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How to Avoid Common Mistakes With Mining Stocks (Part 3: Jurisdiction)

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“Location, location, location…”

This famous real estate adage also matters in mining. After all, it’s an industry that is all about the geology—but beyond the physical aspects and the location of a mineral deposit, there are also social and environmental factors that create a mining jurisdiction.

Common Mistakes With Jurisdiction

We’ve partnered with Eclipse Gold Mining on an infographic series to show you how to avoid common mistakes when evaluating and investing in mining exploration stocks.

Part 3 of the series focuses on six signals investors can use to gauge a company’s preparedness for the jurisdictions they operate in.

jurisdictions

View the two other parts of this series so far, covering mistakes made in choosing the team as well as those made with a company’s business plan.

#1: Geological Potential: Methodical Prospecting or Wild Goose Chase?

It all starts with a great drill result, but even these can be “one-off” anomalies.

Mineral exploration is a methodical process of drawing a subsurface picture with the tip of a drill bit. A mineral discovery is the cumulative effort of years of research and drilling.

The key to reducing this geological risk is to find a setting that has shown previous potential and committing to it. Typically, a region is known to have hosted other great discoveries or shares a geology similar to other mining districts.

Signs of Methodical Prospecting:

  • Lots of geological indicators
  • Potential for further discovery
  • Sound science

#2: Legal Environment: Well-Paved Path or Minotaur’s Maze?

Now that you have identified a region with the prospective geology you think could host a discovery, a company will have to secure the permits to explore and operate any further.

However, a management team that cannot navigate a country’s bureaucracy will face delays and obstacles, costing investors both time and money.

Without clear laws and competent management, a mining company’s best laid plans become lost in a maze with legal monsters around every legal corner.

Signs of a Well-Paved Highway:

  • Existing laws encourage mining investment
  • Relatively low bureaucracy
  • Well-established permitting process
  • Legacy of mining contributing to economy

#3: Politics: Professional Politics or Banana Republics?

A good legal framework is often the outcome of politics and stable governance—however so is a difficult legal framework.

The political stability of a nation can turn on one election and so can the prospects for developing a mine. An anti-mining leader can halt a mining project, or a pro-mining leader can usher forward one.

A positive national viewpoint on mining may be enough to lure investment dollars, but local politics may determine the success of a mining company.

Signs of Professional Politics:

  • Positive history with mining companies
  • Politically stable jurisdiction
  • Rule of law respected
  • Changes in government have little effect on the mining industry

#4: Infrastructure & Labor: Modern or Medieval

Sometimes it is the discovery of valuable minerals that spurs national development, but this can also happen the other way around, in which development can encourage mineral discovery.

A mining company looking to build a new mine in a country with a tradition of mining will have an easier time. Access or lack thereof to modern machinery and trained employees will determine how much money will be needed.

That said, if a company is looking to develop a mining project in a new mining region, they must be ready to help create the skills and infrastructure it needs to mine.

Signs of a Modern Jurisdiction:

  • Developed roads to access and support operations
  • Trained labor for staffing and development
  • Well-established grid lines and back-up power systems

#5: Community: Fostering Friendship or Sowing Enemies

Mining operations have a significant impact on the local community. Good companies look to make mutually beneficial partnerships of equals with local communities.

Ignoring or failing to respect the local community will jeopardize a mining project at every stage of its mine life. A local community that does not want mining to occur will oppose even the best laid plans.

Signs of a Friendly Relations:

  • Operations bring community together
  • Local history shows support for mining
  • Understanding of local concerns and regional variety
  • Company contributes to economic growth and health of the community

#6: Environment: Clean Campsite or One Night Party

There is no way around it: mining impacts the environment and local ecosystems. But, mining operations are a blip on the radar when it comes to Earth’s timeline.

Mine sites can again become productive ecosystems, if a company has the capacity and plan to mitigate mining’s impacts at every stage of the life of a mine—even beyond the life of a mine.

Signs of a Clean Campsite:

  • Development plan mitigates environmental damage
  • Well-planned closure and remediation
  • Understand how communities use their environment

Bringing it together: ESG Investing

These six points outlined above point towards a more complete picture of the impacts of a mining project. Currently, this falls under what is labeled as Environmental, Social and Governance “ESG” standards.

Mining companies are the forefront of a big push to adopt these types of considerations into their business, because they directly affect natural and human environments.

ESG is no longer green wash, especially for the mining industry. Companies that understand and apply these concepts in their business will have better outcomes in the jurisdictions they operate within, hopefully offering investors a more successful venture.

Geology does not change on the human time scale, but bad management can quickly lose a good project and investor’s money if they do not pay attention to the other attributes of a jurisdiction.

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Energy

Visualizing the Uranium Mining Industry in 3 Charts

These visuals highlight the uranium mining industry and its output, as well as the trajectory of nuclear energy from 1960 to today.

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When uranium was discovered in 1789 by Martin Heinrich Klaproth, it’s likely the German chemist didn’t know how important the element would become to human life.

Used minimally in glazing and ceramics, uranium was originally mined as a byproduct of producing radium until the late 1930s. However, the discovery of nuclear fission, and the potential promise of nuclear power, changed everything.

What’s the current state of the uranium mining industry? This series of charts from Truman Du highlights production and the use of uranium using 2021 data from the World Nuclear Association (WNA) and Our World in Data.

Who are the Biggest Uranium Miners in the World?

Most of the world’s biggest uranium suppliers are based in countries with the largest uranium deposits, like Australia, Kazakhstan, and Canada.

The largest of these companies is Kazatomprom, a Kazakhstani state-owned company that produced 25% of the world’s new uranium supply in 2021.

A donut chart showing the biggest uranium mining companies and the percentage they contribute to the world's supply of uranium.

As seen in the above chart, 94% of the roughly 48,000 tonnes of uranium mined globally in 2021 came from just 13 companies.

Rank Company2021 Uranium Production (tonnes)Percent of Total
1🇰🇿 Kazatomprom 11,85825%
2🇫🇷 Orano 4,5419%
3🇷🇺 Uranium One 4,5149%
4🇨🇦 Cameco 4,3979%
5🇨🇳 CGN 4,1129%
6🇺🇿 Navoi Mining3,5007%
7🇨🇳 CNNC 3,5627%
8🇷🇺 ARMZ 2,6355%
9🇦🇺 General Atomics/Quasar 2,2415%
10🇦🇺 BHP 1,9224%
11🇬🇧 Energy Asia 9002%
12🇳🇪 Sopamin 8092%
13🇺🇦 VostGok 4551%
14Other2,8866%
Total48,332100%

France’s Orano, another state-owned company, was the world’s second largest producer of uranium at 4,541 tonnes.

Companies rounding out the top five all had similar uranium production numbers to Orano, each contributing around 9% of the global total. Those include Uranium One from Russia, Cameco from Canada, and CGN in China.

Where are the Largest Uranium Mines Found?

The majority of uranium deposits around the world are found in 16 countries with Australia, Kazakhstan, and Canada accounting for for nearly 40% of recoverable uranium reserves.

But having large reserves doesn’t necessarily translate to uranium production numbers. For example, though Australia has the biggest single deposit of uranium (Olympic Dam) and the largest reserves overall, the country ranks fourth in uranium supplied, coming in at 9%.

Here are the top 10 uranium mines in the world, accounting for 53% of the world’s supply.

A map of the largest mines and countries that undertake uranium mining.

Of the largest mines in the world, four are found in Kazakhstan. Altogether, uranium mined in Kazakhstan accounted for 45% of the world’s uranium supply in 2021.

Uranium MineCountryMain Owner2021 Production
Cigar Lake🇨🇦 CanadaCameco/Orano4,693t
Inkai 1-3🇰🇿 KazakhstanKazaktomprom/Cameco3,449t
Husab🇳🇦 NamibiaSwakop Uranium (CGN)3,309t
Karatau (Budenovskoye 2)🇰🇿 KazakhstanUranium One/Kazatomprom2,561t
Rössing🇳🇦 NamibiaCNNC2,444t
Four Mile🇦🇺 AustraliaQuasar2,241t
SOMAIR🇳🇪 NigerOrano1,996t
Olympic Dam🇦🇺 AustraliaBHP Billiton1,922t
Central Mynkuduk🇰🇿 KazakhstanOrtalyk1,579t
Kharasan 1🇰🇿 KazakhstanKazatomprom/Uranium One1,579t

Namibia, which has two of the five largest uranium mines in operation, is the second largest supplier of uranium by country, at 12%, followed by Canada at 10%.

Interestingly, the owners of these mines are not necessarily local. For example, France’s Orano operates mines in Canada and Niger. Russia’s Uranium One operates mines in Kazakhstan, the U.S., and Tanzania. China’s CGN owns mines in Namibia.

And despite the African continent holding a sizable amount of uranium reserves, no African company placed in the top 10 biggest companies by production. Sopamin from Niger was the highest ranked at #12 with 809 tonnes mined.

Uranium Mining and Nuclear Energy

Uranium mining has changed drastically since the first few nuclear power plants came online in the 1950s.

For 30 years, uranium production grew steadily due to both increasing demand for nuclear energy and expanding nuclear arsenals, eventually peaking at 69,692 tonnes mined in 1980 at the height of the Cold War.

Nuclear energy production (measured in terawatt-hours) also rose consistently until the 21st century, peaking in 2001 when it contributed nearly 7% to the world’s energy supply. But in the years following, it started to drop and flatline.

A chart plotting the total nuclear energy produced since 1950 and the percentage it contributes to the world's energy supply.

By 2021, nuclear energy had fallen to 4.3% of global energy production. Several nuclear accidents—Chernobyl, Three Mile Island, and Fukushima—contributed to turning sentiment against nuclear energy.

YearNuclear Energy
Production
% of Total Energy
196572 TWh0.2%
196698 TWh0.2%
1967116 TWh0.2%
1968148 TWh0.3%
1969175 TWh0.3%
1970224 TWh0.4%
1971311 TWh0.5%
1972432 TWh0.7%
1973579 TWh0.9%
1974756 TWh1.1%
19751,049 TWh1.6%
19761,228 TWh1.7%
19771,528 TWh2.1%
19781,776 TWh2.3%
19791,847 TWh2.4%
19802,020 TWh2.6%
19812,386 TWh3.1%
19822,588 TWh3.4%
19832,933 TWh3.7%
19843,560 TWh4.3%
19854,225 TWh5%
19864,525 TWh5.3%
19874,922 TWh5.5%
19885,366 TWh5.8%
19895,519 TWh5.8%
19905,676 TWh5.9%
19915,948 TWh6.2%
19925,993 TWh6.2%
19936,199 TWh6.4%
19946,316 TWh6.4%
19956,590 TWh6.5%
19966,829 TWh6.6%
19976,782 TWh6.5%
19986,899 TWh6.5%
19997,162 TWh6.7%
20007,323 TWh6.6%
20017,481 TWh6.7%
20027,552 TWh6.6%
20037,351 TWh6.2%
20047,636 TWh6.2%
20057,608 TWh6%
20067,654 TWh5.8%
20077,452 TWh5.5%
20087,382 TWh5.4%
20097,233 TWh5.4%
20107,374 TWh5.2%
20117,022 TWh4.9%
20126,501 TWh4.4%
20136,513 TWh4.4%
20146,607 TWh4.4%
20156,656 TWh4.4%
20166,715 TWh4.3%
20176,735 TWh4.3%
20186,856 TWh4.2%
20197,073 TWh4.3%
20206,789 TWh4.3%
20217,031 TWh4.3%

More recently, a return to nuclear energy has gained some support as countries push for transitions to cleaner energy, since nuclear power generates no direct carbon emissions.

What’s Next for Nuclear Energy?

Nuclear remains one of the least harmful sources of energy, and some countries are pursuing advancements in nuclear tech to fight climate change.

Small, modular nuclear reactors are one of the current proposed solutions to both bring down costs and reduce construction time of nuclear power plants. The benefits include smaller capital investments and location flexibility by trading off energy generation capacity.

With countries having to deal with aging nuclear reactors and climate change at the same time, replacements need to be considered. Will they come in the form of new nuclear power and uranium mining, or alternative sources of energy?

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