Rossing bags R109m profit amid power challenges

By Tiri Masawi

WINDHOEK – Mining giant Rossing Uranium, basking in the comfort of a R107million profit margin on the backdrop of plummeting uranium spot prices worldwide, is grappling with erratic power and water supply challenges, a problem faced by most countries in the Southern African Development Community (SADC).

The heavy mining conglomerate is also on their primary phase of exploration for copper in the Kavango region, which is in the north eastern part of Namibia.

Rossing Uranium Managing director Werner Duvenhage confirmed to The Southern Times this week that despite breathing a sigh of relief from a massive net loss of R385 million in the previous financial year to a R107 million profit, supply of electricity and water are easily consuming the bulk of their expenditure.

He also revealed that 2016 has been the worst year for uranium producers in terms of favourable pricing of the most sought after resource, which is a key agent in the creation and supply of nuclear energy.

Ironically, Namibia imports 65 percent of power from Zimbabwe, South Africa and Mozambique to satisfy domestic demand at peak periods although the erratic power supply has been a regional problem.

“Following on 2015 that was a challenging year for the uranium mining industry, 2016 certainly stretched our resilience and determination to service.

“In international commodity circles, 2016 is widely labelled the worst year of the past decade for the uranium industry. The spot price fell by 50 percent between January and November at one point even hitting below the US$20 mark per pound.

“To put that depreciation into perspective, the breakeven cost for most uranium mines is estimated at between US$40 and US$50 per pound,” an upbeat Duvenhage said.

A recession in uranium spot prices was brought about by uncertainty in the conventional markets about five years ago when an earthquake hit Japan exposing hundreds of thousands to possible radiation shocks emitted by nuclear energy producing companies in the country.

The natural calamity saw an increase in anti-nuclear energy with options presented for more conventional cleaner energy sources  by most first world countries spearheaded by Germany.

While the erratic supply of water to most mining companies operating in Namibia’s coastal towns has been a persistent issue because of unfavourable desert conditions, the very same mining companies which are by far the largest consumers of power have had to deal with severe cost of power brought about by an unsustainable supply in the Southern African country.

Despite the slump in pricing, the mining giant with a very visible local foot print maintained its production targets. According to the Rossing boss the company has also set aside R600 million to execute environmentally friendly closure proceedings for one of the mining pits which will wind up operations in 2025.

Not keen on value addition

Perhaps a rather worrisome aspect of the mining giant’s operations is laxity to develop value chains of the uranium and process it further that the yellow cake level achieved in Namibia and many other producing nations.

“The issue of value addition of uranium is a process that needs serous involvement by government and is not a move that a private company will drive so in the interim it is not necessarily a priority,” Duvenhage told The Southern Times.

The reluctance by Rossing and many other companies in the extractive sector to create value chains and develop the spill over effects of mining in a manner that drives job creation and industrial growth comes at a time when not only the Namibian Government but many others have been agitating for investors to process raw materials locally as compared to exporting them in their raw form.

Duvenhage also reiterated that his company which has been mining in Namibia for 40 years continues to invest in the local economy and contributed in excess of R120 million to the country’s treasury in both dividends and royalty payments.

Namibia relies heavily on the mining industry for revenue collection with both the diamond and uranium producers accounting for the lion’s share of the Namibian government’s revenue.

Tough times ahead

Duvenhage also acknowledged that the difficult days are not over yet as the market is only expected to respond positively from 2021 because of both overproduction and a reluctance to embrace the resource as a price energy source by the major powers which have market control.

“ . . . Again like what I said this is not going to be an easy turn around. We only expect the market to respond well from 2021. However as a mining company we always review our production targets from year to year.

l The writer can be contacted on tirim24@gmail.com or tweeter handle @tirie24 

May 2017
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