Welcome
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 Report to Stakeholders 2016.
We have been a feature of the Namibian economy for more to 40 years and therefore I believe that Rössing is well versed in the nation’s mining business making significant contributions to the development of Namibia.
In Working for Namibia, Rössing Uranium continued to make significant contributions to the development of our country in 2016.
Discussion points
For us, transparency is the key to building trust, so we regularly publish our performance. My discussion with you today is based on information available in our annual Report to stakeholders 2016, of which you all will receive a copy.
I would like to cover the following topics:
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Rössing in the context of the Rio Tinto Group
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Making progress – an overview
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Uranium market conditions
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The company’s performance in 2016, and
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Our corporate social investment and the broader contribution of Rössing Uranium to the Namibian economy
Ladies and gentlemen, Rössing Uranium is part of the Rio Tinto group and before we go into more details, I would like to share a few highlights of the Rio Tinto global company with you, as contained in their latest corporate video.
Rio Tinto corporate video
Where we operate
Let me first place Rössing within the context of Rio Tinto. From the video you would’ve picked up that Rio Tinto is a global mining company that’s been in operation for more than 140 years.
The map gives you an idea of where Rio Tinto operates - in more than 40 countries in the world. With this global presence, Rio Tinto is in the fore in the production of aluminium, iron ore, copper, diamonds, energy sources and minerals.
In 2016, the Rio Tinto Group employed 51,000 people world-wide, including the Group’s share of joint ventures and associates. Of these, approximately
28,000 were located in Australasia, 13,000 in North America, 6,000 in Africa, 2,000 in Central and South America and 2,000 in Europe.
Taking the long-term view
In the year 2016 we went through many changes, and often under less-than-favourable circumstances.
In international commodity circles, 2016 is widely labelled the WORST year of the past decade for the uranium industry: the spot price fell 50 per cent between January and November, at one point even hitting below US$20 per pound. To put that depreciation into perspective, the break-even cost for most uranium mines is estimated at between US$40 and US$50 per pound.
But we achieved a lot…
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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.
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.
Working smarter and harder, we are confident that we will not only survive, but thrive in the long term.
Uranium market conditions
All uranium produced by Rio Tinto’s mines is marketed by Singapore-based
Rio Tinto Uranium under a buy-sell arrangement with the mines. Rössing
Uranium, one of the longest-operating uranium mines in the world, supplies its material via Rio Tinto to electricity companies located in all three major markets namely Asia, North America and Europe/Middle East/Africa. Almost all of our production is marketed through long-term contracts with a diverse selection of customers worldwide.
Somewhat unexpectedly, the uranium market suffered a major collapse in 2016, following a relatively 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 finally 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 with reactor re-start in Japan, combined to cause the market to fall 50 per cent 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.
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 the Erongo Region.
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.
The current imbalance between supply and demand is expected to correct itself by 2020 or so, but a significant near-term recovery is unlikely, unless a major supply disruption occurs.
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.
Our business performance
Having returned to a four-panel shift roster and a seven-day operations schedule at the end of 2015, 2016 witnessed an increase in our production.
We mined a total of 24.4 million tonnes of rock, of which 8.0 million tonnes were uranium-bearing ore from the open pit and 16.5 million tonnes were waste rock. In addition, 1.2 million tonnes of uranium-bearing ore was fed from the stockpiles.
These efforts, combined with having returned to a 24-7 production, resulted in increased mill throughput and a 48 per cent rise in production from 1,245 tonnes of uranium oxide produced in 2015 to 1,850 tonnes in 2016.
Our turnover in 2016 was N$3 billion, up from N$1.8 billion in 2015.
As a major employer and purchaser of goods and services, Rössing Uranium makes a significant contribution to economic development and the creation of prosperity for communities.
Our Value-Added Statement (please see page 61 of the report) reflects the wealth created through the sale of our uranium oxide production, payments for services to suppliers, taxes to the Namibian Government, payments to employees and the investments made in the communities that are our neighbours.
The review period also saw us continue to demonstrate our value to Namibia through contributions to the fiscal authorities. Rössing Uranium paid the Government 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, which includes 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.
In 2016, we spent N$2.4 billion on goods and services for our operations. As during the previous reporting year, most of the procurement expenditure was on Namibian-registered suppliers, amounting to N$1.8 billion, accounting for 76.7 per cent of our total procurement expenditure.
Our business prospects
Despite the challenges we are facing, we are particularly proud that our employees showed 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.
To our credit, we have an excellent supply of uranium bearing ore from our open pit. The mine is currently operating on an approved Life-of- Mine plan to 2025. We further have a reliable infrastructure in place such as water and electricity supply, transport links, and an excellent standing in the community in which we operate. There are currently no drilling initiatives and existing mineral resources which could expand mining beyond this period into the next decade.
Our aspirations for 2017 are a fatality-free Rössing Uranium mine with an engaged and empowered workforce. We will continue to improve our safety foundation, as our primary priorities remain to prevent harm to our people and the environment, whilst staying profitable.
Every year, as part of our continuous improvement focus, we set demanding goals for ourselves for the efficient use of water, and water conservation measures at the mine are taken seriously.
Working smarter and harder, we are confident that we will not only survive, but thrive in the long term.
Our employees
Our workforce is the backbone of our business as they drive productivity to achieve our goals and objectives. We are committed to embracing inclusion and diversity as part of our organisational culture and operational model. This is in line with Rio Tinto’s core values to ensure that our employees feel included, respected and empowered to contribute their best.
Aspiring to be an employer of choice, Rössing Uranium provides long-term and rewarding employment. By the end of 2016 we had a personnel complement of 949 full-time employees (currently 967) – of which 98.4 per cent are Namibians and 17 percent of our workforce are females. The average number of contractors at the mine for the reporting period was 752.
We believe that, through employment creation, the mine is making significant contributions to society and the economy. We therefore strive to keep our workforce engaged through implementing initiatives that benefits the company and our employees.
Our strategic focus continues to be on training and developing of employees, and addressing skills shortages. In 2016, a total of 11 bursary students received support to study at college or university; a further 10 trade job attachments were made available. Rössing also runs an educational assistance scheme for employee dependants at tertiary level and supported 26 individuals through this initiative.
Despite challenging economic times, we invested a total of N$7.6 million in various training programmes (N$5.4 million in 2015), benefiting 130 participants.
Vocational education and training levy: The Namibian Government’s aim with this levy is to facilitate and encourage vocational education and training. The levy rate is one per cent of an employer’s total annual payroll. We have participated in the VET levy system since the regulations took effect in April 2014. We contributed N$5.6 million for the 2016 cycle.
We have invested more than N$32.8 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.
Our HSE best practices – Zero Harm
For Rössing Uranium, the health, safety and well-being of our employees come first. We understand that our operational environment may be hazardous. For this reason, the identification and management of material risks is a crucial principle in our business approach.
We consistently strive to create a working environment free of occupational damage, regardless where our people work or what type of work they are engaged in.
We manage our operational activities to ensure that all impacts, whether on the biophysical or socioeconomic environment, are reduced to acceptable limits. Our operations are governed by applicable national legislative and regulatory frameworks and controlled by way of an integrated HSE management system.
We are committed to the concept of Zero Harm and have put in place rigorous processes to ensure that every employee and contractor finishes his or her working day as safe and as healthy as they were when they reported for work.
We place great importance on safety issues in all areas of our operations and we continuously focus on creating an accident-free workplace. We maintain that all incidents, injuries and occupational illnesses are preventable and our goal is therefore Zero Harm. Our safety aims and objectives are formulated to encourage employees to behave in ways which project a positive and proactive attitude regarding safety.
Our journey on the path of safety continues. In 2017, we will focus attention on a number of areas to bring us closer to the goal of Zero Harm.
One of these is that the Critical Risk Management (CRM) programme of fatality prevention is to become part of every employee and contractor. The CRM programme aims to protect us from identified risks that could kill us. It involves making sure that critical controls are in place and working for all critical risks on site BEFORE work starts, and/or stopping any job if it is found that critical controls are not in place.
Our HSE best practices – Radiation safety
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 since then by the NRPA, against the Radiation Management Plan, found Rössing to be in full compliance with the national regulations.
Radiation safety is and continues to be a discipline that employees and the public are deeply emotional about. With the multitude of allegations and stories abounding, it is often difficult for people to differentiate between rumours and facts. It is therefore important to continuously inform both employees and the public about the perceived and actual risks posed by radiation exposures resulting from the mine, and empower them with sufficient information to assess the risks for themselves. For public information we have launched a series of reports, fact sheets and information pieces on our website (www.rossing.com), under the ‘Reports & Research’ tab.
The results of our Occupational Radiation Monitoring programme are summarised in the graph on the slide, which shows the average occupational radiation dose per person for the three main radiation exposure pathways – external, inhalation of radon progeny, and inhalation of radioactive dust.
The average exposure doses in all Similar Exposure Groups (SEGs) are not only below the regulatory dose limit of 20 mSv per year, they are also below the Rio Tinto standard of 5 mSv per year.
Rössing Uranium has effective controls in place to optimise the exposures to ionising radiation to as low as reasonably achievable; these include engineering controls, respiratory protection, working time restrictions, hygiene facilities, clearance procedures and access controls.
Our HSE best practices - Epidemiological study
You may know that we have embarked on a wide-scale scientific study on the health of our employees. Every year during this event, we provide a progress update to the media. In 2014 we commissioned and completed the scoping process for such a health study. A subsequent scoping report was compiled that determined which epidemiological study designs were appropriate and feasible in Namibia to understand the potential impact, if any, of occupational radiation exposure at Rössing on workers’ health, making use of our detailed medical and radiation exposure records that date back to when the mining operations first began.
The actual study was able to kick off in 2015, building on the scope determined in 2014. The research team selected to conduct the study is the Centre for Occupational and Environmental Health at the University of Manchester. The design of the study, titled ‘An epidemiological study of uranium mineworkers’, will follow the case-cohort approach. In this type of study, the study ‘cohort’ includes all workers who have started working at Rössing Uranium since 1976 until 2010 and who have worked at the mine for more than 12 months continuously.
We initiated collaboration with the Namibian Cancer Registry and the South African Cancer Registry, who will help to identify cancer cases for the study.
From this cohort, with the support of the Namibia Cancer Registry, all cases will be identified who have been diagnosed with cancers that could potentially have resulted from working at the mine, ie respiratory cancers, cancers of the blood and blood forming organs, as well as brain and kidney cancers. For each case a number of ‘controls’ (between five and ten) will be randomly selected from the cohort. ‘Controls’ are employees who are known not to have been diagnosed with these specific cancers, while ‘cases’ are employees who are known to have been diagnosed with these specific cancers. Then, the occupational exposures of the cases and control groups will be compared with each other, allowing a judgement whether an excess occupational exposure might have caused an excess cancer incidence.
At the mine we are working to quantify the occupational exposure of all workers in the cohort. All data used in the study is anonymised to ensure that no personal information is conveyed to anyone, even the researchers. This is achieved by way of a data management protocol that ensures information is coded before it is transmitted for analysis.
An external advisory committee, consisting of members of the Mineworkers Union of Namibia, the Namibian Uranium Association, the Ministry of Health and Social Services and the Ministry of Mines and Energy, has been appointed to provide community oversight and input to the project.
The collection of data and subsequent analysis is expected to take approximately two years, after which the study will be submitted for publication in the internationally peer-reviewed scientific literature.
Our HSE best practices – water management
As a resource-intensive industry, Rössing Uranium’s operations impact on natural resources and the environment. For this reason, the mine evaluates, plans and manages such impacts on an ongoing basis and at all stages of its activities. We continually report on our environmental performance in a transparent manner.
Rössing Uranium is conscious of the fact that water is a precious resource; and because the mining industry is typically a large water user, water conservation measures at the mine are taken seriously.
As the mine is located in the Namib Desert, water management is a one of the most crucial environmental and operational focus areas of our activities. Water management includes all aspects of groundwater pumping, seepage management as well as storage, reuse and recycling of surface and groundwater.
Since 1980, we have been recycling 60 to 70 per cent of our water which is indicative of an effective water management strategy.
Every year, as part of our continuous improvement focus, we set demanding goals for ourselves for the efficient use of water. Our operating plan of 2016 set a target for fresh water use of 2.9 million cubic metres (m³) supplied by NamWater. The actual consumption of fresh water came to 2.1 million m³ only in 2016.
The current cost of water is high and the mine remains open to implementing alternative measures to reduce the cost of desalinated water.
In June 2016, the environmental clearance certificate for the construction of Rössing Uranium’s own desalination plant at Mile 4 close to Swakopmund, was received from the Environmental Commissioner’s office of the Ministry of Environment and Tourism. To meet prerequisites for receipt of the certificate,
Rössing Uranium applied for the water permits required by the Department of Water Affairs and Forestry in September 2016. No reply from the Department had been received by the end of 2016.
We acknowledge the importance of caring for the ecosystems and biodiversity in the regions where we operate. Likewise, we are aware that sustainable growth requires an effective response to climate change.
As a significant uranium producer and consumer of energy, we are committed to reducing greenhouse gas (GHG) emissions.
Current mine plans foresee a cessation of production eight years from now at the end of 2025.
The establishment of the Rössing Environmental Rehabilitation Fund, which provides for expenditures associated with the mine’s closure, complies with statutory obligations and stipulated requirements of both the Ministry of Mines and Energy and the Ministry of Environment and Tourism.
At the end of December 2016, the fund had a cash balance of N$603 million. In 2016 the total cost of closure, excluding retrenchment costs, was estimated at N$1.5 billion. The mine will make additional payments to the fund each year to provide for the eventual total cost of closure by 2025.
Our value addition
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.
Rössing Uranium gives rise to a significant ‘multiplier effect’ — the phenomenon where spending by one company creates income for and further spending by others. Given the prevailing market conditions, our primary focus was to procure goods and services as cost-effectively and efficiently as possible and to focus on maximising our contribution to the local economy.
In 2016, we spent N$2.4 billion on goods and services for our operations. As during the previous reporting year, most of the procurement expenditure was on Namibian-registered suppliers, amounting to N$1.8 billion, accounting for 76.7 per cent of our total procurement expenditure.
During the reporting period, we purchased N$90 million worth of goods and services from previously disadvantaged Namibians (SMEs).
With the aim of securing economic growth, prosperity and the human dignity of all Namibians, the Government of Namibia developed the Harambee Prosperity Plan and the national, broad-based New Equitable Economic Empowerment Framework (NEEEF).
Our neighbouring communities
We strive to build enduring relationships based on open, respectful, and trustworthy communication, which promote better understanding of our impact on the social and physical environment and ensure a significant contribution to economic and social development.
To this end, we align our community and social investment focus with the requirements of Namibia's Mining Charter. The Charter, overseen by the Chamber of Mines of Namibia, is aimed at positively and proactively addressing sustainable and broad-based economic and social transformation in the Namibian mining sector and is grounded in key Government policies such as Vision 2030, the National Development Plan 4 (NDP4) and the Harambee Prosperity Plan.
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. During the year under review, we committed more than N$15.4 million towards the implementation of community initiatives and activities. This is over and above the direct and indirect economic benefits we created through local employment and the procurement of goods and services from local businesses. Most of our community and social investments are channelled directly through the
Rössing Foundation, but the mine also supported various community investment initiatives directly.
The Rössing Foundation’s annual report will be made available soon and I encourage you to visit its website for information on the significant work done by the Rössing Foundation.
Closing message
As we work our way through the current challenges of our business environment, I am confident that Rössing will continue to be a major supplier of energy to the world, as well as delivering value to our shareholders and other stakeholders.
As you may know His Excellency Dr Hage G Geingob, President of the Republic of Namibia visited the mine in August 2016, on the occasion of our 40th anniversary celebration.
President Geingob's presence at the mine marks a milestone for Rössing
Uranium, as all three Namibian Presidents have visited the mine. In July 1990 Namibia's first president and founding father, Sam Nujoma, visited the mine and in 2009 we welcomed former president, Hifikepunye Pohamba.
I would like to conclude with the President’s message at the time.
President Geingob mentioned that he has observed how the mine is a true investment to the country's economic development. Besides the mine’s contributions to the local economy, the President commended Rössing
Uranium for the investment it has made in skills development for Namibians, who have found work on the mine, or elsewhere in specialised fields.
“We do not eat uranium, but others can use it for their specific reasons. What we can do is partner with such investors and ensure a conducive environment is available for them to invest in and so plough back into our economy to the benefit of our people,” said the President.
With these words I proudly present the Rössing Report to Stakeholders for 2016 to you - which is also available on our website www.rossing.com.
Thank you
Werner Duvenhage
Managing director
Rössing Uranium Limited