Nam’s uranium sparkles as gems dim

JOHANNESBURG – The global search for alternatives to carbon-based energy has fuelled a rush for Namibia’s uranium resources at a time when the economic downturn has been taking a toll on the country’s vital diamond industry.

Currently the world’s fourth-largest uranium producer, the southern African country is expected to more than quadruple uranium production over the next four to five years, boosting its economic growth, analysts said.’It all depends on prices and demand… but the long-term fundamentals for Namibia’s uranium industry are solid and the global outlook for the nuclear power generation industry will be a driving factor for our industry,’ said Luise Nakatana, an analyst at Investment House Namibia (IHN).Namibia is home to the Rössing mine operated by Rio Tinto, which together with Paladin Energy’s Langer Heinrich operation account for about 10 per cent of world uranium production.Both companies have aggressively expanded their operations in response to higher uranium prices and growing global demand for low-carbon energy sources. Other companies have been joining the exploration drive, with several new mines due to come on stream within the next five years.Areva’s Trekkopje open-pit mine will become the country’s third uranium mine when it comes on stream in 2011, while Extract Resources’ lucrative Rössing South deposit is forecast to start producing in 2013.Analysts said that within five years Namibia could easily be pushing for the number two or three producer spot in the world.FAVOURABLE CLIMATENamibia’s investment climate has been favourable to the sector, although the uranium rush did prompt the Government to impose a moratorium on new licenses to better manage the resource.At the same time, the State has mobilised agencies to ensure the country’s infrastructure and services can cope with the industry’s growth.State-owned power utility NamPower alone plans to spend N$13,8 billion (US$1,83 billion) to boost electricity supply as demand is expected to nearly triple by 2030. In return the growing uranium industry is expected to have a significant impact on Namibia’s economic growth, especially after the country’s vital diamond industry was forced to halve production owing to a drop in demand for jewellery.Economists say the uranium industry will boost investment in the country of 2,2 million and improve the lives of ordinary Namibians by creating jobs, health and education facilities and by providing business opportunities for local entrepreneurs.’In the next few years there is the capital development phase with significant sums of money going into electrical, water, roads and telecoms infrastructure,’ Mike Leech, president of the Chamber of Mines said in the chamber’s latest newsletter.Rössing alone supplied 3,8 per cent of Namibia’s GDP in 2008 and paid N$849 million in taxes, according to Chamber of Mines data. The industry’s total uranium exports contributed N$5,2 billion to the country’s overall exports that same year.’The expanded Rössing and Langer Heinrich, Areva’s Trekkopje and Rossing South further down the line… that will certainly boost our GDP, our employment, exports and our tax revenues,’ said Robin Sherbourne, an economist at Old Mutual Group.Analysts say the industry will raise the number of permanent jobs in the uranium sector to well over 5 000 from under 2 000 in 2008.POTENTIAL TIE UPSCompanies so far have been developing assets independently in Namibia, but there has been occasional speculation about potential tie-ups as the uranium sector develops.’Everyone is looking at everyone else and jealously guarding their own independence,’ Sherbourne said.’I don’t see a firm like Paladin, which is very ambitious and independent, getting into bed with the likes of Rio Tinto or Extract … but West Australian Metals’ Marenica deposit near Areva’s Trekkopje is one clear example of a project which can only go ahead if the two projects work closely together.’Other interest comes from Russia, China and India, keen to secure uranium assets for their fast-growing nuclear industries.Russian President Dmitry Medvedev sought to strike deals in a visit to Namibia in June to secure fuel for the more than two dozen reactors planned in the next 15 years. Namibia has no plans yet to build its own nuclear reactor, but may look at building one in the future to supply the strained domestic and regional power market.One new uncertainty hanging over the uranium sector is Namibia’s decision early this month to launch a State-owned company to participate in the country’s exploration and mining drive.There has been little official reaction from the industry so far, but mining executives and analysts said there were worries the new firm could receive preferential treatment in the distribution of licenses and its launch could signal a bias towards government ownership in companies.The uranium industry is also watching out for how the Government’s proposed law to force companies to yield 25 per cent of their shareholding to black investors will pan out.The Government plans to test run that policy for three years before turning it into law, but analysts said there were still many uncertainties around the financing of such deals given the small size of Namibia’s investment community.But they agree that the industry’s long-term growth should be supported by uranium prices, noting that while spot prices have been volatile, long-term prices are expected to stabilise at around US$60 to US$70 a pound.’That’s the sort of price (at which) we can see new mines coming onto production and existing mines remaining profitable,’ said Werner Duvenhage, Paladin’s Manager for Africa. – Nampa-Reuters