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. -------------- Summary -------------- ¶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. -------------- A Plea for Help -------------- ¶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. -------------- Uranium: Critical to Namibia's Economy -------------- ¶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. -------------- Chamber of Mines' Letter -------------- ¶7. (SBU) Begin Text November 20, 2009 Her Excellency Dennise Mathieu USA Ambassador to Namibia Embassy of USA WINDHOEK 00000432 002 OF 003 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 WINDHOEK 00000432 003 OF 003 Ambassador Veiccoh Nghiwete, Permanent Secretary, Minister of Foreign Affairs H.E. Mr. Patrick Nandago, Ambassador to the United States of America End Text. -------------- Comment -------------- ¶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. -------------- Action Request -------------- ¶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