Baby-faced but fierce, Mukhtar Dzakishev, the chief executive of Kazatomprom, Kazakhstan's state nuclear corporation, wants to dominate the uranium business.
The clock is chasing down 1 A.M. It's late for dinner — or for interviews — in Almaty, Kazakhstan's former capital. But self-made Kazakh uranium czar Moukhtar Dzhakishev is just hitting his stride. Between spoonfuls of Beluga caviar and bites of ruby-colored tuna flown in from Dubai, he is explaining that his small state-owned company, Kazatomprom, will soon rule the global nuclear energy industry. "I don't think there will be any competitors," he says softly. "I will eat them."
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Baby-faced but fierce, Mukhtar Dzakishev, the chief executive of Kazatomprom, Kazakhstan's state nuclear corporation, wants to dominate the uranium business. |
In Kazakhstan, where the family of President Nursultan Nazarbayev controls much of the country's abundant resources, Dzhakishev, 44 years old, is a rare breed: a Moscow-educated entrepreneur who took over a floundering mining industry — and the world's largest uranium deposit outside Australia — when the Soviets broke camp here. Now, after three years of skyrocketing uranium prices, he has found himself at the forefront of a global uranium boom that is fast making him one of the most powerful men in the country — and increasingly influential beyond it. Kazakhstan's ascendancy is far from assured, but Dzhakishev, described by colleagues as Kasparov-sharp and poker-faced, makes it sound as if he already has it all wrapped up. His confidence might be laughable if his arguments weren't so damn convincing.
As Dzhakishev sees it, a widespread nuclear renaissance is not only inevitable but well underway. And he's probably right. Global warming is weighing heavily on the international conscience, and with it comes a newfound sense of urgency to dispense with coal and other carbon fuels. No alternative is more developed, economically viable, and emission-free than nuclear energy. Since world electricity use is expected to double in the next few decades, nearly every industrialized country is considering a fresh build-out of nuclear power. Worldwide, 34 new reactors are under construction, and 280 are being planned or proposed. China alone has broken ground on five reactors to feed that nation's insatiable need for power.
That has raised questions about whether uranium producers can find enough of the element to fuel this long-term growth. In 2006 producers met only 62% of demand. (The rest was recycled from a diminishing supply of decommissioned warheads or taken from dwindling Cold War stockpiles.) The World Nuclear Association says uranium mining could need to increase by almost 300% in the next two decades.
Talk of such a crunch has brought the market to fever pitch. Spot prices for uranium jumped from about $7 a pound in late 2000 to a record high of $136 in June. Prices today hover at $74. More than 400 uranium companies are listed publicly, hedge funds buy warehouses of the stuff, and old U.S. mines are grinding back to life. Applications for new mines in Colorado and Utah have risen more than 200% since 2003.
Internationally, the world's largest uranium suppliers — Canada's Cameco, France's Areva, and Australia's BHP Billiton (BHP) and Rio Tinto (RTP) — are scouring for pay dirt at a pace rivaled only by Big Oil. And though existing mines are being expanded in Canada, Australia, and Africa, what producers really want is access to the deposits in Kazakhstan. "Kazakhstan needs to deliver," says Nick Carter, an analyst at Ux Consulting, a U.S. research firm.
The boom has put Dzhakishev in an enviable position. First, he made an audacious promise to more than quintuple production by 2015, to 27,000 metric tons a year, which could quench the market's thirst. Now he wants the world to rely on Kazakhstan for all things nuclear — not just the metal for fuel. Uranium, which today accounts for a fraction of the nation's GDP, would become as important for its economy as the $35 billion Kazakh oil industry is currently.
In the past few months Dzhakishev has gone on a high-profile international deal-signing tear, landing agreements aimed at transforming Kazatomprom from an obscure Third World mining group to a full-fledged, integrated nuclear energy powerhouse. Last summer he locked up contracts to ship half of China's uranium imports, agreed to buy 10% of U.S. reactor maker Westinghouse (owned by Japan's Toshiba), and scored a deal with Cameco (CCJ) to build a conversion facility, a technologically advanced link in the nuclear fuel cycle. "It's been honeymoon, honeymoon, honeymoon," he gloats.
But the game is far from over. Dzhakishev's production forecasts are wildly optimistic, requiring the skilled labor, improved infrastructure, and materials to run 16 new mines. That would be tough to execute in any business environment; Kazakhstan is an especially rough-and-tumble place. It is an emerging market with an autocratic government and a rap sheet for bribery that ranked it near the bottom of Transparency International's global corruption index last year. And Dzhakishev's plan could be laid waste by the kind of volatility to which metals commodities are prone. When fresh supply flooded the market, the price of uranium plunged last July, sending futures contracts down with it. "I don't know if they have the resources to do it," says Benoit de Galbert, project manager for Katco, Dzhakishev's joint venture with Areva, who believes a top-to-bottom modernization is needed. "Dzhakishev is pushing, but sometimes you have the impression he is alone."
An atypical mine To get to Kazakhstan's uranium fields, you hop a short flight west from Almaty along the foothills of the Tian Shan mountains and land on a grass field in Shymkent that's strewn with Soviet-era planes. Three hours north by car, where caravans of camels roam an arid steppe, you come upon a series of ten-story windowless boxes. It doesn't look like a typical mine. The boxes are processing facilities that treat a slurry of uranium, sulfuric acid, and water. The acid loosens the uranium from its bond with the rock below — a process called in situ leach — and the liquid is sucked out through a giant straw, no digging required. Production costs as little as $10 a pound, a fifth the cost of open-pit mining.
That low cost is part of what has made Kazakhstan's uranium so attractive. Raw uranium is found on almost every continent. Its biggest producers come from the most bountiful regions, like Canada, where literally any backyard might contain a pound of it. Cameco produces a fifth of the world's uranium and runs three large mines there. But in the past year its Cigar Lake mine, which it operates with Areva, has been hobbled by flooding and natural disasters, setting production back perhaps to 2011. Australia has the most reserves, about a third of the world's uranium, but the ore is of poor quality. The U.S. has mines and fresh exploration but ranks low among world suppliers. Much of the growth in the industry is coming from Africa, where environmentally destructive open-pit mines continue to be developed, and in Kazakhstan. Last year Kazatomprom leaped over Rio Tinto and Areva to become the world's second-largest production company behind Cameco, providing about 5,000 pounds, or 12% of global supply.
To become fuel, raw uranium is concentrated into a curry-like powder called yellowcake, then converted to a gas, uranium hexafluoride, and enriched to contain more of its most volatile molecular component, U235. Finally it is compressed into fuel pellets the size of Bubble Yum pieces that contain enough energy to power a modern home for a year. Each step ratchets up the technology, licenses, and security needed to operate. Kazakhstan doesn't have a conversion plant yet, so it sends trainloads of yellowcake to Russia and China for processing before it is shipped to France for enrichment and then to other countries for use in reactors.
At Tortkuduk, one of two mines run by Areva's Katco joint venture, temperatures are pushing 115 degrees, and the wind has kicked the pale-yellow sand into drifts. Pipes crisscross the desert minefield like cracks in a sheet of glass. Some 2,000 feet underground an ancient shoreline deposited a vein of uranium-rich sandstone like a ring of dirt in a bathtub. The liquefication process used to get it to the surface is relatively clean compared with digging an open pit. There are no tailings, little waste, and minimal ground disturbance. But that's not to say that environmental impact underground, where the sulfuric acid can affect water tables, isn't worrisome. Plant managers say clay layers seal off the mined area surrounding aquifers, but rivers also run through the region, and though the foreign companies share environmental-testing data, the dozens of older mines run by Kazatomprom are less transparent, making it impossible to know what might be going wrong. "There is no access to information," says Sergei Kuratov, president of a local environmental organization called Green Salvation. "There is no access to trust."
Deep in the sun-baked hills on the Kyrgyz border is an oasis — a cavity mined out of a mountaintop that has since become an idyllic aquamarine lake. A feeble fence surrounds the site, and despite a rusted sign bearing a radiation symbol, 20 or so children are splashing about. "This isn't the dangerous place," says Mukhtar Anikbaev, whose parents worked the mine and whose children now swim in it. He points a few hundred feet away to an old tunnel entrance just above water level. "Those are the places with the highest level of radiation — they are better not to visit."
The lake and the nearby mining town of Kurday were the first uranium sites in Kazakhstan and one component of the nuclear legacy left to this Central Asian country when the Soviet Union broke apart in 1991. Kazakhstan was the linchpin of a nuclear Russia. From 1949 to 1989 more than 470 above-ground nuclear bomb tests were conducted in its northeast, leaving behind a swath of radiation illness affecting an estimated 10% of the country's 15 million people. After perestroika, Kazakhstan inherited more than 1,300 warheads — enough, had it not surrendered them to the U.S., to make it the fourth-largest nuclear power in the world. It also inherited 600 million tons of nuclear waste.
That the retreating Soviets also abandoned one of the largest uranium deposits in the world was of little consolation until Dzhakishev showed up to raise the industry from the dead. Nobody was building weapons in the 1990s, and accidents at Chernobyl and Pennsylvania's Three Mile Island had brought growth in the nuclear energy industry to a halt. To mine uranium in those days cost far more than its market price — if you could find a market at all. Kazakhstan was roiled by a depression that followed the collapse of the communist system, and towns like Kurday were mostly shuttered. The workers there, Anikbaev says, began to die from lung, liver, and stomach cancer. But those who survived never stopped pleading for the uranium industry and the jobs it brought to come back.
Dzhakishev could be their savior. He is of the idealist generation President Nazarbayev pumped into government in the late 1990s to bring vitality and ambition to the stalled country. At first, says Dzhakishev, "it was absolute terror." Just 3% of his production was booked. He cut costs, closed plants, and embraced a lean management ethic that ran against the socialist grain. In 1998 the Russians bartered for their uranium with butter. In 2006, the most recent year for which data are available, Dzhakishev says, Kazatomprom posted profits of $500 million.
At the heart of his growth philosophy has been the premise that Kazakhstan could build on its resources, not just sell them off. Dzhakishev has been sparing in his joint ventures and kept roughly half-ownership, avoiding the kind of colonial dynamic that often plagues resource-rich countries and that has left Kazakhstan with a small fraction of the revenues from its thriving oil industry. Kazatomprom's partners in turn provide processing technology and management skill. The strategy has left Dzhakishev flush with cash and leverage. "There's a long line at the border," says Michael Wilson, a lawyer in Almaty who represents Japanese and other interests trying to come to Kazakhstan. "Now everyone wants in."
INSIDE THE URANIUM BOOM
Global-warming woes and huge electricity demands in markets such as China are reviving interest in nuclear energy and, along with it, the radioactive element that is its building block. Here's a look at uranium's five-year rise and a few of the countries that stand to benefit.
Uranium prices per pound
Uranium production in metric tons
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CANADA |
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AUSTRALIA |
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KAZAKHSTAN |
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U.S. |
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SOURCES: UX CONSULTING CO: WORLD NUCLEAR ASSOCIATION
Someone with such a strong vision and so much unbridled power in a single industry certainly may be prone to abusing it. Oversight, for example, falls to the national Committee on Atomic Energy, but it has never once cited a Kazatomprom facility for violations or declined to issue a new permit. Many regulators "are politically weaker than the heads of these big nationally owned companies," says Oraz Jandosov, a former Minister of the Economy, who adds that the ministries often don't have adequate authority either. "They cannot dream of actual control."
Kazatomprom has a reputation for integrity, but Dzhakishev has faced questions about his personal dealings. He was a groomsman at the wedding of Nazarbayev's son-in-law Rakhat Aliyev, now accused of kidnapping and corruption, charges he has denied. Last spring former Parliament member Tatyana Kvyatkovskaya accused Dzhakishev of funneling some of Kazakhstan's net uranium worth to offshore accounts or obscure foreign interests. Dzhakishev also raised eyebrows when some of his mines ended up in the hands of financier Frank Giustra, founder of Lionsgate Films and a friend of Bill Clinton. Giustra's group acquired a large share of two big uranium mines from a Kazakh investment group headed by Moukhtar Ablyazov, a former Energy Minister. It seems Ablyazov purchased the deposits from Kazatomprom when uranium prices were in the gutter. Ablyazov profited handsomely, as did Giustra, when Canadian company UrAsia subsequently acquired the properties. Dzhakishev says all his business dealings have been legitimate.
Indeed, foreign companies seeking access to Kazakhstan's uranium resources seem nonplussed by these issues. (Nor do they seem worried that Kazakhs will all turn out to be like the character Borat.) One night in his Almaty office — an oak-paneled fortress decorated with 16th-century samurai swords and staffed with pretty women — he rolled up his sleeves and walked to a whiteboard to explain an extravagantly bold wish list. He had uranium mining pretty well covered, but he wanted to guarantee market share. And then he needed the most coveted links in the nuclear fuel chain: a conversion facility; an enrichment plant, licenses, and technology to make fuel pellets; and a hand in building the actual reactors themselves. "Once he gets an idea in his head — a vision — then a lot of energy is going to be applied to it," says Jerry Grundy, CEO of Cameco. "He runs at 130% of warp speed almost all the time."
Armed with the knowledge that each of his foreign partners wanted more resources, Dzhakishev began to negotiate ruthlessly and tick off his list with extraordinary precision. Cameco had been wanting more access to Kazakh uranium for years and tried to leverage its production schedule at its new plant to get it. Dzhakishev upped the ante. In July, Kazatomprom struck a deal to borrow Cameco's conversion technology and jointly build a new plant in-country. "You don't do a deal in Kazakhstan anymore without bringing something that's geopolitically advantageous to the table," says Ralph Nodes, the Cameco executive who manages the new plant. "They don't have to give away the ranch, and he's been real smart about that." But that's just a small piece. Several months earlier Dzhakishev negotiated with China's Guangdong Nuclear Power Group to supply the uranium for one of every two reactors it builds, and it has since struck additional deals with other Chinese nuclear bodies. Next it signed a deal with the Russians, who are sensitive about losing access to Kazakhstan's uranium, to trade mining rights for a shared enrichment plant. While finishing the Cameco deal, Dzhakishev secured his stake in Westinghouse. Not bad for a summer's work.
Still, much of Dzhakishev's gain is on paper, and it remains to be seen how well he can execute, starting with the promised increase in production that would make Kazatomprom the world's leading uranium producer within four years. "Five years ago I would have been very skeptical," says Steve Kidd, director of strategy and research at the World Nuclear Association in London. "But look at what they have achieved. They've done what they said they were going to do, and I think now we have to believe them." But Kidd also warns that the market dynamics aren't as black-and-white as Dzhakishev would like to believe. A September report from Kidd's group puts the projected supply crunch in less urgent terms, even projecting a surplus until all the future power plants come online. That explains the price free fall, and it means that Dzhakishev, whose production numbers were tripped up by shortages of sulfuric acid last fall, will have to compete on the fundamentals — low-price production and smooth operations. To do that, he may have to lower his gaze to the near term and watch market growth in Australia or Canada more closely. "The danger," Cameco's Grundy warns, "is that if you are so single-minded and so focused on your own growth opportunities, you fail to understand what your competitors are doing."
As for Dzhakishev's vision of becoming a full-service nuclear provider, a Kazakh Areva, that's something that may have to wait. "They're just a uranium producer at the moment," Kidd says of Kazatomprom. "Dzhakishev's aims — they're not something they can do in five or even 15 years. It will take a whole lot longer."
source: 3apr2008
Mindfully.org note: One major point that is usually ignored whenever nuclear power is described as a green energy, or one that is environmentally clean, is that the processing of uranium into rods used in power plants is extremely energy dependent — it takes a great deal of power that is normally provided by burning coal. And coal is itself possibly the largest source of the greenhouse gasses that are responsible for global warming. In other words, nuclear energy is far from being a clean energy. Much like biofuels, it is a really bad joke that is making the world a dangerous and expensive place to live in. Governments must heavily subsidize nuclear energy in order to make it viable. Governments must also allow it to avoid responsibility for the inevitable disasters it will create. First they get stinking rich. Then they eat caviar, wear fancy suits and look very smart. But it is a very bad joke they are playing on us all. The bottom line is that they the lowest form of life — one that soils its own nest and thumbs its nose at its own descendants. Now that is ignorant! Back to article
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