A sharp rise of the uranium price last year sparked interest among investors in exploration companies searching for this radiant mineral. Uranium is rapidly becoming a major industry in resources-rich South Australia and local law firms are profiting from the spike of corporate activity in this highly regulated industry.
If it were up to Professor Ian Plimer of the University of Adelaide, South Australia (SA) will transform into a Saudi-Arabia styled energy empire, enjoying fabulous wealth on the back of its natural resources. But instead of on oil, the state's prosperity will be based on uranium.
"I think it is an absolute no-brainer that we should look at a cradle-to-grave uranium industry," he said at a uranium conference held in Adelaide in March. "We mine it, we convert it into yellowcake, we create the fuel rods and we lease these fuel rods to the major Western countries that want to use nuclear power. We take the fuel rods back, we clean them up and we dispose of the waste."
Although Professor Plimer's cerebral exercise on the state's future was met with some scepticism, he does have a point in suggesting that the uranium deposits provide a potential goldmine that can be exploited beyond the point of simply mining and exporting the mineral. Although the state's government supports uranium mining, it doesn't allow enrichment of the mineral or storage of nuclear waste. If Plimer's vision were to become a reality, it will undoubtedly require a shift in public opinion about nuclear energy.
The idea of an advanced domestic uranium industry is tempting, not only from an economical perspective, but also from a legal perspective. The nature of the mineral ( and the public suspicion towards its usage) means the industry surrounding uranium is riddled with extensive legislation. What's more, the legislation differs from country to country, and in case of Australia, from state to state.
Transportation of uranium is one example of a heavy legislated area, and the states and territories have all developed their own sets of rules over the years. "In Australia, there is no consistency between the states," says Julia Dnistrianski, partner with Finlaysons. "The states need to agree to a uniform transportation code."
Vast deposits
Australia counts more than 260 companies with two uranium prospects or more. Last year, these companies became the centre of investor's attention when the uranium price showed a sharp increase, reaching a peak of US$138 per pound in June on the back of an increase in the number of planned or proposed new nuclear power reactors.
SA is rich in uranium deposits. The Olympic Dam mine, when extended, has the potential to produce up to 4,600 tonnes of uranium a year, which makes it the largest deposit in the world. The state counts already two operating uranium mines and many more exploration projects are being undertaken.
More importantly, SA's government is one out of only two governments in the country to endorse uranium mining - the other being the Northern Territory's. This has seen the emergence of a domestic uranium industry.
Market interest in uranium stocks started to wane when the price fell back from its peak in June 2007, but recent reports predict a new increase for the price of the mineral. Research group Resource Capital Research says there are indications that the price will rise to US$105 per pound in September from the current US$75 per pound.
Legal speciality
As more uranium exploration projects have become economically viable under the influence of a higher uranium price and have attracted domestic and foreign investment, energy & resources lawyers are starting to pick up on this niche sector.
Dnistrianski runs an energy & resources practice, which has a large number of uranium industry clients. Her portfolio includes Deep Yellow, France-based uranium processor Areva and the Canadian uranium producer Cameco, which is responsible for 20% of the global uranium production.
She advises on regulatory requirements for the mining and export of uranium, but also acts for these companies on corporate matters. For example, she acted for Toro Energy on its takeover of Nova Energy in August last year. Toro runs uranium exploration projects and holds tenements in SA which cover a surface of 26,000km2. It was listed on the Australian Stock Exchange in 2006 and raised A$18m. Nova Energy has tenements holdings in SA, as well as in Western Australia, NT and overseas, including holdings in Namibia and Guinea.
Dnistrianski sees much potential in this industry and is continuously looking to expand her expertise in the field. Last year she attended a two-week course at the International School of Nuclear Law, where she studied the nuclear cycle and international transportation issues.
Kent Grey is a partner in Minter Ellison's energy & resources group and head of the firm's uranium focus group, consisting of three partners and three lawyers. His team acts for the Canadian group, Uranium One Inc., amongst others.
He believes the search for low-emissions energy sources stimulates growth in the industry and uranium is becoming an increasingly more important export product in the SA economy. "Now that the climate change debate is taken more seriously, uranium is back on the agenda," he says. "The evidence of the human influence on climate change is mounting and this results in a stronger push for low-emission type power generation. Uranium is a viable alternative, while most other alternatives are still far away."
Grey says that changes in uranium pricing have meant that more projects have become viable. "We have seen a lot of projects moving from the exploration phase into the production phase. Those projects have a need for infrastructure and will see major construction projects." For the legal industry this is good news. Uranium producers are likely to seek advice on contracting, procuring and taxation matters, while exploration companies still seek help with mergers & acquisitions, setting up joint ventures and negotiations on land access.
Dnistrianski says that it is easier to obtain access to land in SA than in other states or territories. "In SA has a lot less overlap of claims and the state has a good record of resolving native title issues and working with the indigenous people, especially the representative body, the Aboriginal Legal Rights Movement. We have one representative body here, while if you look at WA, they've got at least two representative bodies and in some areas you have to up to five overlapping native title claims."
Olympic Dam
The extension of the Olympic Dam would boost the amount of uranium available for mining, but the project is in many ways essential for the future economic growth of the state as it will see much work flowing off on the back of it.
"There is no doubt that the Olympic Dam is going to create a lot of work," says David Semple, partner with Wallmans Lawyers. "With the extension, more and more people will come into the state and all those people need services. With more people, there is more money to go around."
Apart from services, the Olympic Dam will create much work in the energy sector. When extended, the mine is expected to soak up 42% of SA's current energy supply and new power generators and infrastructure will have to be built, says Clay Wohling, energy partner with Minter Ellison. He sees opportunities in oil & gas projects and the construction of geothermal stations. "With the mining & energy boom, there is a huge need for infrastructure," he says.
Wohling points out that the choice for the type of energy generation plants that will be built is dependent on how Australia will structure a national emissions trading platform and says the industry is waiting for a green paper on emission requirements to be published. "This will change the face of power generation in Australia, as emissions are a critical component of energy generators." With an average lifespan of 30 years for a generator, investors are holding back until there is more clarity on the new emission regulations.
Utopia
Professor Plimer's utopian vision of a vastly rich SA, based on the export of uranium and the storage of nuclear waste, is still far off. But as the search for low-emission energy generation is continuing and technology safeguarding the use of uranium is becoming increasingly sophisticated, public opinion is shifting.
With the state on the cusp of a mining boom, the demand for energy will grow exponentially over the next three years. The question is how much longer South Australians will be able to ignore this rich energy source that lays just a couple of hundred metres below their feet. Law firms seem to have made up their minds and are rapidly developing a uranium specialty.
THOMSON PLAYFORD ON A MISSION
Thomson Playford is on a mission to reinvent itself. After entering the Sydney market two years ago, the firm has now sharpened its focus on corporate law and bids its insurance arm goodbye.
"It was an amicable decision between the insurance partners and the rest of the firm," says Loretta Reynolds, chairman of the firm and partner in the corporate & commercial team. "The main reason relates to the strategic direction and the business model of the firm. We focus on the corporate sector, while the insurance practice is strategically different and has little overlap with the rest of the firm."
She indicates the decision is in line with similar developments at other Australian law firms. "When you look at Mallesons, Blake Dawson, Clayton Utz and, more recently, Herbert Geer & Rundle, they have all departed with their insurance teams."
But it doesn't mean the firm is scaling down. Thomson Playford's Adelaide office is set to move to new premises at 9 Gouger Street, after having spent nearly 20 years in Pirie Street. The firm will relocate before Christmas this year to the new building, which is adjacent to the Supreme Court. Reynolds says that the premises leave room for 20% growth. "This shows the confidence we have in the South Australian market."
For more information on the departure of the insurance team see ALB 6.3
SEEKING SOLICITORS
As the current generation of senior partners reach retirement age, the question of succession has become an urgent one for many South Australian law firms. Wallmans Lawyers decided four year ago to rejuvenate the firm and decrease the average age below 50. "The firm was top heavy with blokes on or above 50," says David Semple, partner with the firm. "We've gone out and laterally recruited."
The firm attracted a number of partners from its rivals, including retirement village specialist Trevor Edmond and tax & superannuation lawyer Stephen Heath - both from Thomson Playford. Local government specialist Michael Kelledy joined the firm from Norman Waterhouse Lawyers, and shipping & maritime specialist Ian Maitland gave up his own practice to become a partner at Wallmans.
The firm has grown from 29 fee-earners four years ago to 49 fee-earners today and is in negotiations with several other partners to join the firm. Semple says the firm has mainly been able to attract people by offering them a better balance between work and private life. "We celebrate the smallest achievements," says Semple.
"Another major reason is to demonstrate to our younger lawyers that there is a career path," says Semple. "Rather than just having these old fuddy-duddies sitting around, we thought, let's promote some of the younger guys and ladies."
But attracting new talent is not easy in the tight labour market of today. Wayne Jackson, chairman of Minter Ellison SA/NT, says his firm is lucky to have the benefit of its size. "We are the largest law firm in SA by far and young people who have recently graduated have Minter Ellison on top of their minds. When they do come here, we work like hell to keep them motivated."
The firm, which moved recently to new premises in Grenfell Street, also keeps in contact with lawyers who have left for a stint abroad. Managing partner Nigel McBride hosts once a year an alumni group in London to stay in contact with them.