BHP reactivates WA uranium site

The deposit ranks as Australia's second-biggest undeveloped uranium deposit after ERA's Jabiluka deposit in the Northern Territory. At current prices for the radioactive material, Yeelirrie's in-situ value is more than $ 9 billion.

It was discovered by Western Mining Corporation in the early 1970s but its development was thwarted by the federal Labor government's ban on new uranium mines in 1983 and more recently, the state Labor ban on new uranium mines.

BHP has written to WA's Mines Minister, Norman Moore, on its reactivation plans. It said it would first undertake a drilling program to confirm the resource outlined by WMC, acquired by BHP for $9.2 billion in 2005.

A project team is being assembled in Perth to evaluate mining and processing options and to prepare an environmental impact statement.

BHP did not mention any traditional landowner issues but the rise of commercially based activism by Aboriginal interests in WA makes it likely Yeelirrie will become the subject of attention.

While Yeelirrie is covered by a 1978 state agreement that predates native title, BHP would nevertheless be likely to consult indigenous groups on a development of Yeelirrie as part of the "modern" way of miners doing things.

The last resource estimate for Yeelirrie was made in 1982. It was 35 million tonnes at 1.5kilograms of uranium oxide a tonne. Feasibility work updated by WMC envisaged a 22-year mine life with annual production potential of 2500 tonnes of uranium in the first 12 years, falling to 1750 tonnes annually in subsequent years.

BHP is already Australia's second biggest uranium producer, thanks to another WMC project, the Olympic Dam operation in South Australia.

Olympic Dam is the world's biggest uranium deposit, with 2.3 million tonnes of uranium. An expansion costing as much as $20 billion will eventually increase annual production there to more than 19,000 tonnes.

BHP's decision to dust off its Yeelirrie project comes as the uranium market is showing signs of life after the steep decline in prices from last year's record levels.

US market watcher TradeTech recently raised its estimate of spot market prices by $US5 ($A7.8) a pound to $US53 a pound. It said a host of producers including Cameco, Denison, Uranium One, URI, and First Uranium had indicated they were either scaling back financial expenditures or production forecasts.

"These developments, along with a decrease in spot supplies in recent weeks, have contributed to further strengthening of the current spot price," TradeTech said.