ASNOs activities in 2000-01 are described and evaluated in
the following sections.

Activities are described in relation to particular tasks,
and grouped according to the output to which they relate (for summary of
outcomes and outputs see page 3).

Output
A Operation of National
Safeguards System

Operation of
Australias national system of accounting for, and control of, nuclear material
and items subject to IAEA safeguards, including promotion and regulation,
within Australia, of effective measures for the physical protectionof
nuclear facilities and material.

Milestone
A1

A1.1 The provisions of the Nuclear Non-Proliferation (Safeguards) Act 1987 administered
effectively.

A1.2 The continued adequacy of the Acts
provisions reviewed and evaluated.

A1.3 Under the Acts PermitSystem, nuclear items in Australiaincluding those subject to
bilateral safeguards agreementscontrolled and accounted for effectively.

A1.4 Locations holding nuclear material and
associated items inspected to check compliance with permit conditions.

Activities

Permits and authorities

During the year six new permits or authorities under the
Safeguards Act were issued, none were varied, expired or revoked.

and Authorities in Australia">
Table 3 Status of Safeguards Permits
and Authorities in Australia

Permit or Authority to:

Granted

Varied

Expired

Number
at End of Period

Total

6

0

0

97

Possess nuclear material

3

0

0

34

Possess associated items

1

0

0

22

Transport nuclear material

1

0

0

23

Transport associated items

0

0

0

0

Communicate information contained in associated
technology

1

0

0

18

Laser
enrichment R&D

Silex Systems Limited, an Australian company, is
developing an innovative method of separating uranium isotopes using laser
techniques. In 1996 the company entered
into an agreement with the United States Enrichment Corporation (USEC) to
explore the commercial potential of this technology. Experimental work is proceeding to establish if the process is in
fact practicable for the separation of uranium isotopes and, if so, whether it
could be commercially viable. This work
has now reached the stage where it appears the process may be practicable,
though this will not be confirmed until 2001-02. However, regardless of the outcome, ASNO in consultation with US
authorities has concluded that process details could be useful for others
working on enrichment technologies. Consequently, a determination was made on 14 June 2001 that SILEX technology constituted associated technology and associated
equipment under the Safeguards Act. United States authorities similarly declared the technology to be
Restricted Data on 1 June 2001. If
successful, the technology may be commercialised in the United Statesthis
aspect is discussed further under Milestone B2 (see page 31).

ASNO is following the progress of this research
closely. The Ministergranted a permitto Silex Systems Ltd to possess associated technology and an
authority to communicate information on 2 November 2000. The objective is to ensure that nuclear
technology remains in exclusively peaceful use and does not contribute to any
proliferation activity. The
classification as associated technology restricts access to the technology to
authorised persons. Under the permit,
Silex Systems Ltd has been required to put in place appropriate security
measures to protect the technology against unauthorised access. ASNO is also ensuring that all IAEA
requirements are met with respect to the reporting category of nuclear-related
R&D.

Replacement Research Reactor

The Australian Nuclear Science and Technology Organisation (ANSTO) is progressing on schedule with its project to
replace its aging reactor, HIFAR. ASNO carried out some
preliminary work with the design team regarding safeguards and security
arrangements for this planned facility. In May 2001 Mr Russell Leslie visited the Egyptian ETRR-2 reactor,
which is similar to the replacement ANSTO reactor, to examine safeguards and
security arrangements there.

Data reported pursuant to the Safeguards Act

As required by sub-section 51(2) of the Safeguards Act,
details of nuclear material and associated items of Australian origin, and
nuclear material and associated items within Australia, regardless of origin,
are set out in Annexes to this Report as follows:

Annex A: Nuclear Material
within Australia at 30 June 2001.

Annex B: Associated Items
within Australia at 30 June 2001.

Annex C: Australian
Obligated Nuclear Material Overseas:

(i) Locations and Quantities of AONMat 31 December 2000.

(ii) Transfers of AONM during 2000.

Some documents relating to the SILEX process were
transferred to the United States during the year. These were passed prior to the determination that SILEX
technology is associated technology but were treated as sensitive and protected
accordingly. A side letter to the Silex
Agreement provides for documents transferred prior to entry-into-force of that
Agreement, but which are later determined to be associated technology or
restricted data, to become subject to the Agreement. No other associated items of Australian origin are located
overseas.

ASNO also provides the Australian National Audit Office with
an annual statement listing nuclear items held by ANSTO.

Inspections of permitholders

In 2000-01 ASNO carried out 27 domestic inspections of five
permit holders. In addition, an ASNO
inspector visited a location in New Zealand where Australian uranium is being
used for non-nuclear purposes (glass-making) to establish that the requirements
of Australias bilateral safeguards agreement covering this material were being
met.

ASNOs largest inspection effort was at ANSTOs Lucas Heights siteto be
expected since this is Australias only nuclear facility. Since the inspection activity at Lucas
Heights is closely linked to the meeting of IAEA requirements, more details are
given under Milestone A2 below, on the implementation of IAEA safeguards.

During the year ANSTO completed a major review of it nuclear
accounting procedures, in order to better reflect current operating and
regulatory requirements. ASNO was
closely involved in this work, which was an interim measure pending future
introduction of performance-based permits underpinned by an ISO 9000 accredited
system at ANSTO. Through inspections
and cooperative effort, ASNO continues its work with ANSTO to further improve
the nuclear accountancy system at Lucas Heights.

As mentioned above, ASNO worked closely with Silex Systems
Limited to ensure the accountancy and control system being developed for the
Silex laboratory effectively protects both nuclear material and, more
significantly, technology.

During ASNOs inspections of the Australian uranium mines,
the operators were very cooperative. They met all ASNO requirements, and demonstrated a willingness to act
upon ASNO advice.

Performance Assessment

ASNO found no indication of
unauthorised access to or use of nuclear materials or nuclear items in
Australia. Inspections of Silex Systems
Limited and the uranium mines have confirmed they are satisfactorily complying
with permit conditions. ASNO assistance
has made an important contribution to ANSTOs upgrading of the safeguards
system at Lucas Heights. Administration
of the Permit System was carried out in a timely manner, with all Permit
changes published in the Commonwealth Gazette as required by the Safeguards
Act.

Milestone
A2

IAEA safeguards implemented satisfactorily in Australia.

Activities

Australias State System of Accounting for and Control of
Nuclear Material (SSAC)is
operated by ASNO in accordance with Australias safeguards agreement with the
IAEA. ASNO reports to the IAEA on the
disposition of nuclear material in Australia and facilitates inspections
carried out by the IAEA at Australian facilities.

Reports on the disposition of nuclear material

As part of ASNOs inspection effort, each month an ASNO
officer audits the inventory record of nuclear material at the ANSTO site at
Lucas Heights (near Sydney), which is the principal location of safeguardable
nuclear material in Australia. Inventory changes at Lucas Heightson a monthly basisas well as any
changes elsewhere in Australia, are reported by ASNO to the IAEA. Accounting reports are also given to the
IAEA by ASNO following Agency inspections described below.

Details of Australian Accounting Reports to the IAEA during
the year are at Annex D.

IAEA inspections in Australia

As in other countries where IAEA safeguards are in force,
the Agency carries out routine inspections of Australian nuclear
facilities. The aim of these
inspections is to verify that nuclear material inventories are as declared by
the operator and the SSAC. Each
inspection deals with what is described as a Material Balance Area (MBA), of
which Australia has five (see Table 4).

IAEA inspectors visited Australia on three occasions during
2000-01 to carry out routine inspections and on two other occasions to carry
out a short notice inspection and complementary accesses(see Annex D for details).

Australia">
Table 4 Material Balance Areas in
Australia

Location

MBA

Facility

ANSTO

AS-A

HIFARreactor

ANSTO

AS-B

Moata reactor^[1]

ANSTO

AS-C

Research and
Development Laboratories

ANSTO

AS-D

Vault Storage

Elsewhere

AS-E

Other
locations in Australia

As the national safeguards authority, ASNO acts as the
intermediary between the IAEA and the facility operator on all safeguards
matters. An ASNO officer accompanies
IAEA inspectors during inspections in Australia. This officer ensures the inspectors are able to carry out their
duties so that Australia meets its obligations and mediates on any issues
arising between the IAEA and the facility operator. In particular, ASNO assists in the resolution of any inconsistencies
discovered during inspections, thus simplifying the IAEA inspectors task.

A major focus of IAEA inspection activity is the
identification and evaluation of material unaccounted for (MUF), that is, the difference
between the records maintained by the operator (the ending book inventory)
and the physical inventory verified by the IAEA. Since MUF is the difference between two
measured quantities, it may be equal to zero, or it may be either a positive or
negative value. If MUF is positive it
does not necessarily indicate that material has been lost, nor does a negative
figure mean that materialhas somehow been
created. In many cases MUF can be
attributed to unavoidable measurement differences, but where the size of the
MUF is outside the range expected from measurement difference further
investigation is required.

In 2000-01 there was MUF in three
material categories in MBA AS-C (R&D Laboratories). For enriched uranium, the Physical Inventory
was greater than the Book Inventory by 2.36 grams of uranium element and 0.06 grams
of U-235 isotopethis was within the expected measurement difference. For natural uranium, the Physical Inventory
was less than the Book Inventory by 0.34 kilogramthis MUF related to a small
container of natural uranium powder which was mislaid. While investigation showed some ways in
which this material may have been used, it was not possible to identify from
the operators records where the material was or where it had been used. For depleted uranium, the Physical Inventory
was less than the Book Inventory by 0.12 kilogramthis difference was under
investigation at the time of writing. ANSTO has undertaken to strengthen its accountancy and control system to
prevent a recurrence.

The IAEA reports all conclusions drawn from its routine
safeguards inspections in Australia, including comments on any MUF, in the
statements provided pursuant to Article 91(b) of Australias NPT
safeguards agreement (see Annex E for details).

Declaration of Safeguards Inspectors

Under section 57 of the Safeguards Act, the Ministermay declare a person to be an inspector for the purposes of the
Act. In practice, only ASNO officers
have been so declared. The role of an
inspector is to ensure compliance with provisions of the Safeguards Act and to
assist IAEA inspectors in the conduct of Agency inspections in Australia. One new national inspector was declared in
2000-01.

The Minister may declare a person designated by the IAEA as
an Agency Inspector for the purpose of the Safeguards Act. In practice, all IAEA staff designated to
Australia are declared under the Safeguards Actthere were 132 new designations
during 2000-01. There are currently 313
IAEA staff declared as Agency Inspectors pursuant to the Act.

Since 1990, the Director of Safeguards has had the right to
appoint inspectors and has held powers of declaration under delegation from the
Minister.

Performance Assessment

All routine IAEA inspections were concluded satisfactorily.

IAEA statements during 2000-01 confirm that all of
Australias IAEA safeguards obligations were discharged satisfactorily, and
that relevant records had been maintained in accordance with prescribed
practice. ASNOs reporting has
satisfied IAEA requirements in full.

The IAEA has never found cause to comment adversely on Australias
accounting for and control of nuclear materiala fact reflected in Article
91(b) statements over the years.

Milestone
A3

A3.1 Appropriate physical protection measures for
nuclear material and associated items in Australia prescribed and reviewed.

A3.2 Sites holding nuclear material and
associated items inspected to check that prescribed physical protectionmeasures have been implemented effectively.

Activities

Physical Protection within Australia

ASNO is responsible for prescribing the levels of physical
protection, or security, to be applied to nuclear items subject to the
Safeguards Act. During the year,
inspections were carried out of the physical protection measures applied at
ANSTO. Inspections were also carried out of the physical protection measures
applied at, and in connection with, the uranium miningoperations in South Australia and the Northern Territory.
In addition, regular inspections were made
of the arrangements put in place for the protection of sensitive information
relating to the SILEX laser enrichmentR&D project.

Performance Assessment

Physical protection requirements prescribed by ASNO are
consistent with the most up-to-date international standards.

Through inspections, ASNO determined that all physical
protection arrangements at ANSTO, Australian uranium mines and associated
operations, and Silex Systems Ltd were satisfactory and effective.