John Munro, CEO Rand Uranium
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SA uranium players ponder tie-ups
Brendan Ryan
Posted: Fri, 18 Apr 2008

[miningmx.com] -- THE stakes are rising in the competition to dominate South Africa's reviving uranium industry, and the West Rand is fast turning out to be the key battleground.

That's where Pamodzi/Harmony, Mintails and First Uranium/Simmer & Jack (Simmers) are all vying for position with the aim to "consolidate" the sector. Also falling into the region are the massive mines owned by Gold Fields and AngloGold Ashanti along the West Wits line near Carletonville.

Both groups have extensive resources of dump materials that could be treated to recover uranium and both are considering their options.
not clear to me that anyone has a dominant position
AngloGold Ashanti executive vice-president Thero Setiloane says: "We're assessing options that range from setting up our own dump re-treatment operation to merging our assets with those of other players, such as Gold Fields and Harmony, to selling off our uranium assets. We've had informal discussions with various parties. We aren't involved in any negotiations at this stage."

Setiloane declined to identify the parties with whom AngloGold Ashanti has held informal discussions.

The latest development is the decision by top Gold Fields executive John Munro to join the uranium company being set up by Harmony and Pamodzi Resources Fund Advisors (PRF). Dubbed "Newco" at this stage, the new company was formed in December last year when Harmony agreed to sell various dumps to it from its Randfontein Estates mine while retaining a 40% stake in the business.

Those assets include dumps in the Cooke Section - in particular, the huge Cooke 3 dump - as well as the dumps forming part of the "old Randfontein" section of the mine.

Harmony sold the Randfontein No 4 shaft in 2006 to Simmers, which it renamed Ezulwini, and is in the process of reopening the underground mine to produce gold and uranium.

The other force to be reckoned with on the West Rand is Australian-listed Mintails, which intends setting up Wergo (West Rand Gold and Uranium) to mirror the rejuvenated East Rand Gold and Uranium (Ergo) plant it's developing there, in partnership with DRDGold.

Mintails got its start in the business when mining entrepreneur Peter Skeat bought the two mothballed Ergo treatment plants from AngloGold Ashanti and then merged his business with Mintails. The refurbished Brakpan plant will treat Ergo's dumps while sections of the former Daggafontein plant are being reassembled on the West Rand to treat Mintails' West Rand dumps.

Both Mintails and First Uranium/Simmers, plus Russian company Renova, are understood to have bid for the assets that Pamodzi now owns.

PRF chief investment officer Gerard Kemp says Newco "could facilitate the consolidation of uranium assets on the West Rand".

That's also the view of Mintails director Lloyd Birrell. Interviewed during a recent visit by financial media to the Brakpan plant, Birrell said Mintails was keen to negotiate a consolidation of the operations of the players on the West Rand. He said it makes commercial and logistical sense to do so. Birrell added that it's one of the areas former Harmony CEO Bernard Swanepoel is looking at in his role as a non-executive director of Mintails.

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Both Skeat and Birrell say a key technical issue is the site of the "super dump" that must be created on the West Rand to contain the hundreds of millions of tons of waste material generated as the existing dumps are retreated and moved.

That material has to be re-deposited elsewhere and obtaining an environmental permit to do so is viewed as one of the most important issues affecting the proposed developments.

Many of the existing dumps are situated on porous geological structures, such as the dolomite formations that cover much of the West Rand. Consequently, water containing high concentrations of uranium and other pollutants has drained from some of the dumps into ground water and eventually into neighbouring rivers, sparking an environmental outcry.

Mintails says it now owns the best site for a West Rand "super dump" situated on ground underlain with granite rock formations about 20km from Randfontein. Granite is impervious, meaning any water that drained out of the dumps wouldn't be able to seep into the underlying ground water. Mintails says ownership of that site is a trump card in its negotiations with regard to consolidation in the region.

Munro disagrees: "It's not clear to me that anyone has a dominant position. We (Pamodzi) have a suitable site 40km away. All the other producers have their proposed sites. Everybody is focused on the issue of getting the tailings dumps off the dolomite."

Munro also doesn't seem convinced that massive consolidation is the way to go, pointing to issues such as the geographical spread of operations and the quality of the various assets.

However, he says: "I think it's in everyone's mind that there will be winners and losers in this process as it plays out. We're creating a platform for uranium production in this country. You want to bring together quality assets with a high probability of success rather than create a large asset with a low probability of success."

The managements of both Mintails and Newco agree that treating dump materials on the surface is the way to go, as that's far less risky than mining underground ore.

Says Munro: "Newco has high value, well drilled surface dump deposits - and that removes a lot of the risk from the development."

Uranium One's developing Dominion mine presents a classic example of those risks, where the underground mining operations aren't delivering anywhere near the volumes and grade ore planned for.

Munro says SA has the potential to be a significant producer of uranium despite problems, such as Eskom's power cuts and the skills shortage. He says SA's uranium sector could eventually consist of five operators, each producing around 2m lb/year of U3O8.

In their heyday during the Seventies and Eighties, SA's mines produced at those levels (or greater), with the peak year being 1980 when 16m lb was produced. Production subsequently declined sharply, as mines closed their plants in reaction to a plunging uranium price.

Currently, the only commercial uranium producer is AngloGold Ashanti, which produced 1,4m lb in 2006, according to Chamber of Mines statistics.

Says Munro: "Uranium consumers are looking for alternative sources of supply. In SA you have resources that are accessible and situated next to good infrastructure. You can say what you like about the uncertainty here, but take a look around the world where mining is taking place. When you look at it 'all up', SA still stacks up as a very attractive mining destination."