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Uranium sector not out of the woods yet

URANIUM producers will need to keep their costs down in an overly saturated market, as the industry still faces tough times.

While demand for uranium is expected to grow in the long run, the rate of growth remains uncertain due to its over-reliance on China’s nuclear building plans.

This is what Rössing Uranium’s managing director, Richard Storrie, said at the launch of the company’s ‘Stakeholder report’ for 2019.

“In February 2019, China’s government gave preliminary approval for the construction of four new domestically designed reactors, ending a two-year long hiatus from approvals of new reactors,” Storrie said.

He noted that at the end of 2018, uranium prices stood at US$28,82 per pound, up 21% from 2017. The price has, however, dropped to US$25,22 per pound.

“The long-term indicator price rose to US$32 per pound, an increase of 3%. Global inventories remain at record high levels, around 950 million pounds or approximately five years of forward utility requirements,” he said.

Storrie added that Rössing, which is one of the longest-operating uranium mines in the world, supplies its material via Rio Tinto to electricity companies located in the four major markets of North America, Europe/Middle East/Africa, Japan and Asia.

The managing director said: “Almost all of our production is marketed through long-term contracts with a diverse selection of customers worldwide. In 2018 Rössing Uranium produced half of the 8,2% uranium produced by Namibia as part the world’s primary production of uranium oxide. This is a significant achievement for both Rössing Uranium and Namibia.”

Rössing managed to increase uranium oxide production by 17%, producing 2 479 tonnes of uranium oxide in 2018 compared to 2 110 tonnes 2017.

Additionally, the company’s revenue grew by 5% in 2018 compared to 2017 because of a higher sales price and a more favourable exchange rate.

“Our cost saving initiatives unlocked some N$310 million.

The combination of these three achievements had a positive impact and resulted in a net profit after tax of N$166,5 million compared to the N$1,9 million profit the previous year.

If we achieve our production and cost targets, and with the assistance from our prospective new majority shareholder, our business will remain feasible,” he said.

Rio Tinto, Rössing’s majority shareholder, announced in November 2018 the signing of a binding agreement with China National Uranium Corporation Limited (CNUC) for its shares held in Rössing.

This came after extensive reviews of Rio Tinto’s strategic options in relation to Rössing as it continued to focus on its core assets.

Storrie said the transaction is, however, subject to a number of conditions to be met and is expected to be completed in the first half of this year.

Meanwhile, Fitch Solutions Macro Research mining team said in April local uranium mining can push the Namibian economy out of the negatives, leading to economic growth in 2019.

“We expect increasing uranium output to underpin robust growth in Namibia’s mining sector over the coming quarters, providing tailwinds to the broader economy, and returning real GDP growth to positive territory over 2019,” they added.

Source: The Namibian