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2005-06-02 15:09:00
Embassy Pretoria
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						UNCLAS SECTION 01 OF 04 PRETORIA 002175 



E.O. 12958: N/A




E.O. 12958: N/A


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

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

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

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


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