Mining sector hit again as $1bn uranium project put on hold

MINISTER for Energy and Minerals, Prof Sospeter Muhongo

A $1 billion project that would have propelled Tanzania into the world's top ten uranium producers has been delayed due to a slump in global prices for the potentially-precious metal, dealing a new blow to the country's fledgling mining sector, officials said yesterday.

Toronto-based Uranium One, the world's fourth-largest uranium producing company which initially planned to begin constructing Tanzania's first uranium mine along the Mkuju River in Ruvuma region in 2013, have announced that the project would now be put on hold until its global industry outlook recovers.

Feroz Ashraf, chief executive officer of Uranium One which is Russian-controlled, confirmed on Tuesday that the company wont start building the planned Tanzanian mine unless spot uranium prices rise by at least 70 per cent - to above $55 per pound - from current levels.

Uranium currently trades at around $32.15 per pound on the global market.

"When people realize the price is going to go up, it's going to go up faster than you and I can dream about," Ashraf said in an interview with Reuters during the Prospectors & Developers Association of Canada convention in Toronto.

Several of the world's biggest uranium producers say they are also taking a cautious approach to building new mines, preferring to shave expenses and wait for higher prices despite forecasts for a supply shortfall by the end of the decade.

France's state-owned Areva SA will trim 100 to 200 more jobs this year and stay out of the hunt for new uranium mine exploration projects.

Spot prices for uranium, which is used to make fuel for nuclear power production, have been depressed since the 2011 Fukushima disaster in Japan which led to the shutdown of that country's reactors and generated burdensome stockpiles globally.

Demand is growing rapidly, however, with China in particular aggressively building reactors.

Uranium One's Tanzanian unit, Mantra Tanzania, initially announced that it hoped to start building the Mkuju River mine in 2013, and that - once completed - it would catapult the country to number 3 in Africa in production of uranium oxide, after Niger and Namibia.

The project in southern Tanzania has an updated resource of 119.4 million pounds of uranium. Construction of the mine was estimated to take two years.

Tanzania's mining sector has struggled over the past few years, losing its dominant position as the country's biggest foreign exchange earner largely due to falling global gold prices and a decline in production.

Mining is currently the country’s No.3 source of foreign exchange, after the tourism and manufacturing sectors.

In 2012, the World Heritage Committee accepted a boundary change for the Selous Game Reserve to allow for uranium exploitation directly south of the 50,000-square kilometer world heritage site, one of the largest protected areas in Africa and hitherto relatively undisturbed by human impact.

But the project was initially delayed by cumbersome regulatory licensing procedures. Environmental groups had also opposed the mine's construction in a world heritage game reserve. Contacted for comment on what the latest delay announced by Uranium One may mean for the government, Ministry of Energy and Minerals spokesperson Badra Masoud said she would respond later yesterday, but had not done so by press time