MALAWI URANIUM EXPORTS BEGIN

C O N F I D E N T I A L SECTION 01 OF 02 LILONGWE 000552 SENSITIVE SIPDIS LONDON FOR AF WATCHER PETER LORD E.O. 12958: DECL: 10/06/2019 TAGS: EMIN EINV ECON ELTN ENRG KNNP MI SUBJECT: MALAWI URANIUM EXPORTS BEGIN REF: LILONGWE 108 LILONGWE 00000552 001.2 OF 002 Classified By: Charge Kevin K. Sullivan for reasons 1.4 B and D. ¶1. (SBU) Summary: Australian mining firm Paladin Africa made its first shipment of yellowcake from the firm's northern Malawi mine in September. Paladin ships its uranium overland through Malawi, Zambia and Namibia to the Atlantic Port of Walvis Bay. Paladin sells on one-year contracts, with its entire output currently committed to three unnamed customers. Paladin's mine represents the largest single investment in Malawi; income generated is expected to add as much as 10 percent to Malawi' s export earnings. End summary. The Waiting Ends: Malawian Uranium Exports Begin -------------- --- ¶2. (SBU) Paladin (Africa) Managing Director Neville Huxham told us on September 30 the company's uranium mine and processing facility at Kayelekera in northern Malawi made its first shipment of yellowcake in September. He said the company purposely made the shipment with no fanfare to avoid interference by mine opponents. Huxham said the mine production was on track to reach its full output capacity by the end of this year. ¶3. (SBU) According to Huxham, Kayelekera uranium is packed in 44-gallon drums and containerized for shipment, following IAEA guidelines. The mine expects to make ten shipments per year, at approximately 150 tons each. Shipments travel by truck through Malawi and into Zambia at the Mchinji-Chipata border crossing, and then on through Zambia and Namibia en route to the Atlantic Port of Walvis Bay. Paladin retains full responsibility for the shipments on land and sea until delivery to the customer. ¶4. (SBU) Huxham said that Paladin had investigated the ports of Dar-es-Salaam, Nacala and Beira during their project feasibility studies, but determined that these options would take at least three years to bring up to the IAEA standard for storage and handling of uranium. He added that the current security situation in the western Indian Ocean poses a real concern. Bureaucratic Hurdles Cleared, Security Ready -------------- ¶5. (SBU) Huxham confirmed that all necessary permits had been secured for the shipments, though the firm had encountered some delays with Zambian and Namibian officials. Huxham noted, however, that SADC protocols guarantee the rights of any member to transit its goods through other members to market. ¶6. (C) Uranium shipments will be escorted by six armed members of the Malawi Police Service in Malawi. The Malawian military will not be involved. In Zambia, shipments will be accompanied by escorts from a range of ministries, departments and agencies. Huxham said Paladin was successful in walking the Zambians back from their initial requirement for sixteen armed policemen to three with each convoy, arguing that a smaller armed escort would attract less attention and therefore less threat. Customers: Unnamed -------------- ¶8. (SBU) Huxham confirmed that the entire output of the mine for the next year was already contracted to uranium processors, not end-users. He said that there are currently three customers, but noted that provisions in the contracts prohibit Paladin from revealing their identities. Huxham explained that similar one-year contracts will be signed during the life of the mine, with the same or different customers, ensuring that all of the mine's output will be sold. Comment -------------- ¶9. (SBU) The first export of yellowcake from Kayelekera marks an important milestone in Malawi's economic development. While the mine makes only a small dent in Malawi's unemployment, the impact on GDP and Government revenue will be substantial. With Malawi's economy still dependent on subsistance agriculture, hopes are high that this major LILONGWE 00000552 002.2 OF 002 resources project can lead to further development in the mining sector. SULLIVAN