Chinese interested in buying Rio Tinto’s Namibian uranium mine

Rio Tinto (ASX, LON:RIO), the world’s second largest miner, has been talking to China National Nuclear Corporation (CNNC) about selling the state-owned company its stake in Namibia’s Rössing uranium mine.

While the mining giant has not officially acknowledged the negotiations with CNNC, Namibia’s energy minister Simeon Negumbo confirmed them to local paper The Namibian.

Rio has close to a 69 percent interest in Rössing, the world's longest-running open pit uranium mine, while the rest is held by the Iranian Foreign Investment Company (15 percent), the Industrial Corporation of South African (10 percent), the government of Namibia (3 percent) and local interests (3 percent).

Rio has close to a 69 percent interest in Rössing, the world's longest-running open pit uranium mine.

Rössing is located in an uranium area. The nearby Husab operation, the world’s third largest uranium-only mine, is set to produce up to 15-million pounds of uranium a year.

Rössing currently generates about 3 percent of the global supply of the radioactive commodity, which has seen renewed interest from investors and better prices — they are up more than 30% in the past four months only.

Experts, however, remain cautious about the long-term outlook for the commodity.

Decade-low prices have had a negative effect on the profitability of existing mines and a devastating effect on the capacity of early-stage projects to raise the necessary funding to be mine-ready when demand picks up.

“The overall nuclear fuel chain remains a challenging environment, with low prices across the chain weighing on margins for producers and consumers,” BMO analysts Colin Hamilton and Alexander Pearce said earlier this month.

They noted, however, that recent supply cutbacks by major producers — mainly Canada's Cameco (TSX:CCO) (NYSE:CCJ) and Kazakhstan's state-owned miner Kazatomprom —, as well as the closure of a number of higher-cost mines, are starting to shift the balance into a deficit for the first time in more than a decade.

Partly due to lower global production and the coming online of Husab mine, Namibia has strengthened its position as a top uranium producer. Currently, the African nation is the world’s fifth largest, behind Kazakhstan, Canada, Australia and Niger.