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A reader responds to “Atomic Anne, her husband and the dubious $2.5 billion African uranium deal” reader Julian Poniewierski, Principal Mining Engineer at PanAust Limited, has some insights into what could have gone wrong with Areva’s 2007 purchase of Uramin, specifically the Namibian properties:

Back in 2006, as a consultant in the mining industry I did a desk-top review of Uramin for a potential purchaser and with less than a week’s work came up with an NPV10% of -500M US$.  It had ZERO probability of ever having a positive NPV.  And that without accounting for any purchase price.  My one weeks’ work involved reading the Langer Heinrich technical report (publicly available) to understand some of the background with those types of deposits in Namibia and then reviewing (and correcting for errors) Uramin’s cash flow model using some realistic mining and metallurgical parameters and costs.

On reading the Langer Heinrich technical report I had noted that the head grade for Trekkopje (around 120-140 ppm U2O3 if I remember correctly) was LESS than the original tailings grade for LH.  LH had to install a special treatment plant to get the tailings grade to less than 100 ppm in order to meet environmental discharge standards.  It would have been cheaper to just re-treat Langer-Heinrich’s tailings (albeit is a much smaller deposit) than to build a mine at Trekkopje.

Another highlight from the LH report was that whilst Vanadium was able to be dissolved into the mill plant liquor, they had not yet found any technical let alone economic means of recovering that Vanadium.  Uramin had done metallurgical testing to show that V2O5 could be dissolved but had done no met test to show it could be recovered.  Using the LH experience I gave the Vanadium in the deposit zero value – and it was a significant value adder in Uramin’s cash model (I think in order of 30% – and then using the price associated with a temporary peak of a spike in the vanadium prices).

To get 50% probability of a ZERO NPV – the project needed a long-term Uranium (U3O8) price of almost $60/lb – which was at the time still north of the spot price, let alone the long-term contract price (which is very much lower and at that time around 3 to 4 $/lb and is the price on which 90%+ of all uranium is sold).

In 2007 I almost fell off my chair when I hear that Areva had paid $2.5 billion for Uramin.  I wondered for many years if I had missed something.  Now I know I did not, and for my client at the time I had well and truly earned my pay and had saved them from a big mistake.

Fraud?  Maybe.  More likely absolute stupidity.


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