Namibia’s Uranium Sector Prepares for the Rebound

Despite current troubles, the future looks positive for Namibia’s uranium industry.

Ramzy Bamieh & Barnaby Fletcher

Nambia-BLOG
SWAKOPMUND, NAMIBIA – Namibia’s uranium industry has been beset by problems. The Fukushima-caused dive in uranium prices has highlighted the country’s over-dependence on the commodity. Competition from regional peers such as Malawi has dramatically increased. A string of scandals and problems have plagued the Namibia’s primary uranium mines over the past few years.

French nuclear giant Areva saw a string of problems at its Trekkopje uranium project, including allegations that it was a victim of fraud in its purchase of UraMin (the original operator of the project), which culminated in the project being placed under care and maintenance in October 2012, with falling uranium prices making it economically unfeasible. Rio Tinto’s Rössing mine has operated on a loss for the past three years, with retrenchment of the workforce occurring earlier this year and speculation (denied by the management) that it will close. The Langer Heinrich mine, operated by Australian company Paladin Energy, has seen reoccurring labor disputes over the course of 2013. Controversy over a lack of public consultation has affected the development of a project being developed by Zhonghe Resources (Namibia) Development, a subsidiary of China National Nuclear Corporation.

Yet Namibia’s uranium sector, based on a strong foundation of geological wealth, sensible government policies and historical expertise, is proving resilient. A number of new projects, such as the Valencia project of Forsys Metals Corporation, and expectations of a recovery in uranium prices led by Chinese demand are reigniting interest in the sector.

Arguably the saving grace of the sector is Swakop Uranium’s Husab mine. The project is 90% owned by China Guangong Nuclear Power Company (CGNPC) and the China-Africa Development Fund (CAD Fund), a Chinese investment fund. The Husab uranium deposit is the world’s third largest and, with planned production of 6,800 mt U3O8 per annum, will propel Namibia into second place in the ranks of global uranium producers.

“Despite the depressed market conditions for uranium, Namibia is in a strong position in that Chinese Investors are now building a mine that will become the second largest uranium mine in the world. We are expecting 15 million plbs per year of production, which is equivalent of about 6,800 mt of U3O8: that will more than double the current production from our two uranium mines,” explains Veston Malango, CEO of Namibia’s Chamber of Mines.

The development of the Husab mine has not been entirely free from controversy: combine the hotly debated issues of Chinese investment in Africa with uranium exploitation and it would have been remarkable if it had been. Yet given this, the Husab project has progressed remarkably smoothly, not only avoiding controversy but also making positive moves toward increasing Namibian involvement. Swakop Uranium is 10% owned by Namibian state mining company Epangelo Mining, who paid $213 million for its equity, to be repaid from dividends. It is one of the first companies to have sold shares to Epangelo. It has stated that 75% of the mine construction jobs will go to Namibians, with the aim of achieving a 90% to 95% Namibian workforce once the mine is in operation. The August issuance of contracts worth 5 billion NAD ($491 million) indicated a construction progress moving forward on schedule.

While this development should cement Namibia’s place not just as an important producer of uranium but as one of the world’s primary sources of the commodity, parallel developments are taking place to establish the country as an integral and responsible partner in global uranium market. Namibia’s Chamber of Mines, a 106 member-strong association that has received high acclaim for its representation and support of the mining industry, has partnered with the Swakopmund-based Uranium Institute, headed by Dr. Wotan Sweigers, to launch the Namibian branch of the international Uranium Association.

The Uranium Association will support the development of a skilled local workforce, high levels of safety and will encourage greater cooperation amongst its 14-strong membership, which includes French giant AREVA, Paladin Energy’s Langer Heinrich mine, early-stage Bannerman Resources and Rio Tinto’s Rössing Uranium, the world’s longest-running open pit uranium mine. While all of these companies have faced problems in the past (noted above), and have recently implemented fairly extreme cost saving measures to cope with the current market conditions, the expectation of rising uranium prices and the subsequent revitalizing of these projects is being well prepared for by Namibia’s industry associations.

“Fukushima has turned everyone’s attention to nuclear safety and that in itself is a good thing. For us to move forward as a clean and safe energy, we have to make sure it is, and is perceived to be, a very safe industry,” said Dr. Wotan Swiegers, director of the Uranium Institute at Chamber of Mines.

Namibia’s uranium industry may be feeling the effects of a global downturn at the moment, but as is often said strength is tested not when times are good but when times are challenging. Namibia’s uranium sector will emerge from its current troubles as a larger producer, thanks to the Husab mine. It already has a strong pipeline of earlier-stage projects to maintain its growth. And thanks to the initiatives taken by industry associations it will have a safer and more socially conscious industry.

This rebound will not happen quickly: though analysts are in agreement that the current low uranium price is unsustainable, there is wide disagreement on when the market will rectify. Yet although the short-term outlook may remain bleak, the medium- to long-term prospects are bright.

This article was written as part of the research conducted on African mining jurisdictions by Global Business Reports (GBR) as part of our partnership with African Mining Indaba LLC. The aim of this partnership is the production of the single most comprehensive intelligence report on the continent’s mineral sector. The Official Mining in Africa Country Investment Guide, will be launched next February 2014, as the only official publication providing country-specific information at Africa’s top mining event, the 2014 Investing in Africa Mining Indaba™ held in Cape Town, South Africa.

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