Johannesburg – A bleak market outlook most likely forced Karoo Uranium mining hopefuls Peninsula Energy Ltd to withdraw from South Africa.
According to Dr Stefan Cramer, SA Faith Communities’ Environment Institute (Safcei) Science Advisor, the same poor outlook will also keep potential buyers from mining the Karoo for uranium.
Peninsula announced last week Wednesday that it had decided to exit and sell its interests in the Karoo Projects in South Africa.
Peninsula MD Wayne Heili said it intended to complete a divestment of its 74% interest in the Karoo Projects.
Cramer said Peninsula’s decision was driven by market forces.
“Uranium prices are utterly depressed and will remain so for the foreseeable future. At this point, investors do not see enough return.”
He said Peninsula’s investor confidence was so low that even the announcement of its off-loading, had not let to a rebound of the share price.
Peninsula, using local partners, planned three uranium mining operations, namely Rhyst Kuil between Beaufort West and Aberdeen, Kwaggas Fontein in the Western Cape, as well as Kareepoort in the Eastern Cape.
Peninsula’s financial woes
Despite advancing its Karoo Projects appreciably from exploration to early stage prefeasibility over the past decade, Peninsula said in its statement that it had opted to focus its future capital expenditures on the operating Lance Projects in Wyoming, USA.
“As a consequence of this, Peninsula has determined that it does not wish to devote significant further capital to progressing its less advanced secondary project,” Heili said.
Cramer believed Peninsula would write off $68m (R961.5m) for its Lance Project and $7m (R98.9m) for the Karoo Uranium Project , after reviewing its latest financial statements.
With a current market capitalisation of only $61m (R862.6m) and many short-term obligations, the company is on the brink of technical insolvency, he said. “It was therefore imperative to take immediate corrective action and establish cost-cutting measures across the board.”
Victory for Karoo?
“We believe it is the end of uranium mining plans in the Karoo for the foreseeable future,” Cramer said. “Resources are limited, production costs are escalating and the infrastructure is absent. It was plain economics that made the company take this rather drastic decision. Why bury more money into a plan that had no future from the beginning?”
Cramer said the writing was already on the wall for some time. The removal of former CEO Gus Simpson to be replaced in April 2017 by a North American uranium insider, and “the futile and often incompetent efforts” of Peninsula’s South African counterparts to secure even prospecting rights all indicated that the Karoo venture was not working out, he said.
Added to that was the growing opposition from within the South African administration and the increasing knowledge and awareness among the local farming communities.
He said some sceptics would argue that the withdrawal of Peninsula is not the end, with one capitalist merely being replaced by another.
“But others have tried before and got nothing than bloody noses, like the French AREVA, who wrote down even larger sums for their Karoo uranium adventure.”
He identified three groups of potential buyers – Peninsula’s previous partners in the enterprise, current South African major uranium miners, or even global uranium players.
“But the SA mining industry is currently in such bad shape that I do not see anyone of the majors to step in, not even the Guptas or their associates. They have enough debt with their inefficient Shiva mine and seem to be more intent on dis-investing.”
Global players, he said, all have all burnt money and time on the Karoo prospects. He believed they will not come here anytime soon.
Cramer concluded that unless suddenly uranium and nuclear energy become the darlings of the economic world, all signs are there that the nuclear industry was dying a slow death.