This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 04 PRETORIA 002175 
 
SIPDIS 
 
STATE PLEASE PASS USGS 
USDOC FOR 4510/ITA/MAC/AME/OA/DIEMOND 
 
E.O. 12958: N/A 
TAGS: EMIN ENRG TRGY PARM KNNP EIND ECON MI NG WA ZA SF DRC
SUBJECT: SOUTH AFRICAN URANIUM PRODUCTION 
 
Summary 
------- 
¶1. (U) South Africa is ranked fourth in world uranium 
reserves and tenth in uranium production.  In 2004, all 
uranium production came from AngloGold Ashanti's Vaal 
River mine and dump treatment operations. Currently, 
South Africa has two concentration plants,both owned by 
AngloGold Ashanti,that produce about 800 metric tons of 
uranium oxide per year.  After a break of 20 years, South 
African producers and former producers are evaluating the 
potential for new uranium mining.  South Africa is well 
positioned to take advantage of a sustained upturn in the 
world demand for uranium.  However, most will probably 
wait to see whether the uranium price stabilizes at 
higher levels before committing to new production.  The 
government has announced its intention to utilize South 
Africa's uranium resources to support a growing nuclear 
industry, including nuclear fuels, that would contribute 
to the security of the country's energy supply.  End 
Summary. 
 
Uranium Resources in South Africa 
--------------------------------- 
¶2. (U) South Africa Department of Minerals and Energy 
(DME) statistics indicate that South Africa is ranked 
fourth in world uranium reserves and tenth in uranium 
production.  DME estimates that South Africa's 
recoverable reserves of uranium total 298,000 metric 
tons.  Gold-bearing conglomerate reefs of the 
Witwatersrand geological formation contain 80% of South 
Africa's uranium resources.  Uranium also occurs over a 
wide area in certain Karoo-age sediments, but these have 
not proved economical.  In addition, the Palabora Mining 
Company (PMC) mines copper ore from a huge carbonatite 
intrusive in the Limpopo Province and, until 1999, 
recovered uranium as a by-product.  With some exceptions, 
Witwatersrand gold ores hold uranium at less than 1 pound 
per ton.  The world average is about 1.5 pounds per ton 
ore. 
 
Uranium Production in South Africa 
---------------------------------- 
¶3. (U) At the peak of world uranium demand in 1980, South 
Africa was the world's leading producer at 6,147 metric 
tons of contained uranium (i.e., uranium contained in 
oxide) per year, accounting for as much as 18% of global 
production.  Since, South African production has fallen 
to just 12% of its historic peak and 3% of global 
production.  Today, South Africa has no primary uranium 
mines.  Uranium is mined only as a by-product of gold 
mining in the Witwatersrand Basin.  As South African gold 
production has declined over the past ten years, so has 
South African uranium production.  In 2004, all uranium 
production came from AngloGold Ashanti's Vaal River mine 
and dump treatment operations. 
 
¶4. (U) With the uranium price at 20-year highs and a 
generally supportive South African government, some South 
African gold mining companies are re-thinking their 
strategy.  Neil Froneman, CEO of Aflease Mines, recently 
announced plans to re-start uranium mining in the 
Klerksdorp area (about 100 miles west of Johannesburg). 
Originally a gold mine, the Aflease mine has an estimated 
resource of 150,000 metric tons of contained uranium, 
mineable at depths of less than 500 meters for the first 
ten years.  Froneman projects 350 metric tons of uranium 
production per year beginning in 2007, with a ramp up to 
1,300 metric tons by 2010 and 2,000 metric tons in 2018. 
This time when the Aflease mine opens, uranium will be 
its primary product and gold the by-product. 
 
¶5. (U) Additionally, AngloGold Ashanti has plans to 
expand output from the Moab Khotsong mine to increase 
production to 1,200 tons per year of uranium oxide.  Gold 
Fields is considering re-opening the Beisa Reef of the 
old Beisa Mine in the Free State that operated for three 
years as South Africa's only dedicated uranium mine. 
 
Uranium Recovery and Concentration in South Africa 
--------------------------------------------- ----- 
¶6. (U) During the 1970's and 1980's, South Africa mined 
uranium to supply substantial but undisclosed quantities 
to its nuclear weapons and research programs.  In 1983, 
South Africa boasted 21 uranium oxide concentration 
plants that produced 6,060 metric tons of uranium 
contained in oxide.  This situation did not last long. 
In the late 1980's, South Africa abandoned its nuclear 
weapons program and, in 1994, the country became a 
signatory to the Nuclear Nonproliferation Treaty (NPT). 
Since, uranium oxide production fell precipitously.  By 
2004, South Africa was producing only 890 metric tons of 
uranium oxide (or 750 metric tons of contained uranium). 
 
¶7. (U) Since 1968, all South African uranium oxide has 
been concentrated and marketed by the Nuclear Fuels 
Corporation of South Africa (NUFCOR SA), a private 
company originally owned by gold producers, but wholly- 
owned by AngloGold Ashanti since 1998.  In 1999, Anglo 
established NUFCOR International, a 50:50 partnership 
with Rand Merchant Bank based in London.  Today, NUFCOR 
SA is responsible for concentrating South African uranium 
oxide into "yellowcake," and NUFCOR International is 
responsible for the international marketing of this 
product. 
 
¶8. (U) Uranium recovery from gold pulp residue takes 
place at the mine sites after gold is extracted.  The 
resulting pulp containing 30-35% uranium oxide is 
transported by road tanker (under escort) to the NUFCOR 
SA plant about 30 miles west of Johannesburg, where it is 
filtered, dried, and calcined to remove ammonia and 
produce a 97% uranium oxide cake, commonly called 
"yellowcake".  According to Greg Donahue, Operations 
Director at NUFCOR SA, all current uranium oxide 
concentration occurs at two plants at AngloGold Ashanti's 
Vaal River operations in the Northwest Province.  The 
South Plant serves the Great Noligwa and Moab Khotsong 
mines and produces about 60 metric tons of uranium oxide 
per month.  The West Plant serves the tailings dump 
retreatment operation and produces about 10 metric tons 
of uranium oxide per month.  The uranium oxide is then 
exported through NUFCOR International to any of four 
sites in the United States, United Kingdom, France, and 
Canada, where the U235 is separated and enriched. 
 
Part of Building a Nuclear Industry 
----------------------------------- 
¶9. (U) In her Budget Speech to Parliament on May 19, 
Minister of Minerals and Energy Phumzile Mlambo-Ngcuka 
stated that the government wanted to utilize South 
Africa's uranium resources, already a "protected" 
mineral, to support a growing nuclear industry and to 
contribute to the security of the country's energy 
supply.  Along these lines, the DME would soon announce a 
"special dispensation" to allow for the licensing of 
exploration, prospecting, and mining of uranium in South 
Africa, which until now the Minister has identified as a 
restricted activity under the Minerals and Petroleum 
Resources Development Act.  In a reference to the re- 
launch of an enrichment program some day, Mlambo-Ngcuka 
stated that while currently South Africa exported uranium 
ore concentrates, it "would actively pursue further 
uranium beneficiation" [read enrichment].  This is in 
line with the Ministry's commitment to add value to South 
African minerals before export and intention to support 
the government's development of a pebble bed modular 
reactor.  Mlambo-Ngcuka recognized that the renewed 
emphasis on nuclear energy as an industry would require 
training a new generation of nuclear scientists.  Along 
these lines, she congratulated the French company AREVA 
for its sponsorship of postgraduate students in France, 
and mentioned the U.S. Department of Energy and the IAEA 
for collaborating to offer training in South Africa. 
 
Other African Production and Exploration 
---------------------------------------- 
¶10. (U) In 2004, apart from South Africa, Africa's other 
two producing countries, Namibia and Niger, accounted for 
14% of global uranium oxide production.  Niger produced 
3,900 metric tons and Namibia 2,400 metric tons of 
uranium oxide (3,300 and 2,040 metric tons of contained 
uranium, respectively).  However, Niger's relatively 
small and rapidly depleting resource base and the 
possible closure of the Namibia's Rossing mine in 2009 
puts a question mark on Africa's long-term supply 
potential.  Uranium was mined in the Democratic Republic 
of the Congo (DRC) at the Shinkolobwe mine until 1960, 
when the mine was officially closed.  Scavenging of 
copper and uranium from waste dumps by locals continued 
until about 2000 when the government finally sealed off 
the area.  No uranium prospecting is known to be taking 
place in the DRC at this time. 
 
¶11. (U) Niger has two producing companies: SOMAIR [COGEMA- 
French (63%) and ONAREM-Niger (37%)]; and COMINAK [COGEMA 
(34%), ONEREM (31%), OURD-Japan (25%) and ENUSA-Spain 
(10%)].  All production is exported to France, Japan, and 
Spain.  SOMAIR reserves are estimated at only 14,000 
metric tons uranium at an ore grade of 3 kg uranium per 
metric ton, and COMINAK at 29,000 metric tons uranium at 
4 kg uranium per metric ton.  These are considered to be 
high-grade operations, equivalent to the Australian 
mines, but less than those in Canada.  However, Niger's 
reserves are rapidly being depleted. 
 
¶12. (U) Annual production at Rio Tinto Zinc's (RTZ) 
Rossing Mine in Namibia is about 2,400 metric tons of 
uranium oxide.  Rossing is Namibia's only uranium 
producer, with a capacity of 4,000 metric tons per year. 
RTZ has completed a feasibility study to extend the mine 
life of Rossing to 2017.  Based on current economic 
conditions, company officials concluded that the mine 
would remain in production to 2009 when the situation 
would again be reviewed.  According to the London-based 
Mining Journal, Rossing intends to increase production to 
3,200 tons uranium by 2006. 
¶13. (U) Paladin Resources recently announced the 
completion of a bankable feasibility study of the Langer 
Heinrich project in western Namibia.  The study found 
that the project was technically and financially viable. 
The mine would be designed to produce 1,180 metric tons 
of uranium per year with production starting as early as 
¶2006. 
 
¶14. (U) The recent positive outlook for the uranium 
market has justified exploration for new deposits and the 
re-evaluation of known, lesser grade deposits in a number 
of countries.  At its Eronga uranium project in central 
Namibia, Reefton Mining recently announced positive 
drilling results and a number of prospective drilling 
targets identified from airborne surveys.  [Note: Some 
industry observers and local geologists have questioned 
whether Reefton has actually located a uranium deposit. 
They believe Reefton stumbled upon a deposit of thorium, 
another well-known radioactive substance.  End Note.]  In 
Malawi, Paladin Resources is currently evaluating the 
Kayelekera project, and Omegacorp the Mkuju River project 
in Tanzania and the Zambezi Valley project in Zambia.  In 
Zambia, Equinox Minerals have completed a bankable 
feasibility study on their Lumwana copper project, which 
included an evaluation of the deposit's uranium 
potential.  Equinox estimates the total uranium resource 
to be 5,900 metric tons of uranium oxide (5,020 metric 
tons of contained uranium). (Note: The information in 
this section was cleared with respective U.S. Missions in 
Lusaka, LiLongwe, Kinshasa, Windhoek, and Niamey, some of 
which also provided input.  End Note.) 
 
Outlook for Global Uranium Supply and Demand 
-------------------------------------------- 
¶15. (U) World demand for uranium is on the incline. 
While most uranium is sold on long-term contract, the 
spot price has more than doubled since 2002, from $10 per 
pound uranium to the current $29 per pound.  Economists 
who track the industry believe that higher uranium prices 
are supported by the expectation that the revitalization 
of the nuclear energy industry is just around the corner. 
 
¶16. (U) New mine annual production of uranium represents 
about 55% of the total global demand of 66,000 metric 
tons.  The 30,000 metric ton shortfall is typically 
sourced from reprocessed stockpiles of high-grade fuel 
and weapons-grade material, some of which is derived from 
dismantled nuclear weapons.  The exact extent of these 
stockpiles is unknown.  The table below shows annual 
global uranium statistics and projections (The World 
Nuclear Association 2004): 
 
                  Uranium Supply/Demand 
(kt = kiloton, or 1,000 metric tons of contained uranium) 
 
                         (2003)   (2004)  (2007)  (2010) 
Country      Reserves  Production 
             (kt) Rank  (kt) Rank  (kt)    (kt)    (kt) 
Australia    863   1    7.57  2    7.92   11.38   11.38 
Kazakhstan   472   2    3.30  3    3.30    6.47    8.30 
Canada       437   3   10.46  1   10.39   12.31   16.42 
South Africa 298   4    0.76 10    0.75    0.58    0.39 
Namibia      235   5    2.04  6    2.04    2.04 
Niger         71  10    3.14  4    3.14    3.14    3.14 
 
Total Mine Supply      35.81      36.26   42.27   48.01 
Inventory Supply       29.89      30.11   23.69   21.05 
Total Demand           65.70      66.66   70.80   74.80 
Supply Shortage         --        -0.28   -4.82   -5.73 
Spot Price $/lb U      11.2       18.0    26.0    30.0 
 
             Global Nuclear Power Generation 
 
                           (2003)  (2004)  (2005) (2010) 
Operating Nuclear Stations   439     441     441    460 
Generation Capacity (GW)     359     363     363    379 
 
[Note: The distinction between resources (ore that could 
be mined given favorable conditions) and reserves (ore 
that is currently economic to mine) is dynamic and 
depends on many factors.  However, the distinction is 
vital to any specific or regional evaluation of future 
production potential.  It is likely that much of what is 
published as reserves is in fact resources, pending more 
detailed evaluations.  End Note.] 
 
Where South Africa Fits into the Mix 
------------------------------------ 
¶17. (U) Canada, Australia, and Kazakhstan are the three 
major country producers of uranium in the world today. 
Together, they account for 60% of the 36,000 metric tons 
per year of newly mined uranium.  Both Canada and 
Australia expect new production to come on stream by 2007 
- 5,900 and 1,400 metric tons, respectively.  Major 
African producers (Namibia, Niger, and South Africa) 
account for 17% of global production.  Australia 
possesses the largest reserves, followed by Kazakhstan, 
Canada, South Africa, and Namibia.  Current estimates 
show a 1% average annual depletion rate of reserves for 
the top five countries, reflecting a substantial global 
reserve-base at current production rates. 
 
¶18. (U) Comment: The revival of world demand for uranium 
could have a major positive effect on marginal gold mines 
in South Africa currently struggling to survive a very 
strong rand.  Many of these mines could also produce 
uranium for the world market.  With nearly 60 years of 
experience in uranium mining, concentration, and 
marketing, and an infrastructure that could be 
rehabilitated fairly rapidly, South Africa is well 
positioned to take advantage of a sustained upturn in 
world demand for uranium.  Nevertheless, industry 
officials tell us that the spot price of uranium oxide 
would probably have to stabilize at $45-$60 a pound at 
current exchange rates before South African mining 
companies begin investing in new production.  What the 
government has in mind in the way of enrichment is not 
clear.  South Africa does possess the technology, but 
domestic demand alone will likely not sustain a nuclear 
fuels industry and, given the dynamics of the 
international market today, the country may have 
difficulty producing fuel at competitive prices for 
export. 
HARTLEY