The dearth of options available to global investors in government debt may end up working in South Africa’s favour as Moody’s continues to delay action on the country’s last remaining investment-grade rating.
Uranium: Getting ready for a nuclear surge
Africa is a destination of choice for uranium explorers because of the large number of known deposits that can be rapidly developed into mining projects. Two of the world’s four newest uranium mines have been opened in Africa in the past three years: Langer Heinrich in Namibia at the end of 2006 and Kayelekera in Malawi this March, both with planned production of above 1,500 tonnes of U3O8 per year and built by Australia’s Paladin Energy. The world’s other new mines are in Kazakhstan.
Led by Namibia, Niger and South Africa, Africa’s uranium production rose to 8,053 tonnes in 2008, or just under 20% of world output. Africa’s biggest mine is Namibia’s Rossing (69% owned by Rio Tinto), which produced 3,449 tonnes in 2008. By 2012, after the opening of at least one new mine in Niger, several in Namibia and one each in Botswana and Central African Republic (CAR), African production is forecast to top 15,000 tonnes. This would push Africa collectively into second place behind Canada, with Namibia alone likely to rival Kazakhstan’s production by then.
A shortfall in uranium supply is forecast from 2012 as new nuclear power plants start coming on line in Asia – especially China – and from 2017 in the UK, with substantial up-front requirements in initial reactor-core loads. Much bulk uranium oxide is sold under long-term contracts, and these have remained consistently higher than spot prices (currently around $53 per pound of U3O8) at between $65-70, well above the level needed for most planned African open-cast mines to be commercially viable.
Canada’s Scotiabank vice-president, Patricia Mohr, a commodity-market specialist, tips a strong recovery in uranium prices after they dropped from over $110/pound in 2007. At a recent conference in London, she said that present spot prices “were clearly too low to be sustained in the medium term, as they were below price levels required to justify investment in new capacity”.
Securing strategic energy supplies?
China’s mounting requirements mean it needs to secure supplies. Last October, French nuclear- plant manufacturer and uranium miner Areva agreed to sell China Guandong Nuclear Power Company (CGNPC) and Chinese sovereign wealth funds a 49% stake in its Areva Resources Southern Africa (ARSA) mining unit. ARSA – the former UraMin company acquired for $2.5bn by Areva in 2007 – is developing mines at Trekkopje, Namibia, and Bakouma, CAR.
The agreement will provide CGNPC with access to “more than half” (the precise amount was undisclosed) of ARSA’s output, most of which will initially come from Trekkopje, where ore processing has started, with full output of 2,200-2,900 tonnes of uranium oxide per year due to be achieved by the end of 2010.
Areva – which already operates Niger’s existing mines at Arlit and Akoutja – signed a mining licence agreement for the Imouraren mine in January. This will produce some 5,000 tonnes of uranium annually from 2012 over a forecast 35-year period for a €1.2bn initial investment and will be Africa’s first in-situ leaching operation. In addition, the China National Nuclear Corporation is developing the Teguida mine with a planned output of 700 tonnes of uranium per year.
Uranium deposits are being actively explored in southern Tanzania’s Karoo basin and in southern and eastern Zambia, while Australia’s A-Cap Resources recently confirmed plans to open a mine in 2011 at Letlhakane, Botswana. In Zambia, Australia’s Equinox Minerals eventually plans to process high-grade uranium mined as a by-product at its new Lumwana copper mine.