Those who favour uranium mining claim that it generates very substantial economic benefits for Australia which outweigh any social or environmental costs. GREENPEACE prepared this analysis of the economic impact.
Detailed information is available regarding the actual economic effects of existing uranium mines, and this represents the best basis on which to assess the impact of any new mines or of expanding existing operations. Proponents of uranium mining frequently use economic models to assess the effects of expanding the industry, but such models are only as good as the assumptions on which they rest and can easily be manipulated to achieve the desired outcome.
Second, it is very important to go beyond broad statements about uranium's impact on general economic indicators such as "national income" or "exports". It is crucial to establish how much of the income generated by uranium mining stays in Australia and to discover who actually benefits from the wealth which is retained here.
Third, it must be remembered that the choice is not between the economic benefits generated by investment in uranium mining and no economic benefits at all. The labour and capital employed in uranium mining do have alternative uses, which also have benefits associated with them; a decision to mine uranium is also a decision to forego these benefits (what economists call "opportunity cost"). It must also be kept in mind that uranium projects absorb public as well as private resources, for example in providing facilities in mine townships and in regulating mining operations.
How many jobs?
Uranium mining is one of the most capital-intensive industrial activities currently undertaken in Australia. It requires more investment to create one job in uranium mining than in most other industrial activities. This is significant not just because it affects uranium mining's capacity to create jobs; it also plays a key role in determining who obtains the income generated by uranium sales.
One way of gauging an industry's capital intensity is to calculate how many jobs it creates per million dollars of value added. On this measure, manufacturing generates 17 times more jobs per million dollars of value added, and mining in general five times more jobs than does Ranger Uranium. Capital invested in uranium mining generates relatively little employment compared to capital invested in other forms of mining or in manufacturing.
Proponents of uranium mining usually accept that it creates few jobs directly. However, they often claim that it generates substantial "indirect" or "multiplier" employment in other sectors of the economy as a result of purchases of goods and services by mining companies and their employees. Indirect employment is usually measured through a "multiplier effect", which expresses the number of jobs created elsewhere in the economy for each job in uranium mining. The multiplier also includes the "original" job; thus a multiplier of three indicates that one job in uranium mining creates two jobs elsewhere.
Those who support uranium mining often claim that the job multiplier is four or five, and one study commissioned by a major mining company and using an econometric model implied a multiplier in the hundreds! In reality, indirect employment is much more modest than these figures suggest.
A detailed study of the indirect employment effects of the Ranger mine was carried out at the North Australia Research Unit in 1985, based on mining company records which provided detailed information on all Ranger's purchases of goods and services and on mineworkers' wages and salaries. This indicated that the multiplier was about 2.25; in other words, 1.25 jobs were created elsewhere in the economy for each one at Ranger. This indicates that establishment of a large uranium mine (3000-4000 tonnes annual capacity) would generate total employment of about 900 (400 in the mine and 500 indirectly).
Uranium mining is highly capital intensive and its purchases of goods and services are low, relative to its output), with the result that it generates relatively little employment either directly or indirectly. This in itself does not mean that uranium mining is undesirable in economic terms; however, it does imply that if generation of employment is a high priority, resources would be better employed in other activities.
Government revenue
In the current economic climate, the contribution of uranium mining to government revenues is particularly important. Little revenue is in fact generated during the early years of a new uranium mining project. During the early phase of its operations (1982/3-1985/6), Ranger did not generate substantial government revenues, mainly because it did not become fully liable to corporation tax until 1984/85, a liability which was not payable until 1985/86.
There are two reasons for this. First, Ranger was entitled to claim investment allowances and depreciation allowances during its construction phase, but had no income against which to set these allowances, which it consequently accumulated and claimed against income when production commenced.
Second, its interest payments were high (between $45 million and $50 million annually), and this also served to reduce its tax liability. A similar situation will apply during the early years of any new uranium mine.
In the longer term, uranium mining may have the potential to generate very substantial government revenue but only if the real (inflation-adjusted) price levels which prevailed during the early 1980s occur again.
If uranium supply expands more quickly than demand, as has occurred in recent years, then prices will be pushed downward. Consequently, expansion of uranium mining, either as a result of new projects or additions to capacity at existing mines, will not necessarily result in an equivalent increase in government revenue, especially given that any downward pressure on prices will affect the profitability of existing as well as new mines.
The impact of oversupply on uranium markets is very apparent from the trend in spot market prices, now lower in real terms than at almost any time since the establishment of the nuclear power industry. It is sometimes assumed that the Commonwealth's uranium export floor price will protect Australian producers from the impact of adverse market trends but this is not the case; for example, the Australian dollar floor price fell in real terms by 31% between 1979 and 1985, and depressed market conditions forced the government to reduce the nominal floor price for new contracts in September 1989.
Thus, in current market conditions, decisions to expand uranium output will involve a trade-off for the Australian government, because it will receive less revenue for each tonne of uranium produced.
It must also be remembered that uranium mines create a requirement for government expenditure as well as generating revenue. For example, the Commonwealth government spent some $48 million up to 1985 in providing facilities in the Ranger township, Jabiru, and in setting up and operating the Office of the Supervising Scientist, which monitors the environmental impact of uranium mining in the Alligator Rivers Region.
Because Ranger will make substantial company tax payments, the Commonwealth can recoup its expenditure fairly quickly. However, the situation regarding the Northern Territory government's finances is quite different. Its revenues are modest, reflecting the low level of royalties it receives on uranium mining (1.25%), and Commonwealth control over personal and corporate income taxes. It spends as much on providing services to Jabiru's population as it receives in revenue from RUM; for example, in 1983/84 its expenditures were estimated at about $4 million, while its royalties from Ranger were $3.7 million.
Balance of payments
Expansion of uranium mining is perhaps most frequently justified in terms of Australia's severe balance of payments problem. Comments on uranium's contribution in this area are usually based on figures for uranium exports. However, these figures refer only to foreign exchange inflows; it is also necessary to take into account foreign exchange outflows generated by uranium mining. These outflows can be very substantial.
During 1982/83-1984/85, for example, they absorbed 45% of the export revenue generated by Ranger Uranium. Servicing of overseas debt was particularly important, with foreign interest payments and debt repayments absorbing 37% of gross foreign exchange earnings. This pattern will change later in the Ranger project's life, and especially after debt repayment is complete. Foreign dividends will then absorb a higher proportion of foreign exchange, but this increase will be less than the decline in debt service payments, with the result that the overall level of net foreign exchange inflow will be higher than during the early years of mine life.
To put uranium's contribution into perspective, the net foreign exchange inflow generated by RUM/ERA amounted to 2.3% of Australia's current account deficit in 1982/83 and 1.9% in 1983/84.
The balance of payments impact of any new uranium mine is likely to follow a similar pattern, since all of the relevant projects have significant foreign equity and since there is little indication of a decline in the propensity of developers to partially fund Australian resource projects through overseas borrowings.
Who benefits?
How the income generated by uranium mining is distributed is indicated by analysing the principal payments by Ranger Uranium and Energy Resources of Australia over a three-year period, 1982/83-1984/85. These figures are derived from the North Australia Research Unit study, which used exact dollar figures extracted from RUM/ERA's creditor payment, payroll and financial records.
During these years nearly two-thirds of every dollar generated by uranium sales flowed to suppliers of capital, in other words to the banks which provided loans and the shareholders who provided equity capital. Indeed, this figure is an underestimate, since it reflects actual payments and does not take into account sums which were retained in the business (working capital, reserves etc) and which added to shareholders' assets.
Only 4 cents from each dollar is used to meet labour costs, and this includes non-wage costs such as leave fares. Only about 17% of each dollar is spent on the purchase of goods and services; this translates to about 15% of sales value, as against about 32 cents for Australian mining and 63 cents for Australian manufacturing, and it helps to explain the modest level of indirect employment associated with uranium mining.
Government received only a small proportion of payments (about 6%), reflecting the fact, mentioned above, that ERA was not making income tax payments at this early stage in the Ranger project's life. As time goes by, the pattern of payments will change to some extent. Interest payments and debt repayments will decline as loans are repaid, while payments to shareholders and to the Commonwealth will increase. However, the share of payments received by labour and by suppliers of goods and services will not change significantly.
Conclusion
Experience with Australia's existing uranium mines offers the most reliable guide to the likely economic impact of expanding Australia's uranium industry. This experience indicates that:
1. A very high proportion of the additional income generated by uranium mining flows to the banks and the shareholders who provide funding for this highly capital-intensive industry. This is especially so during the early phase of a new uranium mining project.
2. If generation of employment is a priority, then resources would normally be utilised more productively in other forms of economic activity.