West Australia Set for Uranium Mines as Liberals Win Government

By Jason Scott and Robert Fenner

Sept. 15 (Bloomberg) -- Western Australia's uranium-related companies are set for a boost after the Liberal Party, which favors ending a ban on mining the nuclear fuel, yesterday won the backing of the Nationals to form government.

Liberal leader Colin Barnett will take over from Labor's Alan Carpenter as the state's new premier, ending a week of political gridlock after a Sept. 6 poll failed to produce a clear winner. Nationals' leader Brendon Grylls said yesterday his party would form a coalition government with the Liberals after using his party's four seats as a bargaining chip for plans to divert more mining royalties to local communities.

Western Australia has as much as 10 percent of the world's known uranium reserves, worth about A$40 billion ($32 billion), according to an estimate from the federal government last year. The Liberals want to open the state, which accounts for more than a third of the nation's exports, to uranium miners such as Cameco Corp., the world's biggest producer, and BHP Billiton Ltd.

``Projects are now going to be developed, which they couldn't before, and there will be a flurry of interest in the sector,'' said Gavin Wendt, senior resources analyst at Fat Prophets Funds Management in Sydney. ``Whilst they will be given the green light politically, they still have to be developed on sound economics.''

Labor, which said it would legislate its ban on uranium mining, had been in power in Western Australia since February 2001, with Carpenter taking the helm in January 2006. Barnett, who replaced Troy Buswell as party leader one day before the election was called, has said he would consider lifting the ban and introduce genetically modified crops.

Monopoly Broken

Carpenter, who became premier in January 2006, called the election five months before it was due, the earliest in Western Australia in 100 years. He resigned as party leader yesterday. Labor holds government in all seven other Australian states and territories and at the federal level.

National party members of the new government will reserve the right to vote against Liberal policy, while ministries headed by Nationals will be ``independent,'' Grylls told reporters in Perth yesterday.

``We're the Nationals, we're from the country, and I'd expect to be driving a hard deal every time I'm at the table,'' Grylls said. The Nationals sought the balance of power to push their Royalties for Regions agenda, which would see a quarter of royalty payments from mining projects invested in local, rural projects such as improvement to roads and new schools.

Dr. Peter Van Onselen, associate professor in political science at Perth's Edith Cowan University, said the Liberal/National arrangement may be volatile given Grylls' promise to be independent.

`Cobbled Together'

``The Liberal party's majority now is a cobbled together group of Liberals, Liberal independents and national MPs who can more rightly be termed agrarian socialists,'' he said. ``The ability for them to govern in a stable fashion is something we will only be able to see over time.''

The Liberals, in alliance with the Nationals, will be in charge of managing more than A$160 billion worth of investment projects planned for the state, which has 10 percent of Australia's population. Western Australia, about four times the size of France, produces 75 percent of the nation's gold and a third of the world's traded iron ore.

Australia, the world's second-largest uranium producer, gives states control of decisions about mining the metal, used as fuel in nuclear power plants. The nation's federal ruling Labor Party last year dropped its 25-year-old ban on new uranium mines, while letting state governments retain the power to reject proposals for new mines.

Western Australia has never mined uranium, mainly due to political and community opposition.

Three Mines

While Australia has almost 40 percent of the world's known low-cost uranium reserves, it supplies less than a quarter from mines in South Australia state and the Northern Territory.

``The premier's bewildering decision to outlaw uranium mining has produced a great deal of uncertainty in the uranium industry and disquiet in the wider resources industry,'' Michael Angwin, executive director of the Australian Uranium Association, said in a Sept. 2 statement.

Cameco, based in Saskatoon, Canada, in July agreed to buy a majority stake in the Kintyre exploration project in Western Australia from Rio Tinto Group for $346.5 million.

BHP Billiton's Yeelirrie resource and Toro Energy Ltd.'s Lake Way/Centipede project are probably the most advanced in the state. Uranex NL and Energy & Minerals Australia Ltd. have earlier-stage projects, according to analyst John Wilson at Sydney-based Resource Capital Research Pty.

To contact the reporter on this story: Robert Fenner in Melbourne rfenner@bloomberg.net; Jason Scott in Perth at Jscott14@bloomberg.net