A mining giant is born

 

Swakopmund ‑ China General Nuclear Power Holding Corporation (CGN) says its Husab uranium mine will catapult Namibia to the world's third largest producer of nuclear fuel, past Niger and Australia by 2017.

“Husab mine's potential of 15 million pounds production is more than the total current uranium production of all uranium mines in Namibia combined, it will elevate Namibia past Niger and Australia to third place on the world ladder of uranium producers,” Zheng Keping, chief executive of Namibian unit Swakop Uranium said at the launch of mining operations.

With targeted output of 15 million pounds of uranium oxide by 2017, Husab could become the world's second largest uranium mine.

“Husab will become a key supply base of natural uranium products for Chinese nuclear power stations. It will guarantee the natural uranium demand of 20 million-kilowatt nuclear units for nearly 40 years, thus making an enormous contribution to China's economic growth,” Keping said.

CGN's installed capacity for nuclear plants is 9.4 GWe, accounting for 59 percent of nuclear installed capacity in China.

The Chinese group is constructing 15 new reactors with a total capacity of 17.7 GWe, representing 24 percent of the world's nuclear capacity being built.

“With CGN as a shareholder, the Husab mine is fortunate to a key market for output,” Keping said.

CGNPC launched the start of mining operations in the presence of Namibia's President Hifikepunye Pohamba, mines and energy minister Isak Katali ad and government ministers.

The Namibian government owns a 10 percent stake in the project, which when fully operational will account for 5 percent of the country's gross domestic product. CGN will invest US$2 billion in the Husab project to get into full commercial production, Keping said.

Off-take Contract Sought

CGN says that it will need an interim buyer for its output from Husab and is currently in talks with Cameco Corp, Canada’s largest uranium producer for an off-take contract for uranium produced at its Husab mine in Namibia.

CGN will ship material from Husab to off-takers, and potentially Cameco, starting next year, and would only start getting uranium from the Namibian mine after expending long term supply contracts it had with other producers around the world.

The Husab mine aims to have 1 million tonnes of stockpiled ore ready for processing in 2015 and is expected to be fully operational by 2017.

“CGN has long term supply contracts and until those contracts are fulfilled we have to sell excess capacity to other customers,” Deon Garbers, senior vice president, operation at Swakop Uranium said in an interview.

CGN is ‘talking to lots of customers’ to sell the excess capacity and Cameco has expressed interest to be an off-taker in the short to medium term, Garbers said.

Tim Gitzel, Cameco president and chief executive officer attended the official launch of mining operations at Husab mine but denied his company was interested in securing material from Husab.

Gitzel said he had visited the Namibian mine ‘to celebrate with the shareholders on the launch of this project’.

“They (Cameco) are talking to us, they came down here to see for themselves what type of an operation we are running. It’s a normal procedure before decisions of this nature are taken,” Garbers said.

“Cameco is definitely a potential customer,” he added. 

“Depending on how much they will take, will might also sell to other customers and eventually Husab will be supplying to China only,” Garbers said.

The Paradox of Two Uranium Deposits

Husab has potential to produce 15 million pounds of uranium and plans to have 1 million tons of stockpiled ore ready for processing in 2015 before becoming fully operational by 2017.

CGN has rapidly developed the US$2 billion mine, despite uranium prices slumping more than 57 percent since the March 2011 earthquake and tsunami that crippled Tokyo Electric Power Co's nuclear power plant.

The Husab operation is situated in the arid Namib-Naukluft national park, eight kilometres south of Rio Tinto’s Rossing uranium mine’s Z20 deposit, an ore body discovered in 2010 and with similar geological structures to the Husab deposit.

The Husab deposit was initially called Rossing South and in 2009 Rio Tinto intended a joint venture to exploit the deposit with Toronto listed Extract Resources Ltd.

Rio Tinto's campaign for the then Rossing South deposit lacked the enthusiasm with which the Chinese pursued the deposit.

CGN in 2012 paid US$2 billion to extract to take control of the Husab deposit as China's second largest reactor builder sought supplies for operations at home.

“Now we refer to their (Rossing) Z20 deposit as Husab north,” Grant Marais, Swakop Uranium spokesperson said.

Husab and Rossing would seek to “co-operate on various aspects to maximise our operations”, Garbers said.

“We do not have harbour facilities at the moment and there is potential in us importing sulphuric acid using their facilities,” Garbers said.

Tough Times Ahead

Global uranium producers are yet to face some of the 'most difficult' times during the coming two years as the prices of the metal struggles to recover, Cameco's Gitzel said in an interview.

While the industry expects to have 93 new reactors come into operation over the next ten years, in addition to the 435 currently operating, current prices of the nuclear fuel 'makes the situation very difficult for producers'.

“The next 18 months we see as being a very difficult period for the market,” Gitzel said. “

We continue to look to the future, the future is bright for nuclear energy but the next 18 months could be difficult,” Gitzel, chief executive of the Canadian-based miner said.

Enter Epangelo

Namibia's state owned company, Epangelo Mining says it will convert its share of dividends to pay for a 10 percent in Husab mine worth R1.8 billion.

“We will pay for this shareholding with our share of dividends, we will know how much we will be able to pay over how long a period once the project starts generating revenue,” Epangelo managing director Eliphas Hawala said in an interview.

Epangelo, established to represent the Namibian government's interests in mining company, “negotiates for shareholding on commercial terms”, Hawala said.

“There is no law for non-commercial, mandatory state shareholding in mining projects.  All our deals are commercial and if there is a loan provision to secure equity, there will be (loan) interest provision,” Hawala said.

Epangelo has signed a confidentiality agreement with QKR Corp to negotiate for a minority stake in AngloGold Ashanti's Navachab gold mine. 

It is also jointly exploring for base metals with Vedanta Resources' Skorpion zinc mine and refinery at two prospects, Hawala said.

May 2014
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