Canada’s federal government has provided a measure of relief to the country’s depressed uranium mining sector by granting an exemption to foreign ownership restrictions on producing mines.
Late on Monday, Federal Natural Resources Minister Greg Rickford said Australia’s Paladin Energy (TSX, ASX:PDN) will be allowed to have majority ownership of its proposed Michelin uranium mine in Newfoundland and Labrador.
Under federal rules, a Canadian company must have at least 51% stake in any uranium project, unless a partner cannot be found.
The government said Paladin was able to show there were no Canadian partners interested in leading the development of the proposed project, located approximately 140 kilometres northeast of Happy Valley-Goose Bay.
“This is an historic decision that could have implications for all uranium companies and projects in Canada,” Raymond James analyst David Sadowski said in an e-mailed note.
The decision to grant Paladin majority ownership of Michelin will be welcome by other provinces, especially by the Saskatchewan’s government, David Talbot, an analyst at Dundee Securities, told The Globe and Mail. This, despite that province has no stake in the asset, financially or geographically.
“Saskatchewan supports [this kind of ownership exception] for its own jurisdiction, and that’s positive for potentially getting Rio Tinto or BHP to go after some of those smaller companies,” Talbot added.
Uranium prices have been down since early 2011, following the Fukushima disaster, which made Japan shut down all of its nuclear plants. Since the Asian nation was the world’s No. 3 producer of nuclear power, the decision it producers quite hard.
Since soaring to a record high of US$137 per pound in 2007, uranium prices have fallen to US$35 per pound — a level at which many miners are losing money and new investment does not seem to make economic sense.
Paladin Energy, which acquired the Michelin project shortly before the Fukushima incident in 2011, says the proposed mine could create up to 750 jobs during construction and up to 350 jobs once it is operational.
The project is still in the development stage.