URANIUM RENAISSANCE IN THE CZECH REPUBLIC

UNCLAS SECTION 01 OF 02 PRAGUE 000102 SENSITIVE SIPDIS DEPARTMENT FOR EUR/CE AND ISN E.O. 12958: N/A TAGS: ENRG TRGY BEXP BTIO RU EZ SUBJECT: URANIUM RENAISSANCE IN THE CZECH REPUBLIC REF: 08 PRAGUE 789 1.(SBU) Summary: For many years, the Czech Republic was a large producer of uranium for the former Eastern Bloc. During the communist years, many political prisoners were sent to work in the uranium mines. Uranium mining declined during the later communist period with most of the production and all exploration ending before 1989. The Dolni Rozinka mine, near the Czech Republic's second largest city of Brno, is the only functioning mine and produces around 300 tons of uranium a year. Originally, production was supposed to end in 2008. However, with the increase in uranium prices, the Czech's heightened desire for increased energy security following January's Ukrainian-Russian gas crisis, and the need to reduce the use of brown coal to comply with EU environmental guidelines, the Government plans to keep the mine open until at least 2012. End Summary. A Long History of Uranium Mining 2.(U) The Czech Republic has a long history of uranium mining. The first mining of radioactive ores took place in Jachymov in 1873. Radium, a by-product of uranium, was first mined to be used for luminous dials on watches and ceramics, as well as for specialized health treatments. Starting in 1947, the then Czechoslovakia began to produce uranium for the Soviet Union. Early mining sites like Jachymov, Horni Slavkov, and Pribram also became part of the Czechoslovakian "Gulag system" with many political prisoners working in the mines, developing cancer, and dying as a result of their labor. Most of the uranium mines were closed by or just after 1989's Velvet Revolution due to environmental concerns and the questionable economic viability of continued mining. Current Production 3.(SBU) The Czech Republic currently produces around 300 tons of uranium each year, making it the 12th largest producer in the world. The state-owned Diamo company runs the last operating mine inside the Czech Republic and Europe. The uranium ore is mined and turned into yellow cake powder. Diamo then sells the yellow cake to CEZ, the state-owned, national power monopoly. Before utilizing the uranium in the Dukovany nuclear power plant, CEZ sends the yellow cake to Russia for processing into nuclear fuel. Officials at the Czech Ministry of Industry and Trade (MIT) told us that the Czech government planned to close the mine in 2008 for environmental reasons, but in May 2007 decided to continue production until at least 2012. The Czech Press reported preliminary calculations indicate that the mine could remain commercially viable for another five to ten years and provide the Government with an additional 2 billion crowns (approximately USD 100 million) of revenue. The same MIT officials mentioned that Diamo has also approached the ministry about re-opening the uranium mine at Straz pod Ralskem. Clean Up of Old Mines 4.(SBU) Besides production at the Dolni Rozinka mine, Diamo is also charged with cleaning up the environmental contamination at old uranium production sites throughout the Czech Republic. Dinamo's ODRA division is responsible for cleaning up and dismantling of defunct uranium mines near Ostrava. The SUL Division focuses on the clean up and dismantlement of the mines near Pribram. The GEAM Division still mines uranium, but is also responsible for the clean up and environmental management at the Dolni Rozinka mine and old mining sites in the region. In all of these locations, these divisions seek to treat ground water, manage waste lagoons, replant trees, and take care of claims by businesses and individuals that they were harmed by uranium production. Commercial Interest in New Production at Czech Mines 5.(SBU) With the increased interest in nuclear energy, several foreign companies have sought to re-open old mines or explore for new uranium deposits in the Czech Republic. For example, in early 2008, Uran, Ltd., an Australian company, applied to explore and possibly mine uranium at a site that may contain up to 7500 tons of ore near the small town of Pribyslav. In exchange for the right to explore and possible commercial production, Uran was prepared to pay the town 800,000 Czech crowns (CZK),approximately $36,000, during the PRAGUE 00000102 002 OF 002 exploration phase and 1.6 million CZK, around $72,000, once production began. The company hoped to use the town's backing to overcome the Ministry of Environment,s objections to the project. In April 2008, the municipal authorities turned down the firm's request. Uran is appealing the Ministry of the Environment,s rejection of their mining application. Future Prospects 6.(SBU) With a growing interest in curbing climate change and increased desire for energy diversification, commercial interest in increased uranium production inside the Czech Republic will only grow. Studies indicate that there may be another 115,000 tons of uranium left in the country that could be commercially exploited. Although prices are down from a spot price of just over $106 per ton in 2008, prices are expected to remain at around $50 per ton for the foreseeable future, a profitable level for continuation of Czech mining. However, there are two possible obstacles to increased production. Most of the minable deposits are located in sandstone, which could require the use of acid and could lead to significant environmental contamination if there were any type of industrial accident. With most of the large scale deposits near Jachymov and Pribram already fully exploited, most new production would have to be on a smaller scale that could increase unit costs for each ton produced. 7.(SBU) Comment: The Czech Republic will likely continue to produce uranium despite opposition from the Green Party, which is part of the current coalition government, and concerns from local residents. January 2009's Ukrainian-Russian gas dispute and the shift away from brown coal is increasing support for expanding CO2 emission free nuclear power. Domestic uranium production will most likely continue to be part of the Czech Republic's energy strategy, especially should the Czechs go forward with new units at the Temelin and Dukovany nuclear power plants (see reftel). However, even with domestic production, the Czechs will still be reliant on Russia for its nuclear fuel needs and for the processing of yellow cake into useable fuel. The Russian company TVEL currently processes the Czech yellow cake, which meets part, but not all, of Dukovany,s fuel requirement. The rest is supplied by TVEL. Westinghouse currently supplies Temelin, the Czech Republic's other commercial reactor, but his will end December 31. In 2010, TVEL will be the sole fuel supplier of both nuclear power stations. End Comment. Thompson-Jones