Rio Tinto’s Rössing Uranium has reported better financials for 2016, compared to the previous year, despite the fact uranium spot price fell 50 percent between January and November 2016, even hitting below US$20 per pound at one point. As a result the market referred to 2016 as the worst year in the last decade for the global uranium industry.
Rössing Uranium, one of the largest and longest-running open pit uranium mines in the world, mined 24,4 million tonnes of rock and milled 9,1 tonnes of uranium bearing ore. This allowed the mine to produce only 1,850 tonnes of uranium oxide, which is a 48 percent increase in output compared to the previous year’s production output.
The mine made a turnover of N$3 billion 2016, nearly twice the N$1,8 billion recorded in 2015, to register a net profit of N$107 million. The previous year Rössing Uranium had suffered a loss of N$385 million.
Rössing Uranium Limited managing director Werner Duvenhage emphasised that the positive figures are to be seen against the backdrop of the unexpected major collapse by the uranium market in 2016, following a relatively stable market in 2015, with the spot price holding at around US$35 per pound for the entire year.
“At that time, many analysts believed that US$35 would prove to be the market low point, given that a few Japanese reactors were finally authorised to re-start,” noted Duvenhage.
Unfortunately, this was not to be the case, as the emergence of additional secondary supplies and large volumes of new production in 2016, as well as the very slow rate of progress with reactor re-start in Japan, combined to cause the market to fall 50 percent between January and November 2016, before stabilising at year-end around US$20 per pound.
The average sport market price in 2016 was US$25.64 per pound of uranium oxide.
Duvenhage says Rössing Uranium achieved the positive results thanks to “increased production [that] helped to counter the effects of the lower price on our cash flow.”
Further, the reason revenue increased by 67 percent compared to the previous year is due to higher sales volumes as result of the return to continued operations late in 2015.
The mine returned to a four-panel shift roster and seven-day operational schedule at the end of 2015, allowing the 2016 financial year to record the increase in production.
“This, together with the exchange rate that was in our favour most of the year, had a positive impact and we realised a net profit from normal operations of N$107 million compared with an N$385 million net loss the previous year,” he says.
“Looking forward, the year 2017 will be a defining one in our history and we will be remembered for the trail we are now blazing. In line with our expectations, the next few years will be challenging. However, we have worked through challenging times before and over the past 40 years, we have survived. If we achieve our production and cost targets, our business will remain feasible,” he says.
The review period also saw Rössing Uranium pay N$80.4 million in royalty tax, N$50.8 million in dividends and N$107.2 million in pay-as-you-earn tax on behalf of employees.
“Despite the current financial strain under which we operate, we invested N$15.4 million in our neighbouring communities during 2016, either directly or through the Rössing Foundation.”
“Payments to public enterprises, such as NamWater and NamPower, amounted to N$392.7 million, including the training levy paid to the National Training Authority of N$5.6 million. We also spent N$506.7 million in net salaries and wages,” says Duvenhage.