R3.5bn uranium project hit by price slump

[miningmx.com] — CONSTRUCTION of the proposed R3.5bn Rand Uranium plant to be built near Randfontein could be delayed because of current low uranium prices.

That’s according to Harmony CEO, Graham Briggs, who was replying to a question posed after his presentation to the Denver Gold Forum being held in Denver, Colorado.

Harmony holds a 40% stake in the unlisted Rand Uranium into which it injected assets formerly belonging to the Cooke and Randfontein sections of the Randfontein mine including the high uranium grade Cooke tailings dump.

Briggs told the conference that: “Rand Uranium is a great project at a uranium price of $65/lb. At prices closer to $45/lb it is not so great and you probably would not make that investment.’

Uranium prices have been depressed for the past 18 months with the spot price currently sitting around $48/lb and the long-term contract price stuck at around $58/lb.

The contract price is the more important of the two because most nuclear power stations buy their uranium on long-term contracts to ensure security of supply.

A number of uranium industry executives – most notably Paladin Energy CEO, John Borshoff, – have predicted that a sharp rise in uranium prices is imminent because of looming supply shortages.

Jonathan Leslie, CEO of Extract Resources, which is developing the Rossing South project in Namibia, commented in Perth recently that: “Current sentiment towards the spot price is for a strong rebound in uranium concentrate prices over a two-year price horizon to satisfy the new growth in demand.

“Spot prices of around $70/lb can be expected to provide uranium producers with the right incentive to develop new supplies.’

Interviewed after his presentation Briggs confirmed to Miningmx that the current outlook for Rand Uranium was not good given present uranium prices.

He said a key issue would be whether Rand Uranium could negotiate long-term supply contract prices with customers that would be high enough to justify going ahead with the project.

Briggs added the Rand Uranium board was due to make a decision on the future of the project within the next two to three months.

He commented, “We have had the first pass estimate on the capital and that is now being reviewed to see if we cannot get it below R3bn.’

DRDGold executive Charles Symons told financial media during a recent visit to the group’s Ergo gold recovery plant near Springs that a price of $113/lb for uranium was required to justify a decision to restart the former Ergo uranium plant.

“Uranium is clearly not feasible for us at current prices but it’s an option should uranium prices ever get that high in future,’ he said.

Said Briggs: “I don’t know the precise details of the Ergo operation but I would say the difference between the price they say they need and what we need is down to the grade of the dumps.

“The grade of the Cooke dump is more than double the average uranium grade found in all the other dumps on the Witwatersrand.’

Gold Fields mine pending

Also pending is a decision by Gold Fields on what it will do about its proposed uranium recovery project which CEO Nick Holland has described as a potential “fifth mine’ for the group in South Africa.

Gold Fields was supposed to have completed its feasibility study by March but has postponed a decision on the project until the end of this year citing technical issues.

In May, Holland said, “My job is to decide the best way to realise the value in that (uranium) resource which we have identified. The project may not take off in the short-term’.

He denied current low uranium prices had influenced the decision to extend the feasibility study.

But one South African mining industry source at the Denver conference commented, ” Gold Fields has to be looking at an investment of at least R4bn to build that uranium project and possibly closer to R5bn.

“When you look at the returns they could get by investing that money in gold projects in South America instead of a uranium project in South Africa at current uranium prices then you have to think it’s unlikely they are going to go ahead with it.’