Ian Cockerill, CEO Anglo Coal
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Gold Fields looks to uranium
David McKay
Posted: Thu, 17 May 2007

[miningmx.com] -- GOLD FIELDS is the latest gold mining firm to announce it may revive uranium production.

It follows AngloGold Ashanti, Harmony Gold, DRDGOLD and Simmer & Jack Mines to find in uranium – now trading at US$120/lb – a potential treasury-bursting addition to the high cost of gold mining. The uranium price was trading at $30/lb about two years ago.

However, Gold Fields doesn’t know whether it will mine the uranium resources itself or dispose of them. “The state at the moment is how do we get the best value – selling or buying?” says Gold Fields CEO Ian Cockerill.
I laugh
That question is crucial, as uranium isn’t a switch that can be easily flicked on. Though there may have been more than 20 uranium mills in South Africa, it’s not obvious the country can pick up where it left off.

AngloGold Ashanti, a major producer of uranium up to the mid-Nineties, recently began lifting uranium production from its South Vaal plant. But it acknowledged earlier this month it had suffered production losses owing to corrosion damage at its plant.

Steve Shepherd, an analyst at JPMorgan, says: “Unfortunately, more than two decades of underinvestment at its South Vaal uranium plant and the high spot uranium price have resulted in losses being incurred.”

“I laugh when I see would-be uranium producers talking about selling metal in the next 18 months,” says Neal Froneman, CEO of Uranium One, one of the first former gold producers to begin exploring uranium again. (It was spawned from Aflease Gold & Uranium Resources.) But that was in 2005: and some two years later the company is building up its Dominion Reefs plant near Klerksdorp.

“If you haven’t started building your plant now, production in about 18 months is virtually impossible,” says Froneman. “There’s a huge under-estimation as to what’s required.” Some specialised equipment, currently installed at Uranium One’s Dominion Reefs, can take months to arrive.

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Additional to the technical difficulties is the risk that the now sky-high uranium market could start to correct sooner than first imagined. That would make some uranium deposits in South Africa unviable at future, lower, uranium prices such as the development of slimes dams that Harmony Gold speaks of.

Says Froneman: “Most of the slimes dams being talked about in South Africa aren’t viable at longer-term uranium prices.”

Perhaps that’s why there’s some talk of consolidating uranium-bearing slimes dams in South Africa. Bernard Swanepoel, Harmony Gold CEO, hinted at the possibility and it raised its head at Gold Fields’ March quarter presentation. However, John Munro, Gold Fields business development director, was quick to say: “We’re talking about consolidating uranium slimes within the company’s assets.”

But there’s still speculation that South Africa’s gold miners might create a new “Ergo” – a company that AngloGold Ashanti once owned which retreated the gold resources of a number of companies that could be reinvented for uranium.

Meanwhile, Gold Fields is picking through a number of proposals for its uranium resources that “have come flying through the door,” as Cockerill described the process.

Unlike many would-be uranium producers, Gold Fields owns a large underground orebody – known as Beisa – of some quality. Froneman acknowledges there’s real value in the mine but stands off making an offer. “I think we have enough uranium in emerging markets,” he says.