Marketing our product

All uranium produced by Rio Tinto’s mines is marketed by Singapore-based Rio Tinto Uranium under buy-and-sell agreements with the mines. These arrangements allow Rössing Uranium to compete for better sales opportunities which require a multisource supply.

As one of the longest-operating uranium mines in the world, Rössing Uranium supplies its material via Rio Tinto Uranium to electricity companies located in all three major markets, namely Asia, North America and Europe/Middle East.

In addition, we have supplied uranium directly to South Africa’s Eskom for the production of power for southern Africa. Almost all of Rössing Uranium’s production is marketed through long-term contracts with a diverse number of customers worldwide.

Somewhat unexpectedly, the uranium market suffered a severe collapse in 2016, following a relative stable market in 2015, with a spot price holding 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 fnally authorised to re-start.

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 in Japan, combined to cause the market to fall 50 per cent between January and November, before stabilising at year-end around US$20 per pound.

During this same period, the long-term price indicator also fell, but somewhat less drastically, from US$44 at the beginning of the year to US$32 by year end. Rössing Uranium’s sales are more tightly linked to the long-term indicator than to the spot price, and are therefore protected by higher base prices and price floors. However, the collapse in both market indices resulted in a small negative effect on revenues for the year.

The cause of such a large drop in spot prices is diffcult to pinpoint on any one factor. There are certainly a number of causes. The situation in Japan remains troubled with only three nuclear reactor units operating for most of the year with long delays in regulatory approvals for additional reactor re-starts.


The uranium-bearing ore at Rössing Uranium is mined through drilling, blasting, loading and hauling from the open pit. The ore is delivered to the primary crushers and then passes through a further series of crushers - secondary and quaternary crushers in the photo - before extraction of the uranium can be done to produce our product, uranium oxide.


It is diffcult to predict how many units will ultimately be allowed to re-start in Japan, or how long it will take to bring all of those units back online. Regardless, the industry in Japan, formerly the largest and most proftable market in Rössing Uranium’s long history, is likely to be only a fraction of its pre-Fukushima size of 54 operating units in the end.

Demand from other quarters has also been lower than was hoped. Several US utilities have announced premature reactor closures due to extremely low electricity prices caused by abundant shale gas and heavily-subsidised renewable energy sources.

Laws passed in the states of New York and Illinois in 2016 will likely save some existing units by way of subsidies for carbon-free electricity, but other units in deregulated power markets remain at risk of premature closure.

Even in China, with the fastest nuclear power growth rate, new-build projects are slowing down. It appears the industry will not meet the 2020 government target of 58 Gigawatt electric (GWe) installed nuclear capacity. It will be closer to 53 GWe. China has also taken advantage of falling prices to build up a large volume of natural uranium inventories.

That country’s utilities may not continue to support the market with the volume of purchases they have sustained over the past fve years. By far, China remains the leader in the expansion of nuclear capacity, but it is now clear that it will not grow at the rate that was expected before the Fukushima incident occurred.

Meanwhile, with a disadvantage to market prices, the supply of uranium is growing rapidly. Much of this growth can be attributed to the entry of two, large mines in the supply equation, namely Cameco’s Cigar Lake, which reached a full annual capacity of 18 million pounds uranium oxide in 2016, and Swakop Uranium’s Husab project, close to Rössing Uranium in Namibia’s Erongo Region.

The latter project experienced a few start-up delays, but has now begun commercial operation, and its Chinese owner, the China General Nuclear Power Corporation, remains committed to a full production rate of 15 million pounds per year over the next few years.

This new supply, on top of the roughly 60 million pounds per year coming from Kazakhstan and all other world suppliers, is more than suffcient to meet any demand from the marketplace for the next few years. In retrospect, it is easy to see why market prices were destined to fall.

Higher-than-expected levels of secondary supplies also contribute to the surplus supply problem. The problem is exacerbated by excess uranium stocks produced by enrichment facilities. Nuclear fuel enrichment facilities are able to utilise their excess capacity to upgrade enrichment tails (waste) material and turn it into natural uranium, which in turn competes on the market with primary mine supply.

Given the effciency of the centrifuge enrichment process and the large capacity of Russian and European enrichment facilities, this source of supply is unlikely to diminish anytime soon.

Bearing in mind the demand-side problems and excessive production of the past few years, inventories are high at all levels of the supply chain. This has kept a number of buyers off the market as they seek to consume these inventories. On the brighter side, American and some European utilities will remain mostly uncovered into the early 2020s, and therefore should be present in the marketplace in 2017 to satisfy some of that demand with long-term contracts.

Others may believe that prices are now truly at a low point, already below the cost of production at most mines around the world. Consequently, it is a good time to lock in new contracts. It is likely that 2017 will be a better year for mid- and long-term contracting than was the case in the period between 2014 and 2016.

In short, it is still a very challenging time for the uranium production industry as a whole and not just for Rössing Uranium. All producers will need to keep costs low in an overly-saturated market.

The current imbalance between supply and demand is expected to correct itself by 2020 or so, but a signifcant near-term recovery is unlikely, unless a major supply disruption occurs.

Demand is unlikely to come to the rescue in the short term, but utilities still value the diversifcation attributes that Rio Tinto and Rössing Uranium bring to their fuel portfolios. More importantly, nuclear power still has a critical role to play in the world’s energy security, reliability and carbon mitigation goals.


Members of the drill and blast team at the mining operations checking on newly drilled blast holes to be charged in preparation for a production blast.