VZCZCXRO5551
RR RUEHMA RUEHPA
DE RUEHNM #0508/01 1881213
ZNR UUUUU ZZH
R 071213Z JUL 09
FM AMEMBASSY NIAMEY
TO RUEHC/SECSTATE WASHDC 5179
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHTA/AMEMBASSY ASTANA
RUEHBJ/AMEMBASSY BEIJING 0196
RUEHBY/AMEMBASSY CANBERRA 0042
RUEHMD/AMEMBASSY MADRID 0252
RUEHMO/AMEMBASSY MOSCOW 0031
RUEHNE/AMEMBASSY NEW DELHI 0035
RUEHOT/AMEMBASSY OTTAWA 0565
RUEHKO/AMEMBASSY TOKYO 0114
RUEHWD/AMEMBASSY WINDHOEK 0037
RUEHHI/AMEMBASSY HANOI 0006
RHMFISS/HQ USAFRICOM STUTTGART GE
RHEFDIA/DIA WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 04 NIAMEY 000508 
 
DEPT FOR AF/W, AF/RSA, EEB/ESC, AND EEB/CBA 
ACCRA ALSO FOR USAID/WA 
DAKAR ALSO FOR FCS 
DEPT PLS PASS TO USAID AFR/W 
DEPT PLS PASS TO USGS 
PARIS FOR AF WATCHER 
DOE FOR SPERL AND PERSON 
USDOC FOR ITA/DIEMOND 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958:  N/A 
TAGS: EMIN ECON EINV ENRG KCOR KNNP SENV NG
SUBJECT:  URANIUM MINING IN NIGER: EXPLODING PRODUCTION 
 
REF:  NIAMEY 00371 
 
Note:  Not for Distribution on the Internet - Contains Business 
Proprietary Information 
 
¶1. (SBU) Summary:  On May 4, President Mamadou Tandja laid the 
foundation stone of a massive new uranium mining complex at 
Imouraren, Niger.  The project will be developed by AREVA, the 
French nuclear giant, which is majority owned by the Government of 
France.  Imouraren will be the second largest uranium mine in the 
world with a projected investment of 1.2 billion Euros 
(approximately 1.7 Billion USD; current exchange rate 1 USD = .719 
EU) and production of 5,000 tons per year at completion.  AREVA also 
operates the two existing uranium mining operations in Niger, which 
produced 3,000 metric tons, representing 43% of Niger's export 
income, in 2008.  The Government of Niger (GON) has issued a large 
number of new uranium exploration permits in order to attract 
investors from other countries, but the Imouraren project ensures 
that AREVA will continue to dominate uranium exports from Niger for 
the foreseeable future.  End summary. 
 
-------------------------------------------- 
Recent Mania for Exploration and Development 
-------------------------------------------- 
¶2. (SBU) The Government of Niger has been promoting exploration 
activities actively in the mining sector since the mining law was 
updated in February 2006.  Booming international prices attracted 
new mining exploration and investment around the world, and Niger 
wanted to diversify beyond AREVA.  According to Mahaman Nomao Djika, 
a Deputy in the former National Assembly, Niger awarded 127 
exploration permits for uranium and 27 exploration permits for other 
metals between June 2006 and December 2008.  (Note:  Mahaman's 
efforts to promote an audit and full accounting of all parties, 
including intermediaries who benefitted from this process, was 
subsequently voted down.  End note.)  The process of negotiation and 
the precise terms of these exploration agreements have not been made 
public, but the law establishes a three-year term for exploration, 
renewable for two further terms providing that the company 
investment in exploration activities meets specified levels. 
 
-------------------------------------- 
Who Are the New International Players? 
-------------------------------------- 
¶3. (SBU) Among companies with active uranium exploration permits, 
Embassy Niamey has identified only one U.S.-based company: American 
Technologies Incorporated, based in Oak Ridge, TN, which has two 
permits immediately north of the Chinese operations at Azelik, but 
does not currently maintain an office or staff in Niger.  American 
Technologies Incorporated has provided nuclear services to a wide 
range of American and international companies, and ATI Chairman Dr. 
Dinh Duc Huu, a Vietnamese-American nuclear scientist, is a senior 
advisor on nuclear energy to the Government of Vietnam.  Other U.S. 
firms provide exploration services to companies with exploration 
permits, including a number of established "junior" mining companies 
based in Canada. (Note:  The term "junior" refers to smaller 
exploration companies, frequently based in Canada, where the large 
and well established mining sector provides access to potential 
investors.  End note.) 
 
¶4. (SBU) The permit mania attracted other investors with more 
enthusiasm than mining expertise, and a number of exploration 
permits have already changed hands or been reassigned.  The Chinese 
originally obtained a second exploration permit for Madaouela, a 
deposit near Arlit that originally had been evaluated by AREVA. 
(Note:  AREVA has been conducting research and exploration in Niger 
for decades.  Research information is supposed to be shared with the 
 
NIAMEY 00000508  002 OF 004 
 
 
Ministry of Mines and Energy, but it has been reported that AREVA 
declined to share the research maps and information with the 
Chinese.  End note.)  The Madaouela permit subsequently was 
reassigned to Trendfield, a China-based company involved in mining 
negotiations; Trendfield exchanged the exploration rights for a 12% 
shareholding in GOVI EX, a private uranium exploration company 
headed by Govind Friedland, whose father has been involved in 
various global mining ventures for decades.  GOVI Ex also exchanged 
a 12% shareholding for the uranium permits held by Semafo, and 
subsequently announced an investment by the Canadian mining giant 
Cameco, the world's largest uranium mining company, which retains 
the right to increase shareholding to up to 50%.  These robust ties 
to larger and better financed companies make Govi-Ex the strongest 
player among the various exploration companies. 
 
¶5. (SBU) Other players with uranium permits include companies from 
Canada, England, Russia, and India: 
 
-- Homeland Uranium of Canada, which is actively evaluating permits 
at Adelal, immediately west of Societes des Mines de L'Air (SOMAIR) 
and Compagnie Miniere de'Akouta (COMINAK), and at Asekra, west of 
Imouraren; 
 
-- Brighton Energy, a joint venture between Orezone and North 
Atlantic Resources, each of which contributed multiple permits. 
Both these companies appear to be focused at present on gold mining 
projects elsewhere in West Africa; 
 
-- Niger Uranium, a company registered in the British Virgin 
Islands, whose shareholders include Northwestern Mineral Ventures 
(30%), RAB Capital (17%) UrAmerica (4%), North Sound Capital (4%), 
Libra Advisors (4%) and Southern Rock Insurance Company (4%).  Niger 
Uranium holds permits at Ingal, Irhazer, and Kamas 1, 2, 3 and 4; 
 
-- BVI registered Semmous Lion Mining, under the direction of 
Russians Sergey Matveev and Dmitry Bakaev, is said to have more than 
10 exploration permits obtained with through Matveev's close 
connections to the President's office.  Their original funding was 
from Russia; and 
 
-- Companies with ties to India include Mumbai-based Taurian 
Resources and Earthstone Group, founded by a non-resident Indian 
based in Indonesia.  India's announced focus on nuclear power 
generation will translate into significant demand for uranium fuel, 
but it is not yet clear that either of these companies has the 
financial resources to develop its permits in Niger at this point. 
 
---------------------------------- 
AREVA Dominates Current Production 
---------------------------------- 
¶6. (SBU) The Imouaren site was first discovered in 1966. Development 
was delayed until renewed interest in nuclear electricity generation 
dramatically increased the price of uranium.  Prices, which peaked 
in June 2007 at over USD 130 per pound, have dropped considerably, 
but remain high.  The GON granted AREVA an exploration license in 
¶2006.  The average ore grade at Imouraren is lower than at the two 
older operations, but total reserves are very large.  AREVA plans to 
produce 3500 to 5,000 tons per year for over 35 years, which AREVA 
claims will make Niger the second largest uranium producer in the 
world.  (Note:  This calculation compares Niger's anticipated 
production in 2012 (8,000 tons) with current levels of production in 
other countries.  Niger is currently the sixth largest producer, and 
is unlikely to surpass Canada (9,000 tons in 2008), Kazakhstan 
(8,500 tons in 2008), or Australia (8,400 tons in 2008).  End note.) 
 
 
 
NIAMEY 00000508  003 OF 004 
 
 
¶7. (SBU) The French have been mining uranium in Niger since the 
Arlit open pit mine was opened in 1965 by SOMAIR, which is jointly 
owned by AREVA (63%) and the GON (37%).  In 2007, the SOMAIR 
processing plant produced approximately 1,750 tones of yellow cake 
uranium, and current reserves are sufficient to maintain this level 
of production for at least 15 years.  AREVA also operates the second 
mine at Akouta, which is owned by COMINAK, which is composed of 
AREVA (34%), the GON (31%), Overseas Uranium Resources Development 
Company of Japan (25%), and ENUSA of Spain (10%).  Akouta is an 
underground mining operation that began production in 1978 and 
produced around 1,400 tons in 2007.  The ore as originally mined 
contains only a low concentration of uranium.  It is milled at mine 
sites to produce the uranium concentrate of over 80% uranium called 
"yellowcake." 
 
¶8. (SBU) During the 1970s, income from uranium production sustained 
Niger's economy, but production fell significantly when the world 
lost its appetite for nuclear energy following accidents at Three 
Mile Island and Chernobyl.  Four shareholders:  AREVA, OURD (Japan), 
UNUSA (Spain), and SOPAMIN (Niger), purchase the total output of the 
two producing mines at a price set by agreement between the 
companies' shareholders and the GON.  Between 1987 and 2003, a 
period of low uranium prices, long-term contracts maintained prices 
above market levels, but the subsequent rise in world prices did not 
benefit Niger until the pricing was renegotiated and payments 
increased 50% effective January 2007.  The most recent price 
negotiation, announced in January 2008, set purchasing terms and 
conditions for 2008 and 2009.   According to World Nuclear 
Association records, AREVA had been paying royalty of US$57 per kg 
of production.  The new two-year agreement boosted this to US$83 per 
kg.  AREVA has honored this new price structure, even after prices 
dropped lower. 
 
¶9. (SBU) As part of the pricing agreement in 2007, GON negotiated 
the right to sell a portion of the production of the existing mines 
directly on world markets.  In late 2007, Niger established a 
government-owned company, SOPAMIN, which holds the government's 
ownership share in the uranium companies and manages independent 
sales.  SOPAMIN's direct sales option was subsequently increased to 
900 tons, and the new mining contract for Imouraren also gives 
SOPAMIN the option to sell its share of production independently. 
SOPAMIN currently sells 300 tons per year to Exelon Corporation, the 
largest electric utility in the United States.  This sale, however, 
is in part mediated by AREVA; because of the cost and difficulty of 
shipping uranium from Niger, SOPAMIN fulfills the Exelon contract by 
barter with AREVA, which arranges delivery of yellowcake produced in 
AREVA's Canadian operations.  SOPAMIN has yet to identify a customer 
for the remaining 500 tons.  Exelon reports that it plans to extend 
its existing contract with SOPAMIN, but has no interest in 
purchasing a larger amount from Niger at this time. 
 
¶10. (SBU) Comment:  The special characteristics of the world uranium 
market make it difficult for SOPAMIN to market large volumes of 
uranium at prices above what it would get from AREVA.  Most 
yellowcake uranium is sold on long-term contracts to the limited 
number of companies that have the facilities to process it for use 
as fuel.  As the world's most vertically integrated nuclear power 
company, AREVA has a dominant position in processing and sales of 
enriched fuel and a commanding presence in the development and 
construction of new nuclear power plants, which generally include 
long-term fuel contracts.  SOPAMIN, a tiny organization based in the 
GON Ministry of Mines and Energy, does not have the transportation 
system or the global reach to be cost competitive.  End comment. 
 
¶10. (SBU) AREVA controls and monitors the transfer of uranium 
produced at both mines.  It is sealed in drums and transported by 
 
NIAMEY 00000508  004 OF 004 
 
 
truck to the port of Cotonou, Benin, for shipment to the French port 
of Montoir.  It is further refined and enriched at AREVA's 
Comurhex-Malvesi plant in southern France. 
 
----------------------------------- 
Chinese Production to Start in 2011 
----------------------------------- 
¶11. (SBU) A consortium led by China Nuclear International Uranium 
Corporation (SINO U), a subsidiary of the China National Nuclear 
Corporation (CNNC), is developing the Azelik uranium mine at 
Teguida, a remote area north of Ingal.  Ownership in the consortium, 
incorporated in Niger as SOMINA, is made up of SINO U (37%), the 
Government of Niger (33%), Beijing ZXJOY Investment (25%), and the 
Government of South Korea, which recently purchased the remaining 
5%.  The Teguida Mine is projected to produce 600 tons per year from 
2011, with the potential for higher levels of production if SOMINA's 
continued exploration of the concession identifies higher reserves. 
Because of the remote location of this mine, the US$ 140 million 
construction contract signed in April 2008 with Sinodydro 
Corporation includes a coal-fired power plant as well as the mine 
and processing plant. 
 
----------------------------------- 
French Domination Likely to Persist 
----------------------------------- 
¶12. (SBU) Niger's uranium resources are among the globe's largest, 
but costs are high due to Niger's remote location and poor 
infrastructure.  Historically, the French have dominated the uranium 
sector in Niger, and AREVA's new commitment at Imarouren further 
consolidates Niger's strategic importance to France.  The new 
operations already under construction are projected to make Niger 
the second largest global producer, with considerable potential for 
additional production if the global market for uranium is sustained 
by renewed investment in nuclear energy. 
 
¶13. (SBU) French dominance of the uranium sector in Niger is not 
without its risks, among them the public perception that the GON is 
too close to AREVA.  This perception is reinforced by the fact that 
negotiations with AREVA as well as other mining companies have not 
been managed by technocrats from the Ministry of Mines and Energy, 
but instead have been negotiated by politicians at the highest 
level.  France and AREVA have actively promoted Niger's 
participation in the Extractive Industries Transparency Initiative 
(EITI).  As reported in reftel, Niger's EITI project has been 
established, but the political commitment to significantly greater 
transparency is not clear. 
 
------------------------------------ 
The Future of Niger's Uranium Sector 
------------------------------------ 
¶14. (SBU) In order to diversify investment in the mining sector, 
Niger has opened vast new areas of the country to exploration.  This 
has attracted interest and exploration by new companies, a 
significant percentage of which are new to mining and lack 
sufficient capital or access to capital to develop their claims; 
they hope to demonstrate sufficient resources to attract investment 
from larger, more-established, producers.  Other countries, 
including Namibia, Kazakhstan, Australia, and Canada, also have 
significant uranium resources and are attracting new investment.  If 
Niger is to compete successfully for new investment and create a 
more diverse uranium sector, it will have to address both policy and 
infrastructure issues in a more open and pragmatic way. 
 
ALLEN