By Barbara Adam and Ray Brindal Of DOW JONES NEWSWIRES CANBERRA...

By Barbara Adam and Ray Brindal
Of DOW JONES NEWSWIRES

CANBERRA (Dow Jones)--Australia could sign a nuclear treaty with energy-hungry
China as early as next week, fueling more interest in Australia's already
frenzied uranium exploration sector.
Australian Prime Minister John Howard said Tuesday talks between Chinese and
Australian officials on nuclear safeguards were progressing well.
"It's possible that the discussions could be satisfactorily concluded so that
something could be said or signed when the Chinese premier visits Australia next
week," Howard said at a media conference in Canberra.
Chinese Premier Wen Jiabao is scheduled to be in Australia April 1-4 as part
of an eight-day trip that will also take him to Fiji, New Zealand and Cambodia.
Australia, which hosts the world's biggest uranium reserves, exports all the
output of its three uranium mines. The government stipulates Australian uranium
can only be used for power generation and exports are limited to countries that
have signed the nuclear nonproliferation treaty.
China, a signatory to the treaty, plans to increase its nuclear capacity
fivefold by 2020 and will rely heavily on imported uranium to power its nuclear
power plants, according to the industry-backed Uranium Information Center.
Nuclear power currently accounts for only 3% of China's energy production.
"There's no question it will be a very welcome fillip if the safeguard
agreement is signed in terms of increased market access to the major growing
market for minerals and energy products," Minerals Council of Australia Chief
Executive Mitchell Hooke told Dow Jones Newswires.
BHP Billiton Ltd.'s (BHP) Olympic Dam mine in South Australia, Energy
Resources of Australia Ltd.'s (ERA.AU) Ranger mine and Heathgate Resources'
Beverly mine would all benefit from a nuclear pact with China, Hooke said.
ERA is around 68% owned by Rio Tinto PLC (RTP) and Heathgate is a unit of
California-based General Atomics.
"It's almost like a perfect storm," said Paul Adams, a resource analyst at
stockbroker DJ Carmichael, referring to the impact on uranium stocks of the
pending China deal, the rising price of uranium and a possibility of sales to
India.
The spot price of the fuel is now just over US$40 a pound, a gain of one-third
in the past six months.
Rising uranium prices over the past two years have triggered a boom in
exploration for the mineral, including local companies such as Redport Ltd.
(RPT.AU) and Compass Resources NL (CMR.AU), plus global majors, including
Canada's Cameco Corp. (CCJ) and France's Areva's (427583.FR) Cogema mining unit.

China has also indicated it wants to undertake its own uranium exploration and
mining projects in Australia.
Shares of Deep Yellow Ltd. (DYL.AU) rocketed 43% Tuesday to close at 16.5
cents, while Encounter Resources Ltd. (ENR.AU) soared to A$1.15 after listing
Friday at 30 cents before settling at 88 cents, up 85%.
The stock market listing of South Australia-based uranium explorer Toro Energy
Ltd. (TOE.AU) was a further expression of confidence in the industry, according
to South Australian Chambers of Mines & Energy Chief Executive Phillip
Sutherland.
Toro's shares were issued at 25 cents and listed on the Australian Stock
Exchange on Friday at 86 cents and ran to A$1.495 cents Tuesday before closing
at A$1.395, up 6.5%.
Sutherland predicted an agreement with China would lure more uranium
exploration companies to South Australia, with a strong likelihood of more
discoveries in the state by a new player or one of the 15 companies already
searching.
"South Australia could be the Dubai of Australia on the back of the uranium
industry," he said.
A boom in uranium exploration has also been underway in the Northern Territory
since August after Resources Minister Ian Macfarlane announced the federal
government, which strongly supports the industry, took over administrative
control of the industry in the territory, which contains about 20% of the
world's known uranium resources.
Major uranium deposits have also been identified in Queensland and Western
Australia but state governments there ban mining of the fuel, a stance DJ
Carmichael's Adams expects to come under increasing pressure.
Adams said Australia's uranium sector boom was being eclipsed by the rally in
Canada's uranium industry.
"There's still some potential for this thing to go a long way further," he
said.
Canadian companies were looking to form alliances and buy Australian
explorers, he said noting Canada's Mega Uranium Ltd.'s (MGA.V) current
stock-based takeover offer for Australia's Hindmarsh Resources Ltd. (HMR.AU).
While pushing to sell uranium to China, Australia has so far baulked at
exporting the mineral to the similarly energy-hungry India, which isn't a
signatory to the nonproliferation treaty.
However, Australia is sending a delegation of officials to New Delhi and
Washington next month to investigate a nuclear agreement between India and the
U.S.
Australia's uranium production is forecast to increase 8% in the fiscal year
ending June 30 to 11,900 metric tons.
The value of the nation's uranium export earnings, meanwhile, are expected to
increase 50% to A$712 million, according to Australian government forecaster,
the Australian Bureau of Agricultural Resource and Economics.

-By Barbara Adam, Dow Jones Newswires;
61-2-6208-0901; [email protected]
-Edited by Graham Morgan

(END) Dow Jones Newswires
28-03-06 0743GMT
Copyright (c) 2006 Dow Jones & Company, Inc.(AP-DJ-03-28-06 0743GMT)