By James Regan
SYDNEY, Aug 3 (Reuters) - An environmental regulator in Australia on Wednesday recommended the rejection of a proposal by Cameco CCO.TO of Canada to mine uranium in the country's far west because it fails to protect underground fauna.
Cameco, the world's second largest supplier of uranium for nuclear power, is seeking permission to mine up to 7,500 tonnes of uranium oxide annually from the Yeelirrie deposit 630 kms (390 miles) northeast of Perth, which it acquired from BHP Billiton BHP.AX BLT.L for $430 million.
The Western Australia Environmental Protection Agency said the proposal would threaten more than 70 species of underground fauna, known as "stygofauna", and recommended the state's environment minister reject the plan.
"Of the nine factors assessed, one - subterranean fauna - was unable to meet the EPA's environmental objectives," Tom Hatton, the agency's chairman said in releasing the recommendation.
"Therefore, the EPA concluded the proposal would threaten the viability of some species of subterranean fauna, animals which live underground, such as stygofauna," he said.
In a statement Cameco said it respected the findings and would continue to seek a resolution.
"We believe that with further sampling and research, subterranean fauna can be appropriately managed at Yeelirrie and we will work with government agencies and stakeholders to find a way forward," it said in a statement.
The EPA's report to the Minister for Environment is now open for a two-week public appeal period, closing August 17, according to the agency.
Cameco has been exploring for uranium in Australia since 1996. Besides Yeelirrie lode, it also owns the undeveloped Kintyre deposit in Western Australia, which it bought off Rio Tinto RIO.AX RIO.L in 2008. The Kintyre project received environmental clearance last year.
Any timeframe for development of both projects hinges on a recovery in uranium prices, according to a spokeswoman for Cameco, Amanda Walker.
"We are still looking for signals that the market is turning," she said. "Our corporate message for the moment is lower for longer."
Cameco last week reported a C$137 million ($104.4 million)quarterly loss, which it blamed on weak uranium demand and prices. sells UX-U3O8-SPT for around $25 a pound, the lowest since 2005. ($1 = 1.3119 Canadian dollars)