SIGNS OF LIFE FOR NIGER'S BEST EXPORT AS NEW

UNCLAS SECTION 01 OF 02 NIAMEY 001055 SIPDIS SENSITIVE SIPDIS DEPT. FOR AF/W: BACHMAN E.O. 12958: N/A TAGS: ECON ETRD EINV ENRG EMIN NG SUBJECT: SIGNS OF LIFE FOR NIGER'S BEST EXPORT AS NEW CANADIAN VENTURE SEARCHES FOR URANIUM NIAMEY 00001055 001.2 OF 002 -------------- SUMMARY -------------- ¶1. (SBU) In a sign of heightened interest in Niger's uranium reserves, a small Canadian exploration company - Northwestern Mineral Ventures Inc. - has begun operations in a 4,000 square kilometer concession centered on the northern Nigerien town of Ingal. World market prices for uranium are rising after two and a half decades of decline and stagnation. Niger is the world's fourth largest producer, accounting for approximately 10% - 15% of global production. However, since the early 1980s, little in the way of exploration has been attempted. Thus, the country still offers significant unclaimed tracts for exploration and exploitation. Against this backdrop, Northwestern's interest in Niger is significant both in its own right and as a suggestion of what is still possible here in Niger - substantial additional exploration and exploitation in an uncrowded field. For the people of the world's poorest country, that could equate to much needed foreign investment in their most lucrative - but long dormant - natural resource sector. END SUMMARY ¶2. (SBU) In a meeting with acting Econoff on September 18, Northwestern's Chief Financial Officer (CFO) Erik Martin described the company and its Niger venture. Northwestern is a small publicly traded company based in Toronto. Approximately 85% of its shareholders are Americans, though they collectively hold only 20% of the company's stock. Majority ownership is Canadian, though the firm is also listed on the New York Stock Exchange. With approximately $15 million in the bank, Northwestern plans on investing $4.4 million dollars in Niger exploration over the next three years. The company currently operates a uranium mine in Quebec and a gold mine in Mexico. Noting that Niger produces roughly 10% of the world's uranium, Martin argued that the country was attractive to small companies such as his, as large tracts remain unexplored and unclaimed by larger operators. Given rising global demand for uranium, Martin argued that exploration in environments such as Niger was a better investment now than at anytime in the last 20 years. ¶3. (SBU) Northwestern has obtained exploration rights to two tracts, which collectively total 4,000 square kilometers, located west of the city of Agadez. NOTE: Niger's active uranium mines lie in a straight line running 300km north from the city of Agadez to the city of Arlit. END NOTE Martin informed Econoff that Northwestern had already conducted aerial exploration of their concession and that results were promising enough to merit land-based exploratory efforts. Those efforts would be undertaken by a contractor - RSG Group of Ghana. RSG will establish base camps in the zone and begin intensive exploration from mid-October. In the event that exploration yields results, Northwestern would approach the Government of Niger (GON) for a separate exploitation permit. The company has established a Niamey office with seven full-time employees, and is about to open an office in Agadez. It expects to soon double the number of local employees and to continue hiring in the near-term. It has retained a former senior employee of the Ministry of Mines and Energy, an Agadez regional native, as its local chief of operations. For security purposes, the company has agreed to pay the Nigerien Army 2,000 to 5,000 CFA (approximately $5.00 to $10.00) in per diem expenses for each of ten soldiers deployed to the site. ¶4. (U) Niger derives $27.5 billion CFA (approximately $53 million) per year in revenue from existing uranium mining activities. This constitutes five percent of the national GDP (up from two percent in the late 1980s and 1990s, but down from a high of twelve percent in the 1970s). Long dormant due to market prices as low as $14.00 per unit, and exploitation of more accessible reserves in Australia, Canada, and elsewhere, Niger's uranium sector has been sustained by two public companies - SOMAIR (Socit des Mines de l'Air),and COMINAK (Compagnie Miniere de l'Akota). These two companies collectively employ 1,632 Nigeriens in their surface and subterranean mining activities. ¶5. COMMENT: (SBU) In recent years, popular anxiety over reports of chemical runoff from the mines contaminating the drinking water of Arlit and Tchighozerine has been balanced by public optimism over the rising price of uranium. While hopes for development based on gold mining or oil drilling are present in more muted form, Nigerien nostalgia for the NIAMEY 00001055 002.2 OF 002 "good old days" of the 1970s uranium boom revives at the mention of any new venture related to this proven money-maker. At the same time, the uranium sector has not attracted the aggressive Chinese interest manifest in the oil exploration sector. Therefore, we expect the GON to be supportive of Northwestern's efforts, and to make reasonable efforts to clear bureaucratic roadblocks from the company's path. END COMMENT ALLEN