Message from the Managing director

Tough times, but moving ahead towards our vision

It is my pleasure to present Rössing Uranium's Report to Stakeholders 2015. This report explains our business and our approach to what we do. It outlines how we performed in the past year, measured against our key drivers.

It is well-known that the uranium industry, locally and internationally, is going through tough times, but it is equally acknowledged that the long-term prospect of our industry remains positive

As expected, 2015 was a tough year, but we are positive that we will survive - and even prosper - in the years to come. This is especially relevant as we invested substantial resources during the past few years to gain access to higher grade ore.

We have seen some improvements on our safety performance compared to the previous reporting year, but had ten potentially fatal incidents where ten colleagues could have lost their lives at work. This is of great concern to us, and we are placing renewed focus on improving our safety performance. During 2015 we moved our Critical risk management programme of fatality prevention from pilot to full implementation.

From a production point of view, we further reduced our uranium oxide production during 2015. This is in line with our decision taken in 2014 to down-scale our production and supplying mainly our long- term contract customers.

We produced 1,245 tonnes uranium oxide compared with 1,543 tonnes the previous year. Understandably this situation had a serious impact on our free cash flow position in the short term.

As we entered 2015, the mine sustained an incident that affected us in the first quarter of the year - a fire broke out at our Final Product Recovery Plant. As only part of the plant was damaged, we continued with uranium production.

After curtailing our operational plan in 2014 when we moved to a non-continuous operation in the mining and processing areas, we restarted with full continuous operations in October 2015. This required us to increase our workforce with 92 employees, impacting further on our cash flow. We are, however, confident that we will reap the fruits of this investment in the years to come.

Globally the uranium market stabilised somewhat in 2015 with less volatility compared to the previous year. Late 2015 saw the re-start of two nuclear plants in Japan, the first to resume operations since the Fukushima incident.

While this did not reverse the effects of the current supply-demand imbalance in the market, it was an important first step in the market's recovery. It is expected that additional reactor re-starts in Japan will take place during 2016, leading to a further recovery in the market price.

 

Looking ahead, the next few years will remain challenging, but in the mining industry we are used to look beyond the immediate challenges. To find and maximise our opportunities in the future, we will take a close look at how efficiently we work. Our priority is to keep our business profitable.

We are proud of our achievements regarding our cash generation initiatives. We are in a process of making use of integrated productivity improvement principles to unlock even more value and improved future cashflows from our operations.

The two main focus areas for 2016 will be:

  • the successful implementation of our Critical risk management (CRM) programme to ensure our safety performance improves; and
  • the implementation of our Integrated productivity model to focus on and meet our production targets, and to support our cash generation.

We are in a race against time if we want to secure the right to develop Phase 4 of our Life-of-mine extension programme. To this extent we need to reduce our unit costs significantly.

Despite the challenges we are facing, we are particularly proud that our employees have shown resilience, commitment and creativity in overcoming tough times. We are looking beyond the current difficult times and remain positive about the future of our business.

In 2016 we celebrate a milestone - 40 years of production at the mine. If we can achieve and exceed our targets over the next couple of years, there is no reason why we can't look forward to another successful 40 years for the longest-running open pit uranium mine in the world - Rössing Uranium.

 

Werner Duvenhage
Managing director
25 April 2016