becomes more energy intensive, this option might be particularly attractive to off-grid minerals projects requiring a capacity of around 10 MW (or greater) currently supplied by liquid fuel fired generators.

There are several small scale nuclear reactors, using both modular and advanced reactor technologies, currently under development (see Table 11).83 However, the successful commercialisation of these technologies will clearly be a critical step in providing an alternative to traditional generation sources, both for nuclear energy and other baseload generation fuels.

Table 11: Evolution of nuclear reactor technology

Light water reactor Small modular reactor Advanced reactor

Design features Uses water to cool uranium fission reactions

Most are similar to light water reactors, but have been reduced in size and complexity

A range of designs with coolants ranging including water, molten salt, liquid metal and gases

Size 800 to 1,600 MW Modular units with capacity less than 300 MW

Scalable from 2 to 1,200 MW

Cost to construct (US$/kW)

US$2,600 to US$6,600 (average US$4,000)

Estimated at US$3,200 to US$16,300 (average US$4,000)

Estimated at US$2,500 to US$3,900

Time to construct 4.5 to 6 years (onsite modules)

1.5 to 2.5 years (factory modules)

1 to 5 years (factory or onsite modules)

Spent fuel (mt/annum)

Average 20 mt 33.6 mt 0.5 to 1 mt (can use 55 mt)

Operations Existing light water reactors need an operator to shutdown, albeit new designs may not require immediate operator intervention

Shutdown without immediate operator intervention

‘Walk-away safe’ without operator intervention

Proliferation risk Requires uranium enrichment

Requires slightly more fuel with uranium enrichment

Can use enriched uranium, depleted uranium or used nuclear fuel

Expected commercial application

Now 2020 to 2025 2025 to 2030

A receptive community

Minerals production and processing occurs across every region of Western Australia and many of its residents are employees of resources sector companies or organisations servicing these companies. As a result, the majority of the population of Western Australia are familiar with the activities of the resources sector and are supportive, if not enthusiastic, with respect to the prospect of its future growth.

Internal CME polling indicates the level of community support for uranium mining is similar to South Australia, with approximately two-thirds of the community either supportive or indifferent toward uranium mining and this support has been the case for at least the last five years.

83 Brinton, S., 2015, ‘The advanced nuclear industry’, Third Way


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An Australian Nuclear Industry

The outcomes of the Royal Commission should lead to a wider, national discussion on the future of the nuclear industry in Australia. By virtue of its constitutional powers and existing Commonwealth legislation, it is the Australian Government with ultimate control over the destiny of an expanded nuclear energy industry. Rectifying the regulatory environment, which is prohibitive, complex and inefficient, will be a condition precedent to the future expansion of the Australian nuclear energy industry.

As nuclear generation capacity grows globally, market conditions may emerge rendering a larger portion of Australia’s undeveloped uranium resource economically viable, which could deliver significant economic benefits to the nation.

The combination of Australia’s uranium resources, potential future production and suitability for radioactive waste storage facilities creates an opportunity for Australia to provide a ‘cradle to the grave’ nuclear fuel product to the global nuclear generation industry.

While opportunities for conversion, enrichment and fuel fabrication in Australia will likely be limited by costs, the lack of expertise, security considerations and global excess capacity, the possibility for future participation in these processes should not be totally discounted.

Much of the installed baseload capacity in Australia is ageing and approaching retirement. Nuclear energy generation could progressively displace retired generators, enhance energy security by diversifying into a third baseload generation fuel source, and reduce the nation’s emissions profile to meet Australian Government targets.

An expanded nuclear energy industry would initially be dependent on skills transfer from jurisdictions with established nuclear industries. However, the industry would subsequently provide benefits such as job creation for highly skilled workers, new vocational education and training (VET) and higher education programs, export and taxation revenues, and benefits for regional communities, including Aboriginal communities.

The ultimate outcome from a wider national discussion on the nuclear fuel cycle should be a pathway to the development of an economically rational, environmentally and social sustainable and safe nuclear energy industry, involving expanded uranium exploration, mining and some downstream processing, nuclear energy generation, and waste disposal.

Need for efficient and effective regulation

By virtue of its constitutional powers and legislation restricting the nature of any expanded nuclear industry in Australia, it is the Australian Government that has ultimate control over the destiny of the industry. Nevertheless, each state and territory has its own regulations and policy with respect to exploration for, and mining of, uranium (see Table 12).

Table 12: Recent policy of states and territories regarding exploration and mining of uranium

State/Territory Policy Position on Uranium Mining

Western Australia In 2008, the State Government overturned the pervious State Government’s prohibition of uranium mining for nuclear purposes.

Northern Territory Uranium exploration permitted and mining permitted at one mine.

Queensland Historically, uranium was mined at the Mary Kathleen project up until 1982 when resources were depleted. A policy banning uranium mining was subsequently implemented. This ban was momentarily lifted by the State Government in 2012, but then reinstated by the current State Government. Exploration for uranium is permitted.

New South Wales Both exploration for, and mining of, uranium was prohibited since the mid-1980s. In 2012, the State Government relaxed the prohibition pertaining to uranium exploration but maintained the prohibition on mining uranium.


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State/Territory Policy Position on Uranium Mining

Victoria Exploration for, and mining of, uranium is not permitted.

Tasmania No legislative restriction on uranium mining, but no known significant uranium mineralisation.

Australian Capital Territory N/A

Largely as a result of variable and changing state uranium exploration and mining policies, as well as a somewhat ad hoc approach by the Australian Government to legislate against the development of any downstream nuclear industry activities, the legislative and regulatory framework pertaining to the industry is, in addition to being prohibitive, complex and inefficient (see Table 13).

Table 13: Current state and Commonwealth legislation regarding uranium mining and nuclear energy

Activity Jurisdiction Key legislation/regulation

Uranium mining

Commonwealth Aboriginal Land Rights (Northern Territory) Act 1976

Atomic Energy Act 1953

Environment Protection and Biodiversity Conservation Act 1999

Environment Protection (Alligator Rivers Region) Act 1978

Native Title Act 1993

Nuclear Non-Proliferation (Safeguards) Act 1987

Nuclear Safeguards (Producers of Uranium Ore Concentrates) Charge Act 1993

Western Australia

Environmental Protection Act 1986

Mining Act 1978

Mines Safety and Inspection Act 1994

Northern Territory

Mining Act 1980

Mining Management Act 2001

South Australia Mining Act 1971

Development Act 1993

Radiation Protection and Control Act 1982

Roxby Downs (Indenture Ratification) Act 1982

Environmental Protection Act 1993

New South Wales

Uranium Mining and Nuclear Facilities (Prohibitions) Act 1986 (NSW)

Victoria Nuclear Activities (Prohibitions) Act 1983 (Vic)

Queensland Mineral Resources Act 1989 (Qld)

Tasmania Mineral Resources Development Act 1995 (Tas)

Conversion, enrichment, fabrication and power generation

Commonwealth Australian Radiation Protection and Nuclear Safety Act 1998

Environment Protection and Biodiversity Conservation Act 1999

Nuclear Non-Proliferation (Safeguards) Act 1987

States and territories

Transportation of radioactive material must comply with the ARPANSA Code of Practice for the Safe Transport of Radioactive Material, and meet the requirements of the radiation safety legislation in Item 5.

In addition, the following legislation applies in the Northern Territory:

Radioactive Ores (Packaging and Transport) Act

Transportation Commonwealth Nuclear Non-Proliferation (Safeguards) Act 1987


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Activity Jurisdiction Key legislation/regulation


Transportation of radioactive material must comply with the ARPANSA Code of Practice for the Safe Transport of Radioactive Material, and meet the requirements of the radiation safety legislation in Item 5.

In addition, the following legislation applies in the Northern Territory:

Radioactive Ores (Packaging and Transport) Act

Export and import

Commonwealth Customs Act 1901

Waste management and radiation protection

Commonwealth Commonwealth Radioactive Waste Management Act 2005


Prohibitions on transport and storage of wastes under:

Nuclear Waste Storage and Transportation (Prohibition) Act 1999 (WA)

Nuclear Waste Storage Facility (Prohibition) Act 2000 (SA)

Nuclear Waste Transport, Storage and Disposal Prohibition Act 2004 (NT)

General application:

Nuclear Activities Regulation Act 1978 (WA)

Radiation Safety:

Radiation Protection Act 2006 (ACT)

Radiation Control Act 1990 (NSW)

Radiation Protection Act 2004 (NT)

Radiation Safety Act 1999 (Qld)

Radiation Protection and Control Act 1982 (SA)

Radiation Control Act 1977 (Tas)

Radiation Act 2005 (Vic)

Radiation Safety Act 1975 (WA)

The streamlining of legislation and regulation pertaining to the nuclear industry is a condition precedent to progressing most of the actions discussed in the following subsections beyond a mere conversation.

The process of a review of the legislative framework pertaining to the nuclear industry in Australia should ultimately lead to the repeal of legislation that unilaterally restricts the expansion of the nuclear industry in Australia. For example:

o Mining and milling of uranium ore should be removed from the ‘nuclear actions’ definition in the Environmental Protection and Biodiversity Conservation Act 1999 (Cth), as these activities do not carry environmental risk that is additional to the mining of other mineral commodities;

o The prohibition on nuclear energy under the Australian Radiation Protection and Nuclear Safety Act 1998 (Cth) should be repealed to enable proponents to develop nuclear energy projects where there is a business case to do so and where appropriate environmental and planning conditions are met.

An efficient and transparent regulatory regime should facilitate the responsible development of the sector, while achieving positive outcomes in respect of health, safety, security and environmental protection at each of the stages of the nuclear fuel cycle.

There has been a considerable amount written in the past decade regarding the regulation of the uranium industry in Australia, much of it in the context of the existing mining, milling, transport and export activities, with some focus on the prospect of expanding into the generation of nuclear energy and related activities. This includes:

o A report commissioned by Prime Minister, John Howard, in 2006, Uranium Mining,

Processing and Nuclear Energy— Opportunities for Australia? (‘Switowski Report’);


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o A report commissioned by the House of Representatives Standing Committee on Industry and Resources, Australia’s uranium – Greenhouse Friendly Fuel for an Energy Hungry World, also released in 2006 (‘Prosser Report’);

o A review undertaken in 2008 by the then Department of Resources, Energy and Tourism of regulatory efficiency in relation to uranium mining (‘RET Review’); and

o An independent review of uranium mining regulation in Western Australia commissioned by the Department of Mines amd Petroleum in 2012 (‘ACG Review’).

Consistent with the view that, in many respects, the uranium sector is no different from many other sectors in Australia, many of the calls for regulatory reform in various reviews and reports are applicable across other sectors. For example, the creation of a ‘one stop shop’ for environmental approvals is intended to remove unnecessary overlap and duplication of regulatory effort and the benefits of such reforms have broad application.

Regulation of uranium mining

The RET Review explored the concept of market failures requiring regulation in the context of uranium mining, and these included the following six areas:

1. In return for access to the uranium resource, the obligation on mining companies to mine Australia’s valuable resources in a responsible manner, and to provide a financial return to the Australian community.

2. The need to ensure protection of the environment, particularly in sensitive areas, and including protection from the effects of radiation.

3. Indigenous land rights and cultural heritage issues in areas in which mining activity is taking place.

4. Occupational health and safety concerns, including protection from the effects of radiation, associated with mining activities along all parts of the uranium supply chain.

5. Radiation protection for affected local communities and more broadly.

6. The risks of proliferation of nuclear materials, and the safeguards established to ensure the use of Australia’s exported uranium is only for peaceful and non-military applications.

The first four areas apply to mining activities generally, while the last two, radiation protection and proliferation risks, are unique amongst mining activities to uranium.

Regulation of an expanded nuclear industry in Australia

Other developed countries with uranium resources and a federal system of government like Australia’s exhibit a strong level of federal government control over the industry. Canada and the United States in particular are examples of this and, unlike Australia, they both currently have significant nuclear energy industries.

Establishing a single Commonwealth or national regulatory framework is appropriate in order for Australia to be in the best position for a potential shift to nuclear energy as part of its energy generation portfolio. Efforts to establish such a framework could draw upon the extensive experience of nuclear fuel cycle regulation in Canada and the United States.

Uranium production

In addition to the uranium mines operating in South Australia and the Northern Territory, and the advanced projects in Western Australia, there are an additional nine known major undeveloped uranium deposits in Australia (see Table 14).84 These represent additional

84 Geoscience Australia, cited in: MCA, 2015


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reserves of 135.4 million pounds of contained U3O8 and resources of 461.2 million pounds of U3O8.

Table 14: Major undeveloped uranium deposits in Australia

Deposit Ore reserves contained U3O8

(million lbs)

Mineral resources contained U3O8

(million lbs)

Northern Territory

Jabiluka 2 135.4 147.9

Koongarra 44.6

Bigrlyi 19.2

Angela 19.8

Subtotal 135.4 231.5

South Australia

Four Mile West 37.4

Crocker Well and Mt. Victoria 13.5

Subtotal 50.9

Queensland

Valhalla 69.2

Westmoreland (Redtree, Junnagunna, Huarabagoo, Sue, Outcamp) 50.2

Mt. Isa Region (Skai, Odin, Bikini, Andersons, Watta, Warwai, Mirrioola) 59.4

Subtotal 178.8

Total 135.4 461.2

Current Australian uranium production value is approximately $600 million and provides approximately 4,000 jobs.85

As installed nuclear generation capacity grows globally, market conditions for uranium could result in prices rendering many of these projects economically viable. An opportunity to expand uranium production in Australia would result in significant economic, employment and social benefits for the country beyond those the industry currently delivers. Furthermore, if the industry does not have the option to expand production in response to changes in market conditions, it will risk losing significant market share to exporting nations that have such flexibility.

Uranium exports

Australia currently exports uranium in the form of U3O8 to the United States, Japan, People’s Republic of China, Republic of Korea, Taiwan, Canada, France, Germany, Sweden and Belgium and has civil Nuclear Cooperation Agreements with India, United Arab Emirates and Russia. Expanded production above would obviously lead to increased exports of U3O8.

Current legislation prohibits the import of radioactive waste to Australia and countries with nuclear energy capacity are required, under multilateral agreements, to manage the waste produced from those facilities domestically. However, subject to changes in this legislative framework, Australia, by virtue of its vast uranium resources and suitable sites for radioactive waste storage facilities, could provide a highly valued ‘whole of fuel life cycle’ (‘cradle to the grave’) product to the global nuclear generation sector.

85 Department of Foreign Affairs and Trade, 2014, ANSO Annual Report, Australian Government, Canberra


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Indeed, the United States’ proposed Global Nuclear Energy Partnership (GNEP) was envisaged to create such a ‘cradle to the grave’ process, which would promote nuclear energy and close the nuclear fuel cycle to reduce waste and proliferation risks. In essence, this sought to form two separate classes of countries, namely ‘fuel supplier nations’ supplying the enriched uranium fuel and receiving back spent fuel, and ‘user nations’ utilising the leased or loaned fuel for their nuclear plants. The aim of GNEP was to create a global network of nuclear fuel cycle facilities falling under International Atomic Energy Agency control or, at a minimum, close supervision.

Even without a domestic nuclear energy industry, Australia was positioned to be a significant actor as a fuel supplier nation, which meant it would have the potential to become involved within value adding aspects of the nuclear fuel cycle. With a change in the United States administration in 2008, GNEP became the International Framework for Nuclear Energy Cooperation (IFNEC), which then shifted to a greater focus on research and development into proliferation resistant fuel cycles and waste reduction strategies. Funding for IFNEC has decreased and, while it still exists, its role has become much narrower.86

Nuclear fuel production in Australia

Creating fuel used in nuclear reactors from U3O8 generally involves three stages:

o Conversion

Conversion involves converting U3O8 into a fluoride so it can be processed as a gas at low temperature.

o Enrichment

Enrichment involves increasing the concentration of the U-235 isotope so it can be used as a fuel. In general, there are two main methods of enrichment, diffusion and centrifuge. A new laser method, developed in Australia, but now being driven out of the United States under the Global Laser Enrichment project could, in time, become a more common form of enrichment.

o Fuel fabrication

Fuel fabrication involves assembling the enriched uranium into rod assemblies specifically designed for particular types of reactors according to standards.

The process of concentrating the U-235 isotope in the enrichment phase is particularly complex, expensive and energy intensive. Given the potential for proliferation and the application for nuclear weapons, the enrichment of uranium is viewed as a sensitive technology and subject to a range of international and national level safeguards.

The exception to the requirement for enrichment is the Canada Deuterium Uranium (CANDU) reactor. It is a pressurised, heavy water reactor that uses heavy water (deuterium oxide) for moderator and coolant and natural uranium for fuel. CANDU reactors use approximately 15 per cent less uranium per kilowatt than a pressurised water reactor.87

The core design means the CANDU reactor can be fuelled with natural uranium and other low-fissile content fuels, including spent fuel from light water reactors. These reactors supply around 50 per cent of the electricity requirements for Ontario and 16 percent of Canada’s overall electricity requirements.88

According to the World Nuclear Association, “13 countries have enrichment production capability or near-capability” but around “90% of world enrichment capacity is in the five

86 IFNEC, 2013, Membership, www.ifnec.org/About/Membership.aspx

87 CANDU Owners Group, 2013, CANDU Reactors, www.candu.org/candu reactors.html

88 Ibid.


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nuclear weapons states.”89 These nations, together with Germany, Netherlands and Japan provide toll enrichment services to the commercial market. At present, there is significant oversupply of enrichment capacity worldwide with an expectation over-capacity will continue to increase through to 2020.

With the recent United States-Iran nuclear deal and forecast growth in nuclear energy internationally, the institutional arrangements for multilateral enrichment processes for fuel designated for nuclear plants will continue to evolve. Pending a major shock, it is unlikely demand for new uranium enrichment capacity will occur before 2025.

However, given there may be new multilateral structures for enrichment, leasing of nuclear fuels and repatriation for waste, in any discussion of an expanded Australian nuclear energy industry it is worth considering the entire value chain. Despite Australia’s current lack of competitive advantage in conversion, enrichment and fuel fabrication, in a future scenario where Australia hosted a spent fuel storage facility and nuclear generation technology that can use spent fuel as a primary feedstock, this dynamic may change.

Nuclear generation as part of the domestic energy mix

Economically rational, environmentally and socially sustainable and safe deployment of nuclear energy generation is a sensible option for Australia to consider, primarily to displace ageing generators and to provide a reliable third fuel alternative for baseload generation.

Emerging, small scale reactor technology, should it prove commercially viable, could also be particularly useful for deployment in regional and remote off-grid population centres and industrial centres, such as those hosting resources sector operations.

A radioactive waste storage sector

There is a strong global scientific understanding of the behaviour of radioactive waste in terms of associated hazards and technical requirements for safely managing those hazards. The technology facilitating the safe storage and disposal of radioactive waste is available and a robust national and international safety regime is in place to ensure all phases of the lifecycle of radioactive waste can be executed safely and securely. Furthermore, Australia has been an important historical and ongoing participant in the development of the international safety and security regime.90

There has been technical consensus amongst most waste management specialists for several decades that geological disposal, using a system of engineered and natural barriers is the preferred means of disposal for high level and long lived radioactive wastes.91 Australia has relative abundance of locations that, by virtue of their remoteness, absence of alternative land uses, tectonic stability and suitable geology and hydrology, could host both surface and geological storage systems of scale.

Subject to the necessary changes in multilateral agreements and legislation, a radioactive waste storage industry could present significant economic benefits to the nation. The storage of spent fuel that may be extensively reusable in the future could also deliver significant strategic and economic benefits.

89 World Nuclear Association, 2015, Uranium Enrichment, www.world-nuclear.org/info/Nuclear-Fuel-Cycle/Conversion-Enrichment-and-Fabrication/Uranium-Enrichment

90 Williams, G. & Woollett, S., 2010, ‘Managing radioactive waste in Australia’, Australian Radiation Protection and Nuclear Safety Agency Issues, 92, 1, p. 9-13

91 IAEA, 2003, Scientific and Technical Basis for the Geological Disposal of Radioactive Wastes


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Domestic capability

One of the main constraints on the development of an expanded nuclear sector is domestic capacity in terms of skills and expertise beyond exploration, mining and processing to U3O8 and transport of U3O8. While the relevant research expertise at ANSTO is considered world class, this is unlikely to scale to commercial capability and has in more recent times focused more on medical and industrial applications for isotopes, rather than issues concerning conversion, enrichment, fuel fabrication or nuclear energy generation.

It would take considerable time for Australia to develop domestic nuclear energy capabilities in this regard and an expanded industry would likely be dependent on skills transfer from nations with developed nuclear capability. However, once this occurs and the industry has expanded adequately to support new domestic VET and higher education programs designed to deliver the skills the industry needs, Australia will have a new industry that employs highly skilled staff.

Community and economic benefits

An expanded nuclear industry in Australia will deliver benefits in terms of new job creation, export revenues and tax revenues, as well as energy security for the community and improved environmental outcomes.

The Indian Ocean littoral nations are currently home to an estimated 2.6 billion people, or 40 per cent of the world’s population.92 Access to energy will be critical to support population and economic growth in these nations. It is likely nuclear energy will see significant increased penetration in the region to meet the growing energy demand. There are an estimated 391 nuclear reactors operable, under construction, planned or proposed across China (230), Southern Asia93 (115) and the Middle East94 (46).95

These geographic regions are distinctly different from those where adoption of nuclear energy has traditionally occurred, resulting in a marked shift in the locations where supplies and services for the nuclear fuel cycle are required. The need for fuel production and waste storage to supply this forecast reactor fleet, combined with Western Australia’s relative political stability and proximity to the growth regions, provides an economic opportunity for the state to meet some of this demand.

Many activities associated with an expanded nuclear industry may occur within land subject of claims or determinations under the Native Title Act 1993 (Cth). Provided engagement with Traditional Owners with respect to the development of an expanded nuclear energy industry is consistent with the Native Title Act, other legislation regarding lands in which Aboriginal Australians have interests, effective prior engagement takes place, and true and meaningful partnerships are established with Traditional Owners and Aboriginal communities, there is potential for Aboriginal communities to benefit significantly from an expanded nuclear energy industry.

The experience between uranium companies in the Canadian province of Saskatchewan and the First Nations and Metis communities is illustrative of the potential opportunities. In 2014, Cameco employed 1,250 indigenous people at their four northern Saskatchewan work sites, which represents approximately 45 per cent of the northern workforce. Aside from employment opportunities, there has been a collaborative approach to engaging with First nation and Metis communities over a decadal scale, which has created a partnership for future development.

92 Future Directions International, 2012, Indian Ocean: A Sea of Uncertainty

93 ‘Southern Asia’ including Bangladesh, India, Indonesia, Malaysia, Pakistan, Thailand and Vietnam

94 ‘Middle East’ including Egypt, Iran, Jordan, Saudi Arabia and United Arab Emirates

95 World Nuclear Association, 2015, World Nuclear Power Reactors & Uranium Requirements


Conclusion CME appreciates the opportunity to input into the Royal Commission and looks forward to continued discussion on uranium mining and nuclear energy in South Australia, Western Australia and across the nation.

Authorised by Position Date Signed

Reg Howard-Smith Chief Executive 05/08/2015

Document reference K:\lnfrastructure\Projects & lssues\Energy\Uranium and Nuclear Power\ 150727 -INF-CME Submission to NFCRC v0.5.docx

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