Canberra, 9 March 1971

Secret

Record of Conversation with Sir Philip Baxter, K.B.E., C.M.G., Chairman, and Mr. T.F.B. Macadie of the Atomic Energy Commission

Officers Present: Sir Keith Waller,¹ Mr. K.C.O. Shann, Dr. J.W.C. Cumes,² Mr. P.J. Flood³

Atomic Energy Matters

Safeguards and N.P.T.

After mentioning that the Commission would like an inter-departmental meeting convened shortly to assess the position on safeguards, Sir Philip Baxter commented that little real progress was being made in the current IAEA discussions on the safeguards financing issue. He added that, leaving aside conditions other than safeguards, the safeguards provisos specified in Australia's statement when the Government signed the Non-Proliferation Treaty were not being met. The Commission remained of the opinion that it was not in Australia's interests to ratify the Treaty. Australia's position of some aloofness towards the Treaty had not, in his view, diminished in any way the interest of potential customers in Australia's uranium.

The Secretary agreed that Foreign Affairs would convene an inter-departmental meeting as soon as possible after Mr. Timbs' return to Australia and the receipt of sufficient documentation to enable an inter-departmental meeting to do useful business.

Uranium Resources

2. Sir Philip Baxter said it was now certain that Australia had massive uranium reserves. Although several years of exploration would be required before an assured figure could be placed on the Nabarlek and Ranger I deposits in the Northern Territory and the recent discoveries in South Australia, he expected the total reserves might be as high as 300,000 short tons of U308. This would put Australia in the first three in the world, with Canada and South Africa. Present known reserves in Western countries, excluding Australia, were about 900,000 tons.
3. New discoveries might well disclose that Australia had the world's largest reserves of uranium and this would have far-reaching commercial as well as strategic implications. By the year 2000 enriched uranium could become Australia's largest single item of export revenue. He estimated possible accumulated export earnings as $15 billion, or about $1 billion p.a. as from the late 1980's and throughout the 1990's. In reply to questions Sir Philip Baxter said these projections envisaged that present known deposits would be used by about 1990, i.e. he was assuming that there would be substantial new discoveries or that reserves in existing deposits would be proven to be much larger than at present.
4. Recent developments in uranium discoveries were such that, in the Commission's view, the Government would have to consider the creation of a nuclear-fuels corporation. This might need to be formed before 1975/76 when production of yellowcake from Nabarlek could be expected. A corporation, in which the Government might have a 51% share, would be able to assure the orderly development of uranium resources and avoid what he described as the present disorderly exploitation of Australia's iron ore resources. Creation of a single corporation would also reflect the reality that, in the future, uranium would be sold only between Governments. The Chairman referred to the existence of similar authorities in the U.S., Britain, South Africa and Japan.

Enrichment

5. Sir Philip Baxter went on to say that doubts about America's ability to meet other countries' needs for enriched uranium raised the question of whether there should be investment in an enrichment plant in Australia. He discussed briefly the tripartite Britain/Germany/Netherlands company to develop the centrifuge process and also the announcement by South African authorities last year of a new process different from the gas diffusion and gas centrifuge methods.⁴ While very little information about the South African process had been released, he was convinced that the claims made were genuine. He later added that he accepted the claims about the feasibility of the process, but the economics remained to be assessed.
6. An enrichment plant in Australia would involve a total investment of about $1 billion. This could only be contemplated as a joint venture with other countries and indeed Australia would have to think of development in conjunction with likely customers for the final product; the total investment had to be seen against the figures he had quoted for potential export revenue. Sir Philip said the demand for enriched uranium would expand particularly from the early 1980's; since it would take 5-6 years to construct a plant decision would have to be taken about 1974. Meanwhile the Commission hoped to have ready for consideration by Ministers in about a year a proposal for a pilot centrifuge plant. This was an essential step to making firm estimates of the commercial potential of this enrichment process. He expected that the pilot plant might cost only $15 million. (He mentioned that, unlike the larger plant which would produce low enrichment, the small pilot plant could produce highly enriched uranium; this would, he said, leave open a future option on the production of nuclear weapons.)
7. In reply to questions about whether Australia would really have the competitive edge to establish a profitable market, Sir Philip Baxter said that the present cost of a unit of enrichment in the United States was about $28 and the price was likely to rise to $30 due to the decision of the Tennessee Valley Authority to increase its power charges. Further escalation of U.S. costs must be expected. He estimated that costs in Australia would be below these U.S. costs. He made the point that countries establishing enrichment plants should, to be competitive, have substantial supplies of uranium and low power costs. Only three countries really satisfied these criteria at the moment: Canada, South Africa and Australia. South Africa was at a disadvantage for political reasons. Belgium had had a 'hare-brained idea' that an enrichment plant might be established in the Congo but the political risks to investment were too great. So Australia and Canada were really the two countries which put themselves forward most clearly as locations for enrichment plants. In answer to the Secretary's query Sir Philip Baxter said Australian electricity costs, at the power station, and ignoring rural distribution costs, were well below United States costs and those in most other parts of the world. For example, based on N.S.W. black coal, unit costs for electricity at the power station were now 3.5 mills per KwH. The Commission had even seen estimates that costs might be brought as low as 2.8 mills but it did not accept these as realistic. In the United States, for new non-nuclear power stations, the costs were as high as 7.0 m. per KwH.

Bilateral Consultations

8. Finally Sir Philip Baxter said he wished to mention to the Department that the Commission proposed to engage in further consultations with the French, British, Americans, South Africans, Japanese and others. These would be focussed on the issue of the most economic technology for enrichment. The Secretary referred to the need for Ministers to know about this. Sir Philip Baxter said that the submission to Cabinet on the Jervis Bay reactor by the Minister for National Development⁵ included a reference to these proposed consultations.⁶ In those instances where Australia had co-operation agreements (e.g. U.S., Britain, Canada and France) there was already general provision for consultation. In respect of South Africa, Sir Philip said that he too had some doubt about how far there was scope for co-operation. The Chairman of the South African Atomic Energy Commission, together with some technicians, would be visiting Australia next month. He said that this would fit into a pattern of two-way visits which had developed over the years and that no publicity would be given to it.

[NAA: A1838, 919/10/5 part 33]

• 1 Secretary, Department of Foreign Affairs.
• 2 First Assistant Secretary, International Organisations Division, Department of Foreign Affairs.
• 3 Assistant Secretary, Economic Policy Branch, Department of Foreign Affairs.
• 4 A reference to Urenco, a nuclear fuel company operating uranium enrichment plants in the United Kingdom, the Netherlands and Germany.
• 5 Reginald Swartz.
• 6 See note 1 to Document 160.