2008 good for uranium

NAMIBIA’S uranium production hit record levels in 2008 and should do so again this year as the country’s third uranium producer could come on stream in 2010 if all goes to plan.

It will be known as Valencia Uranium owned by Forsys Metals, which is listed on the Toronto Stock exchange (TSX) in Canada.
Valencia is located some 45 kilometres from the long-established Rössing Uranium mine near Swakopmund, which has been in operation since 1976.
The proposed Valencia mine is still at the feasibility stage. A technical report produced by Snowden Mining in 2007 looked at construction of an open-pit mine which would produce around three million pounds of U3O8 annually, starting production from 2010.
The Namibian government granted a mining licence for Valencia in August last year.
The financial parameters used in the Snowden report are much higher than current uranium prices following the collapse in the uranium market last year.
Snowden did the financial assessment assuming a uranium price of US$100 per pound for the period 2010/2012 and US$75 per pound for the period 2013 to 2121. The current uranium price is around US$55 per pound.
Despite this, George Forrest International Afrique (GFI) bid for Forsys in November last year, offering seven Canadian dollars a share in cash which was a 55 per cent premium on the level of the Forsys share price at that time. The bid valued Forsys at C$579 million.
The Forsys board of directors has approved the bid and the plan is to have it wrapped up next month.
GFI is part of the privately owned Forrest group, which is one of the largest groups operating in the Democratic Republic of Congo (DRC).
‘We believe Forsys and the Valencia Uranium deposit represent an excellent investment opportunity. We are also very impressed with the Namibian infrastructure and the regulatory environmental standards,’ Forrest said in November.
As of mid-December last year, Rössing Uranium was on track to produce 4 004 tonnes of uranium oxide (U3O8) during 2008, making this the first year it has reached this level of output since 1990.
In November last year, Australian mining company Paladin Energy announced that its Langer Heinrich mine – situated south of Rössing – had produced 650 555 pounds of U3O8 during the third quarter of 2008.
That meant Langer Heinrich had hit its envisaged annual production capacity of 2,6 million pounds of U308 for the first stage of the mine’s development.
Paladin is about to commission the second stage at Langer Heinrich, which will boost production to 3,7 million pounds a year.
Paladin Managing Director John Borshoff estimated at the end of last year that Langer Heinrich should produce about 3 million pounds of U308 for Paladin’s current financial year to end next June.
Still being evaluated is the stage-three expansion of Langer Heinrich which is ‘dependent on design and costing and on some water agreements with the Namibian government’.
‘If this issue is settled within our expected time frame we expect to increase production to 6 million pounds in late 2010,’ says Borshoff.
Rössing is in the middle of an expansion programme to extend the life of the mine to 2021 and increase production capacity to 4 500 tonnes a year from 2012.
That involves major expenditure on overburden stripping during the next two years to extend the current open-pit mining operations.
According to a Rössing statement released last month, the company remained ‘geared for growth’ but warned about the likely financial strain.
‘Even though we have revised our capital and production plans, the company’s cash flows independent of the financial crisis will continue to be strained,’ read the statement.
‘The company’s outlook for 2009 is positive and the company is sound but it will continue to engage in initiatives and projects that will preserve cash flow particularly in 2009 and 2010.’
However, Rössing is also affected by the global credit crunch and it may have to lay off workers this year. Its mother company, Rio Tinto, has already decided to streamline operations and to cut expenditure.
– Additional reporting by Miningmx.com