VZCZCXRO9550
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHWD #0202/01 1541502
ZNR UUUUU ZZH
R 031502Z JUN 09
FM AMEMBASSY WINDHOEK
TO RUEHC/SECSTATE WASHDC 0559
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEHC/DEPT OF LABOR WASHDC
RUEHBJ/AMEMBASSY BEIJING 0092
RUEHBY/AMEMBASSY CANBERRA 0032
RUEHLO/AMEMBASSY LONDON 0141
RUEHMO/AMEMBASSY MOSCOW 0088
RUEHNE/AMEMBASSY NEW DELHI 0028
RUEHOT/AMEMBASSY OTTAWA 0043
RUEHFR/AMEMBASSY PARIS 0226
RUEHSG/AMEMBASSY SANTIAGO 0010
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHZO/AFRICAN UNION COLLECTIVE

UNCLAS SECTION 01 OF 05 WINDHOEK 000202 
 
SIPDIS 
SENSITIVE 
 
STATE PLEASE PASS USAID 
STATE PLEASE PASS USGS 
DEPT FOR AF/S, EEB/ESC AND CBA 
DOE FOR SPERL AND PERSON 
DOC FOR ITA/DIEMOND 
 
E.O.   12958: N/A 
TAGS: EMIN ENRG EPET EINV ETRD KNNP SENV WA
SUBJECT: Namibia's Uranium - Today a Boom, Tomorrow What? 
 
Ref:  WINDHOEK 200 
 
Not for Distribution on the Internet 
 
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Summary 
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¶1. (SBU) The Erongo region of Namibia hosts numerous economically 
viable uranium deposits.  There are two mines in production, an 
additional one that will enter production by 2010, and some 19 
prospects in various stages of evaluation.  Currently the fourth 
largest uranium producer in the world, Namibia could advance to 
third when current expansion projects and near-mines start to come 
on-line.  Declining output from other mineral commodity mines makes 
uranium a major driver of Namibia's near-term economic growth. 
Water scarcity, health and environmental concerns, and the 
availability of skilled labor pose challenges for the industry.  End 
Summary. 
 
---------------------------------- 
Namibia's Future Lies with Uranium 
---------------------------------- 
 
¶2. (SBU)  Namibia's Erongo region hosts a large number of 
easily-accessible, near surface, primary alaskite- and secondary 
calcrete-hosted uranium deposits.  These deposits are mostly 
low-grade, but economically mineable at prices above $60 per pound 
projected.  Uranium should surpass diamonds as the country's most 
valuable mineral export by 2010, according to the Chamber of Mines 
of Namibia.  Namibia ranked fourth amongst the world's largest 
uranium oxide producers in 2008, behind Canada, Australia and 
Kazakhstan.  In 2008, Namibia's total production reached 5,150 tons. 
 Rio Tinto's Rossing Uranium mine produced 4,070 tons (reftel), 
while Paladin Resources' Langer Heinrich mine produced 1,080 tons. 
Planned expansions could increase the country's output to 13,000 
tons of U3O8 (yellow-cake) per year by 2015.  Uranium exports in 
2008 amounted to $629 million, up 11 percent from 2007, and 
accounted for 37 percent of total raw mineral exports and 22 percent 
of Namibia's total exports. 
 
--------------------------------------------- - 
Government Policy - Somewhat Business Friendly 
--------------------------------------------- - 
 
¶3. (SBU)  The Namibian government (GRN) encourages foreign 
investment in the mining industry, especially the uranium sector. 
Namibia currently has no legislated minimum local equity 
requirement, but the five-year national development plan (2007/08 to 
2011/12) calls for an 11 percent black economic empowerment (BEE) 
shareholding in all mining operations.  The government announced in 
April 2009 that companies applying for new exclusive prospecting 
licenses or renewals will be required to show proof of local equity 
participation and a plan to address poverty in areas where they are 
active.  A moratorium introduced in February 2007 on the issue of 
new uranium prospecting licenses (excluding those in the pipeline) 
is expected to be lifted later this year. 
 
¶4. (SBU)  Most mining companies face a three percent royalty on 
gross sales.  Rossing Uranium, however, pays an exceptional royalty 
rate of six percent.  This stems from Rossing's challenge to the 
previous minerals law that charged mineral fees to companies that 
failed to provide "value-addition" to their finished mineral 
products.  Rossing argued that only enrichment could add value to 
its yellow-cake.  As Namibia is not permitted to conduct uranium 
enrichment, Rossing argued that it was not obligated to pay the 
value-added royalty under the old minerals law.  The GRN changed the 
minerals law in late 2008 to give the Minister of Mines and Energy 
the discretion to charge companies mining the same mineral different 
royalty rates.  Using his discretion, the Minister has decided to 
charge Rossing a temporarily higher (six percent) royalty to recover 
the monies the government did not collect under the old law. 
 
 
WINDHOEK 00000202  002 OF 005 
 
 
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Producing Uranium Mines 
---------------------- 
 
¶5. (SBU)  Australia's Paladin Energy holds a 100 percent share of 
Langer Heinrich Uranium Mine (LHU), which began production in 2007. 
Paladin expects to complete its stage-two mine expansion project 
during the second quarter of 2009.  This will boost annual capacity 
by 40 percent, from the current 1,179 tons of U3O8 to 1,678 tons. 
LHU's major economic mineral is carnotite, a secondary 
uranium-vanadium mineral leached from source rocks and deposited in 
recent calcreted alluvial sediments.  Carnotite is deposited in thin 
films on mineral grains or in small cracks in the deposit.  Only 
uranium is recovered currently, but the company is developing a 
process to also recover the vanadium (an element used in 
rust-resistant alloys for machine tools, nuclear reactors, and 
superconductive magnets). 
 
¶6. (SBU)  LHU is the first new uranium mine in Namibia in over two 
decades.  The mine, which is in a dry riverbed, is a 20-100-meter 
deep open-pit.  The deposit depth ranges from 50-100 meters and is 
generally covered by some eight meters of river sediments.  A study 
is underway to further increase production to 2,700 tons. 
 
--------------------- 
Mines in the Pipeline 
--------------------- 
 
¶7. (SBU)  France's vertically integrated nuclear energy company 
Areva is on track to commission Namibia's third uranium mine, 
Trekkopje, in late 2009/early 2010 at a capital cost of 
approximately $750 million.  Areva sold a 49 percent equity stake to 
China Guandong Nuclear Power Co (CGNPC) and Chinese sovereign wealth 
funds in October 2008, in order to facilitate financing of the 
project.  CGNPC has "guaranteed access" to Trekkopje's production 
and will take 35 percent of the mine output for the next 14 years. 
Trekkopje is yet another shallow low-grade deposit.  Areva will use 
heap-leaching to extract its yellowcake.  Full production is planned 
for the first half of 2010 at 100,000 tons of ore per day to produce 
some 3,860 tons of U3O8.  Trekkopje contains a current measured and 
indicated resource of 46,100 tons of U3O8 at a 0.013 percent average 
grade, sufficient for an 11-year mine life. 
 
¶8. (SBU)  Valencia Uranium, owned by Canada's Forsys Metals 
Corporation, could be Namibia's fourth uranium mine.  The GRN issued 
Valencia a mining license in 2008.  Forsys issued an upgraded 
resource estimate for Valencia in February 2009, which put measured 
and indicated resources at 27,700 tons of U3O8.  Planned production 
is 1,400 tons per year of U3O8.  Forsys plans to commission the mine 
by 2011, but the timetable is currently uncertain.  Belgian-owned, 
Democratic Republic of Congo-based Forrest Group International has 
offered to take Forsys over.  Forsys accepted Forrest's $474 million 
offer, but Forrest has been unable to secure the required finance to 
complete the deal.  The estimated cost to bring the Valencia to 
production is $154 million. 
 
----------------------------- 
Projects in Feasibility Stage 
----------------------------- 
 
¶9. (SBU)  Two promising alaskite-hosted uranium prospects with 
near-term production potential are Extract Resources' Rossing South 
project and Bannerman's Etango project.  Both projects are in the 
feasibility stage, and are on adjoining license areas to the south 
of the Rossing Uranium mine.  Mine construction at both sites is 
planned to start during 2010, with production start-ups after 2011, 
provided the feasibility studies confirm the economic viability of 
mining operations.  There are also 16 other projects in various 
stages of evaluation. 
 
¶10. (SBU)  Australian company Extract Resources announced in January 
2009 that a new resource estimate incorporating all drilling results 
is expected to confirm Rossing South has a resource of 100,000 tons 
 
WINDHOEK 00000202  003 OF 005 
 
 
of U3O8, with only three-fifths of the deposit drilled to date.  The 
defined resource at Rossing South has already been estimated at 
49,000 tons of U3O8, which is in excess of the size and grade at Rio 
Tinto's Rossing operation, currently one of the world's largest 
uranium mines.  Extract Managing Director Peter McIntyre has stated 
that Rossing South was the largest and highest-grade uranium deposit 
yet discovered in Namibia and possibly one of the world's largest 
uranium deposits.  (Note.  Rossing Uranium holds a 21.5 percent 
direct and indirect share of Rossing South.  End Note.) 
 
¶11. (SBU)  Australian-owned Bannerman Resources announced that 
Etango's has the potential to yield 40,500 tons of U3O8, as of 
February 2009. Less conclusive geoscientific studies lead Bannerman 
to infer that the mine could yield another 17,000 tons of U3O8,but 
further research is required.  Bannerman aims to complete a 
prefeasibility study by mid-2009, and a bankable feasibility study 
by the year-end. 
 
--------------------------------------------- ---- 
Other Nations Show Interest in Namibia's Uranium 
--------------------------------------------- ---- 
 
¶12. (SBU)  Uranium projects at the advanced exploration stage 
include a cluster of calcrete-hosted deposits to the immediate south 
of Langer Heinrich, and the Marenica alaskite deposit northeast of 
Rossing.  Exploration drilling at both projects was completed in 
2008 by Australia companies Deep Yellow and West Australian Metals, 
respectively.  Reports say that the Australian-based Russian mining 
entrepreneur Vladimir Nikolaenko has offered to buy a stake in 
Marenica.  Additionally, Russia's Atomredmetzoloto, a subsidiary of 
the state nuclear power company Atomenergoprom, has announced that 
it plans to start uranium prospecting in the Klein Spitzkoppe area 
of Namibia.  According to news reports, India's commerce minister, 
Jairam Ramesh, discussed the possibility of a uranium supply 
arrangement with Namibian Prime Minister Nahas Angula during 
Ramesh's visit to Namibia in March 2008. 
 
----------------------------- 
Uranium Mining Creates Jobs 
----------------------------- 
 
¶13. (SBU)  Namibia faces between 30 to 40 percent unemployment. 
Uranium mining is increasingly seen as an engine for job creation. 
On the assumption that most uranium projects would go ahead and 
using a 4:1 multiplier for dependents for each mining job, one could 
estimate the potential jobs in uranium mining as follows: 
 
 Year        Direct Jobs    Dependents Supported 
--------------------------------------------- --- 
 2007           2,200            9,000 
 2008           3,000           12,000 
 2011           5,000           20,000 
 2015         6-9,000        24-36,000 
 
Langer Heinrich has a non-union work force, while Rossing's force is 
unionized.  Rossing has had few labor disputes but did suffer from a 
wildcat strike in early 2008.  The issue was settled in arbitration 
largely in Rossing's favor, but the company did agree to raise 
salaries by 10 percent and increase housing allowances.  While over 
95 percent of jobs are filled by Namibians, finding skilled labor 
still poses a major challenge for the uranium mines.  Both Rossing 
and Langer Heinrich have active skills development programs.  As new 
mines come on-line, they will likely poach some skilled employees 
from existing mines.  Rossing has already lost some employees to LHU 
and other mines. 
 
------------------------------ 
Desalination - Water is Scarce 
------------------------------ 
 
¶14. (SBU)  The uranium mining boom in the Erongo Region of Namibia 
has placed a heavy demand on the country's limited fresh water 
supplies.  This has given rise to consideration of multiple efforts 
 
WINDHOEK 00000202  004 OF 005 
 
 
to augment supply by desalination of seawater.  Both the water 
utility NAMWater and the GRN have proposed projects, but these are 
on hold.  Areva has forged ahead and is building its own (USD 175 
million) desalination plant, planned for completion by 2010.  The 
plant is designed to produce 45 million cubic meters of water per 
year, of which Areva's Trekkopje mine will take 17 million cubic 
meters and the rest will be sold to other mines and NAMWater. 
(Note.  Estimates show that future uranium mines in Erongo, some of 
which will come on line between 2010 and 2013, will consume about 53 
million cubic meters of water per year.  This would place a 
significant stress on the water utility's annual national supply of 
67 million cubic meters.  End Note.)  In addition to scarce water 
resources, access to reliable energy resources is also a challenge 
for uranium projects. 
 
------------------------- 
Corporate Responsibility 
------------------------- 
 
¶15. (SBU)  There is a general paucity of environmental regulation 
governing uranium mining in Namibia, according to LHU General 
Manager Wyatt Buck.  LHU has adopted the same environmental 
standards used in Canada, but the GRN does not enforce these 
standards to provide an independent check on LHU's environmental 
practices.  LHU has commissioned its own studies to establish 
baseline environmental information, which will be used as reference 
data for ongoing monitoring of the environment and worker health. 
 
¶16. (SBU)  Dr. Wotan Swiegers, who leads the Chamber of Mines' 
Uranium Stewardship Committee, echoed many of Buck's comments.  The 
Committee was established to ensure that all uranium companies 
assume collective responsibility for the development of Namibia's 
uranium in accordance with international best practices.  In the 
absence of comprehensive uranium mining and environmental 
regulations, the committee advises the GRN on these needs.  It also 
offers advice on the way forward for developing a future nuclear 
energy industry, a program the GRN has expressed interest in 
pursuing.  Swiegers notes that there is no overall radiological or 
environmental baseline data for the Erongo region and acknowledges 
that a set of standards and a unified environmental regulatory 
regime for uranium mining is essential.  He argues that Namibia 
needs assistance to establish a baseline for cancer prevalence in 
the region to assess the industry's impact, if any.  LHU and Rossing 
Uranium have contributed to the establishment of a urine radiation 
testing laboratory in Swakopmund and have provided $1.6 million to 
purchase U.S. equipment. 
 
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Comment 
------- 
 
¶17. (SBU) There is little doubt that uranium presents a tremendous 
growth opportunity for Namibia.  At a time when diamonds sales, 
Namibia's main foreign exchange generator, have almost evaporated 
due to the economic downturn, uranium appears to provide economic 
salvation and much needed jobs.  Nevertheless, there is a 
possibility that the vast array of new projects might lead to 
overdevelopment.  Overproduction in Namibia and elsewhere could lead 
to suppressed prices for yellow-cake.  This could leave some 
Namibian mines economically unviable.  Today's boom could be sowing 
the seeds for tomorrow's bust.  As LHU and the Uranium Stewardship 
Committee both have identified, the government has failed to put in 
place regulations to govern the health and environmental effects of 
uranium mining.  Finally, if the supply of water and energy is not 
expanded in line with the rapid pace of the uranium boom, the mines 
and average Namibians may find themselves battling for the same 
scarce resources.  End Comment. 
 
----------------------------- 
Embassy Team Visit to Namibia 
----------------------------- 
 
¶18. (SBU)  Officers and specialists from both Embassy Pretoria and 
 
WINDHOEK 00000202  005 OF 005 
 
 
Embassy Windhoek visited mines, industry, and government offices in 
Namibia March 30-April 3 to investigate Namibia's rapidly growing 
uranium sector.  Embassy Windhoek wishes to thank Embassy Pretoria's 
David Young and Paul White for their assistance with the visit. 
 
MATHIEU