Rössing Uranium – Looking ahead
(21 May 2014)
Members of the Media
It gives me great pleasure to be here today and talk to you about Rössing Uranium, at the time of the launch of our 2013 Report to Stakeholders.
We have been a feature of the Namibian economy for over 37 years and therefore I believe that Rössing is well versed in the nation's mining business.
Today I would like to cover with you the following topics:
- Rössing in the context of the Rio Tinto Group
- Uranium market conditions
- The company's performance in 2013, and
- Our corporate social investment and the broader contribution of Rössing Uranium to the Namibian economy
Let me first place Rössing within the context of Rio Tinto. Rössing is a Rio Tinto Group company which is one of the largest diversified global mining businesses with operations across Africa and the globe.
Rio Tinto has been in business for more than 140 years.
Our 66 000 employees work in more than 40 countries across the world. We are strongly represented in Australia and North America, and also have significant businesses in Asia, Europe, Africa and South America.
This global presence, and our expertise in operating excellence, technology and marketing, enables Rio Tinto operations to supply the right product, at the right quality, at the right time.
Given the downturn in commodity prices and the volatility in the global economy, Rio Tinto has committed to its shareholders to extract greater shareholder value. This means driving down operational costs, critically reviewing all capital spend and projects, as well as continually reviewing the portfolio of businesses within the group.
In the history of the mine, 2013 will undoubtedly be remembered as a challenging year, but it secured our future.
Our industry is currently experiencing challenging times – mainly because of global influences. It was a tough year because the uranium price continued to decline globally, putting substantial pressure on our business, and even as recently as last week the price dropped to under US$30/lbs.
The 2011 tsunami in Japan and its impact on the Fukushima nuclear plant continued to plague the uranium market in 2013, with excess supply causing a decline in market prices. Nuclear plants in Japan remained off-line for most of the year. Supply has increased over the three years since the Fukushima incident. This is a recipe for continued weak prices in the near term. Utilities are holding large stocks in all forms, which defer their need to buy for one to three years on average.
However, the long-term outlook for the nuclear industry remains encouraging as number of new mines are expected to enter production in the next couple of years, but the industry will need new mines to be developed in the next five years in order to meet the demand later this decade and in the post-2020 period.
At Rössing we had to embark on cost-cutting initiatives last year to ensure that we stay operational.
Despite the challenges, we are particularly proud that our workforce has shown resilience, commitment and creativity in respect of overcoming these issues. Looking at Rössing's history, we have made it through tough times in the past only because our employees accept and rise to the challenge.
During 2013 Rössing made significant improvements across the range of business performance metrics.
Our productivity improved significantly – we saved more than N$300 million in a wide range of cost-reduction activities across the mine.
We produced 2,409 tonnes of U3O8, down from 2,699 in 2012, which accounts for about 3.4% of the world production of primary produced uranium.
The impact of lower prices, despite the improvements in uranium production and unit costs, strained operational cash flow, but we reported a net profit of N$32 million, after losses in 2010, 2011 and 2012.
Our turnover in 2013 was N$2.96 billion, up from N$2.88 billion in 2012.
Rössing has a strong sales portfolio, with a healthy mix of long-term and short-term price exposures, which assists to strengthen our competitive position.
Positioning Rössing to withstand short- and medium economic challenges has become part of the daily business of the operation and the pressure remains to drive operating costs to remain competitive.
At the moment our business is negatively affected, and along with poor productivity and high production cost so far this year, we are not making a profit and cannot cover our current costs.
Last week the Rössing Board of Directors gave us the opportunity to review our current business operations and in this way giving the company the opportunity to become more sustainable in the short to medium term.
This is our chance to review our operations and to come up with the most feasible survival option. What we foresee is that with the input from all employees, we will have to come up with a plan that would see us through this difficult period.
At this stage we simply do not know what will be the outcome of this review exercise, but we do know that it would impact us all in one or the other way.
To our credit, we have an excellent supply of uranium bearing ore from our open pit, a number of sales contracts running beyond 2017 and also a reliable infrastructure in place such as water and electricity supply, transport links, and excellent standing in the community in which we operate.
Rössing now has an employee complement of around 1,141 employees, of whom 98% are Namibians. Our strategic focus continues to be on training and developing its employees, and addressing skills shortages. We have invested more than N$63 million in training and development over the past five years. The company continues to invest in its human capital by offering a wide range of improvement and leadership development programmes, and capitalises on Rio Tinto's exchange and secondment programmes.
As always safety is the most important matter to us. Our HSE practices are recognised as complying with international best standards.
The National Radiation Protection Authority (NRPA) approved Rössing's Radiation Management Plan in 2010. Since the approval we have continuously reviewed and updated the plan in consultation with the NRPA, and audits conducted by the NRPA against the Radiation Management Plan in 2011, 2012 and 2013 found Rössing to be in full compliance with the national regulations.
Recently a report by Earthlife Namibia claimed that our operations have an impact on the health of our employees. I am pleased to announce that we have embarked on a wide-scale scientific study with the first steps to design the scope of the study already underway. Further information of the study is to follow as it progresses.
Rössing is a major player in the Namibian economy, with significant contributions in sourcing of goods and services, taxes, training, development as well as community investment.
Our spending in Namibia is significant, which leads to a long chain of value addition throughout the economy. In 2013 we
- Spent N$1.9 billion on goods and services
- Generated N$83 million in royalty payments
- Generated N$143 million in PAYE payments
- Made N$289 million of payments to state owned enterprises, and
- Paid N$783 million in employment costs
Rössing remains a responsible corporate citizen with corporate social responsibility programmes extending into the work of the Rössing Foundation, providing support in the fields of the environment, education, health and recreation for more than 30 years. Over the past five years, more than N$131 million was invested in social investment programmes.
Despite the current depression in the uranium price, the world's demand for clean energy continues to rise, and forecast demand is expected to be strong in the medium to long term.
As we work our way through the current challenges of our business environment, I am confident that Rössing will continue to be profitability and continue to be a major supplier of energy to the world, as well as delivering value to our shareholders and other stakeholders.
I commend the Rössing Stakeholders Report for 2013 to you which are also available on our website www.rossing.com.
Rössing Uranium Limited