NAMIBIA ASKS DOE TO REVIEW SALE OF URANIUM TO USEC

UNCLAS SECTION 01 OF 03 WINDHOEK 000432

SENSITIVE
SIPDIS

AF/S PHAEDRA GWYN PLEASE PASS TO DEPARTMENT OF ENERGY
PASS TO EEB/ESC/IEC

E.O. 12958: N/A
TAGS: ENRG EMIN ETTC PREL WA
SUBJECT: NAMIBIA ASKS DOE TO REVIEW SALE OF URANIUM TO USEC


1. Action request - please see paragraph 9.

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Summary
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2. (SBU) Veston Malango, General Manger of the Chamber of
Mines of Namibia (CMN),called on Ambassador Mathieu to
convey his organization's concern over the U.S. Department of
Energy's plan to sell excess USG uranium to the United States
Enrichment Corporation (USEC). Explaining that the DOE sale
could suppress global uranium prices, Malango emphasized that
Namibia could ill afford any move that would damage its
rapidly expanding uranium industry. Uranium has played a
critical role in Namibia's weathering the global financial
crisis by offsetting precipitous declines in other
commodities, primarily diamonds and copper. Malango's verbal
request was accompanied by a formal letter (text included in
paragraph 7). The Namibian government (GRN),Malango
stressed, fully supports the CMN letter. End Summary.

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A Plea for Help
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3. (SBU) Ambassador Mathieu met with Veston Malango, General
Manger of the Chamber of Mines of Namibia, at Malango's
request on November 23. The CMN represents all (60) major
mining and exploration companies active in Namibia. Malango
delivered an impassioned plea that the USG reconsider its
announced plan to sell excess uranium to USEC. Malango also
provided a formal letter outlining the Chamber's arguments
against the sale. He emphasized that the letter had been
fully cleared by four Namibian ministries (see letter text
included in paragraph 7). Malango acknowledged the USG,s
right to sell its excess uranium reserves. However, he
opined that DOE should follow its Excess Inventory Management
Plan (of December 2008),and/or the manner the USG handles
its gold Reserves, in order to avoid disturbing international
markets or negatively affecting the economies of developing
countries.

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Uranium: Critical to Namibia's Economy
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4. (SBU) According to the CMN, uranium should surpass
diamonds as Namibia's most valuable mineral export by 2010.
In 2008, uranium mining contributed to over four percent of
Namibia's GDP, and in 2009 it will likely contribute even
more. Namibia has been able to weather the global financial
crisis and the near collapse of the diamond (and its smaller
copper) industry primarily based on the increased worldwide
demand for nuclear fuel and a fortuitous expansion of the
Namibian uranium industry in recent years. Namibia jumped to
fourth amongst the world's largest uranium oxide producers in
2008, behind Canada, Australia and Kazakhstan reaching a
total production of just over 5000 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.


6. (SBU) Malango noted that the uranium industry employs 2000
people, which is roughly the same number of jobs lost by the
diamond and copper sectors over the past year-and-a-half.
Malango projects that the industry could add another 7000 to
8000 jobs if all forecasted uranium projects come on line.
More modest predictions estimate an employment increase of no
more than 5,800 jobs, with between three to six new mines
opening in the next five years. While some projects may
never come to fruition, some are all but certain. France's
vertically integrated nuclear energy company Areva is on
track to commission Namibia's third uranium mine, Trekkopje,
in 2011. At full capacity, Trekkopje should produce 3,860
tons of U308 per year and employ 1,100 workers.


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Chamber of Mines' Letter
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7. (SBU) Begin Text

November 20, 2009

Her Excellency Dennise Mathieu
USA Ambassador to Namibia
Embassy of USA

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Windhoek

Your Excellency,

(Subject) US Department of Energy Imminent Sales of Excess
Uranium Inventory

It has come to the attention of the Chamber of Mines of
Namibia that the US Department of Energy has announced plans
to "transfer large quantities of excess government uranium to
the United States Enrichment Corporation (USEC) on a
non-competitive basis."

We are concerned that if this is implemented in the manner
that it has been announced, it will no doubt impact
negatively on the price of uranium, with major ramifications
on the uranium mining industry of Namibia and corresponding
reductions in the state revenue to the Government of the
Republic of Namibia.

To put things in perspective, Namibia is now a major world
producer of uranium, contributing about 10% (percent) to
world production. In 2008, Namibia rose to 4th (fourth) rank
as the World producer of uranium, from the 6th (sixth)
position. With more uranium mines coming on stream (two
mines are currently under construction),Namibia is poised to
play a major role as a significant world producer of uranium.
This will translate to increased GDP, mineral exports, tax
revenue to the government and employment.

The diamond industry has been the backbone of the Namibia
mining industry for many years. However, due to depressed
mineral commodity prices brought about by the global
financial meltdown, the diamond industry has been badly
affected resulting in production holidays, reduced production
in line with demand and loss of jobs / reduction in labour
force with resultant social consequences and reduced income
to Government coffers.

Luckily, the uranium industry remained resilient in these
depressed market conditions and continued to grow and offset
the negative impacts suffered by the diamond industry.

Your Excellency, the planned sales of excess uranium
inventory by your government has the potential to wipe out
all the gains attributable to the Namibian uranium industry.

The purpose of this letter is to appeal to your Government,
through your good offices, to reconsider the matter so that
this is not in a manner that will adversely affect the
uranium markets.

The Chamber of Mines of Namibia has brought this matter to
the attention of the Government of the Republic of Namibia
through the Minister of Mines and Energy.

We are fully mindful that the USA government does not wish to
harm economies of developing Countries such as Namibia. Our
appeal, therefore, is to warn of unintended consequences of
such a move.

Your Excellency, we respectfully request your good offices to
prevail on your government to review the method of the
planned sales of excess uranium inventories so as not to
distort the market and safeguard our uranium mining industry
and the Namibian economy from further distress in addition to
repercussions already suffered as direct consequence of the
global financial crisis.

The Chamber of Mines of Namibia wishes to present Your
Excellency, assurances of the highest order and is ready to
provide your office with any additional information as may be
needed.


Yours sincerely,

(Signature)

Mike Leech
President - Chamber of Mines of Namibia

CC.: Hon. Erkki Nghimtina, Minister of Mines and Energy
Hon. Dr. Hage Geingob, Minister of Trade and Industry
Hon. Saara Kuugongelwa-Amadhila, Minister of Finance
Hon. Marco Hausiku, Minister of Foreign Affairs
Mr. Joseph S. Iita, Permanent Secretary, Minister of Mines
and Energy

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Ambassador Veiccoh Nghiwete, Permanent Secretary, Minister of
Foreign Affairs
H.E. Mr. Patrick Nandago, Ambassador to the United States of
America

End Text.

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Comment
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8. (SBU) In a country with a total population of 2 million
that is battling 37 percent unemployment, the Namibian
uranium sector has provided many needed jobs and contributed
significantly to Namibia's tax revenue base. Although
officially classified as a middle income country, Namibia's
income disparity is among the most acute in the world. As a
result, Namibia has many of the characteristics of least
developed countries.

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Action Request
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9. (SBU) Post is aware that DOE released a report on November
5 titled "Quantification of the Potential Impact on
Commercial Markets of DOE's Transfer of Natural Uranium
During the Period October 2009 Through December 2013." Post
is also aware that, on November 12, DOE Secretary Steven Chu
made a "final determination" that the proposed uranium
transfer would not have an "adverse material impact on the
domestic uranium industries." Post would appreciate a
written response to the Chamber of Mines' letter, or talking
points to explain the USG's position regarding the sale of
excess uranium inventories.
MATHIEU