KAMENOGORSK, Kazakhstan — The flame-licked doors of a hydrogen furnace clattered open at a Cold War-era bomb factory in Kazakhstan's Ural Mountains, spilling a tray of baked metal capsules into the pale winter light. Each enriched-uranium pellet the size of a Brazil nut packs almost as much energy as a ton of coal.
Mukhtar Dzhakishev, president of state-owned mining enterprise Kazatomprom, said he plans to triple production at the Ulba Metallurgical Plant in Ust-Kamenogorsk, a former secret city south of Siberia.
With 15 percent of world uranium under his control, Dzhakishev is trading domestic mineral rights to joint-venture partners in China, Japan and Russia for the technology he needs to make Kazakhstan the world's biggest supplier of atomic fuel for civilian nuclear reactors. He's seeking to become, in effect, the John D. Rockefeller of nuclear power.
"We don't want to be just a sack of uranium," Dzhakishev said in a recent interview. He proposes to invest $850 million at the Ulba compound, 6 1/2 times the plant's projected annual cash flow, according to the company's 2006 financial statement. Dzhakishev said he aims to integrate the four-stage atomic fuel chain at the guarded industrial complex just as Rockefeller once controlled crude oil from wellhead to gasoline tank.
If successful, Kazatomprom would consolidate the market for its 983 million pounds of recoverable uranium deposits, second only to Australia's, and become less reliant on the raw ore's spot-market price by supplying higher-value products needed to fuel next-generation reactors.
Dzhakishev's plan puts Kazatomprom in direct competition with some of its largest customers and partners, including France's Areva and Russia's Techsnabexport, the world's two leading integrated fuel suppliers. Both firms own mineral rights in Kazakhstan.
U.S.-based Ux Consulting projects that global nuclear fuel demand will grow 29 percent to $26.3 billion by 2020. Dzhakishev said he wants one-third of that.
"I'm optimistic about Kazatomprom meeting the objectives," said Ux Consulting analyst Masha Katsva, who this month inspected the firm's mines.
Kazatomprom has mastered two phases of Dzhakishev's strategic plan: uranium extraction, which accounts for about 46 percent of the cost of nuclear fuel, according to Ux Consulting, and the production of uranium dioxide fuel pellets, an interim step. Completing his integration strategy would almost double the value of the firm's uranium products.
Dzhakishev needs to add conversion, the chemical transformation of uranium to gas, which contributes about 4 percent of finished nuclear fuel's value. The third stage, enrichment, or conversion of the gas into a radioactive compound suitable for civilian fuel production or nuclear weapons, represents about 30 percent.
To deflect nuclear proliferation concerns, Dzhakishev said Kazakhstan won't perform enrichment and instead will contract the step to Russia.
Dzhakishev said he plans for the Ulba plant to develop the capacity to manufacture the fuel-rod assemblies that are inserted in a reactor's core, contributing 10 percent more value. These zircaloy rods, packed with the capsules baked in the hydrogen furnace, unleash atomic reactions that produce heat, create steam and generate electricity.
Last July, Kazatomprom paid $540 million for a 10 percent stake in Toshiba's Westinghouse Electric unit, the world's largest provider of nuclear plants and atomic fuel.
Kazakhstan has a competitive advantage because its extraction costs are among the world's lowest, about 15 percent of today's price. Kazatomprom's East Mynkuduk mines, 1,200 kilometers west of Almaty, demonstrate the mass production Dzhakishev is seeking.
Workers in bright blue overalls flush uranium from beneath the semi-desert, where camels graze and temperatures range from minus 30 degrees Celsius in winter to 60 degrees Celsius in summer.
Open pits, once characteristic of uranium mines, aren't in use. Instead, injection wells dot the steppe, forcing sulfuric acid into subterranean deposits surrounded by groundwater. The ore dissolves into slurry that is pumped into surface-level tanks. Resin beads absorb the uranium and the remainder is returned to the ground. Later, industrial presses squeeze fine, powdery yellowcake from the resin.
East Mynkuduk, which began production in 2002 and reached peak output last year, will generate at least 2.2 million pounds of yellowcake annually for 15 years, 15 percent of the country's current total. The production would be worth $152 million per year at today's prices. Kazakhstan is the ore's third-largest marketer behind Canada and Australia, and said it plans to surpass both by 2010.
Dzhakishev said he is now adapting the plant at Ust-Kamenogorsk, 900 kilometers northeast of Almaty, to supply Westinghouse and other Western reactors. Next year, Japan's Kansai Electric and China's Guangdong Nuclear Power will be the first firms to buy the modified fuel products.
Kazatomprom does not yet have the ability to convert yellowcake to uranium hexafluoride gas, or UF6, the second part of the four-stage atomic fuel cycle.
Kazatomprom and Canada's Cameco are negotiating to build a $100 million conversion unit adjacent to the existing pellet plant.
The final step, production of machined nuclear fuel rods, is contingent on the outcome of the sales and Dzhakishev's efforts to win customer orders.