AngloGold Ashanti set to cash in on uranium boom
http://www.miningweekly.co.za/article.php?a_id=108391
One of the world’s biggest gold producers, AngloGold Ashanti, hopes to realise significant upside from its uranium production, as long term contracts taper off and production ramps up in the next couple of years, the firm tells Mining Weekly Online.
AngloGold Ashanti is currently producing uranium at a cost of about $15/lb, and is still selling it into contracts in which it is realising only about $20/lb, African Operations COO Neville Nicolau said in an interview after the company’s AGM on Friday.
However, most of these contracts would have ended by 2010, when AngloGold Ashanti would be making significant margins off its uranium production, he said.
Further, the company was planning a production ramp up and expansion of its current plant, which would coincide with the conclusion of the current contracts, Nicolau said.
“We’ll decide later if we will continue to produce uranium as a by-product or we will produce it as a primary product,” he stated.
The spot price for uranium reached $113/lb a pound this week, and he expects a long-term price of around $60/lb.
“We should be able to get our uranium production up to the 1,5-million pounds a year, which will more or less allow us to deliver into our contracts,” Nicolau stated.
“For the next two years we have got a further screen expansion, which will take production up by a further 375 000 lb/y, and that comes on line in the first year that our contracts come off.”
“I think we’re looking at a long term price of around $60/lb, and our production costs would be way below that,” Nicolau enthused. “If the uranium price stays at current levels, we are happy, but we don’t need that price.”
“We have a very serious uranium strategy,” he added. “We want to get ourselves into a position where we can really get value for uranium.”
Plant refurbishment
Nicolau said that AngloGold Ashanti had produced uranium for a long time and had the only uranium producing plant in South Africa.
The plant was built in 1979 that was one of some 14 plants that were processing in South Africa at the time.
It had a lifetime of 25 to 30 years and was now coming to the end of its life.
“Two or three years ago uranium was not particularly interesting and we weren’t too interested in extending the life of the plant,” Nicolau stated, adding that AngloGold Ashanti had planned to shut the plant down after its contracts had been fulfilled.
However, he said that the firm had realised two years ago that uranium was a good opportunity, and decided to rather expand uranium capacity.
“Immediate action was to begin serious maintenance at the plant,” said Nicolau.
He said that its capacity would reach a production level of 1,5-million pounds in some two years, and AngloGold Ashanti would increase capacity by 25% shortly thereafter.
“We have a revenue stream for the next 10 to 15 years after that, which is encouraging,” Nicolau said.
Growth strategy
On acquisitive uranium growth, he said pointed out that the firm already owned significant reserves, at 25,9-million pounds.
“We would look at acquisitions, but at the moment we have got significant uranium reserves, however, where opportunities come up we will take those on,” Nicolau.
Uranium market
He reported that the uranium spot market tended to exaggerate the spot price, as very little was sold out of long term contracts.
However, this was soon set to change.
“In 2009 a lot of other companies’ contracts will also be ending so the market will change,” Nicolau said.
