China's Battle For African Uranium

As reported by the Wall Street Journal, Sundayand turbulence have come about because of the
night's revelations that China National Nuclear CorpAsian and Russian scramble to lock-up the uranium
(CNNC) may strengthen its ties to UraMin couldresources of entire countries.
represent a broader picture than an ordinaryThe energy battle in Africa is good news for the two
acquisition of a near-term uranium producer.front-runners in Namibia: UraMin and Forsys Metals.
There is an ongoing global war for energy security,We've called this a horse race, over the past several
which appears to be politically inspired. China andmonths. Both endeavor to become the 'next miner'
Russia are the main opponents, especially in Africa,following Paladin Resources in this country.
but have rivaled each other, over the past severalYet, both companies are vulnerable to acquisition
years, in Central Asia. The goal for both nations is notefforts by Russian or Chinese companies. Or either
only energy security but political influence and alliancecould be acquired by one or more majors hoping to
over their targeted territories.build up their uranium reserves. In the case of Rio
On May 12th, Russia, Kazakhstan and TurkmenistanTinto, acquiring one or both could mean expanding
signed a declaration to upgrade and expand transporturanium operations in this country.
pipelines along the Caspian Sea coast directly toAcquisition Candidates
Russia. The project relies mainly upon the vastJust as the announcement by Energy Metals Corp,
Turkmen gas reserves. This is part of Russia'sregarding a potential sale of the company, fueled
growing monopoly of Central Asian gas. Althoughweekend speculation as to the 'next' takeover
Europe was shocked by Vladimir Putin's newcandidates, the same could occur this week with
arrangement, the Chinese were flabbergasted.African acquisition candidates.
We've been following developments in Central Asia,One might be misled into believing China would focus
and had reported upon milestone events in both ofon Niger, where the company has built a foundation,
our uranium publications, and again (with far greaterand Russia's focus would remain in Namibia. However,
details) in our soon-to-be-released Investing in China'sin a state visit to China this week, Namibian Defense
Energy Crisis.force chief exchanged views with Guo Boxiong,
After more than two decades in power, TurkmenCentral Military Commission vice chairman, on
strongman Saparmurat Niyazov passed away thispromoting relations between the two countries.
past December. In April 2006, Niyazov had signed aIn February, Chinese President Hu Jintao visited
framework agreement on oil and gas cooperation. ByNamibia to sign an economic deal with Namibia giving
August, Niyazov had announced a pipeline, designedthe country a grant of US$4.3 million and an
to pump gas to China, would be opened in 2009. Theinterest-free loan of the same amount. Reportedly,
deal died with the dictator, it appears.some of the money would be used to boost group
A few weeks ago, a spokesman for China's Nationaltourism from China to Namibia. This is the same tactic
Reform and Development Committee announcedChina has utilized in courting relationships in South
China was unlikely to reach its natural gas target of aAmerica to help develop natural resource deals.
10-percent portion of the country's energy portfolioWith US$1.2 trillion in foreign currency reserves, China
by 2010. Increasingly, Russia has shut China out ofis exercising its financial biceps. In March, the country
Central Asia in obtaining long-term, multiple energyformed the Huijin Fund as the state's investment arm.
sources.Up to US$400 billion have reportedly been placed in
Aside from South America, where China hasthis fund for investment purposes. On Sunday night,
strengthened the country's ties with Venezuela andthe Huijin Fund invested US$3 billion to purchase a
others, Africa is a prime hunting ground for China'sstake in about 9.9 percent of the Blackstone private
future energy security. China has established a strongequity firm. Our research suggests the fund is likely
foothold in the Sudan for petroleum. But, Africa is richto strongly invest in natural resources.
in uranium deposits.On this basis, we can not rule out a simple carving of
According to a report published by the InternationalAfrica. We don't believe China will quietly step back
Atomic Energy Agency in 2005, Africa has 18 percentand focus the country's uranium acquisition efforts in
of the world's known recoverable uranium resourcesNiger, permitting Russia to concentrate on Namibia
- about six percent less than Australia and oneand South African uranium.
percent more than Kazakhstan. We began coverageIn Niger, we covered two 'early days' prospective
on both Namibia and Niger, after Russia sent auranium juniors over a year ago. North Atlantic
delegation to Egypt to discuss the nuclearResources acquired a uranium permit in the
renaissance. At the time, our research pointed to1900-square kilometer Abelajouad in this country. This
Africa, particularly those countries, as ripe for futurepast April, the company increased its holdings to
uranium production. Chinese prospectors raced tonearly 3,000 square kilometers. In late April,
Niger within weeks after our initial coverage.Northwestern Mineral Ventures announced uranium
During 2006, Namibia became saturated withmineralization in assays from rock samples after a
numerous exploration plays hoping to capitalize on thefirst-pass reconnaissance on its In Gall and Irhazer
country's uranium resources and relaxed environment.uranium properties. Both would need to further
Consequently, the Namibian Minister of Mines andexplore their properties before attracting serious
Energy closed the country's exploration window.interest from the Chinese.
Since then, Niger has become a new hunting ground.However, in Namibia both UraMin and Forsys Metals
We expect this country to become just as saturatedare actively progressing toward mining uranium on
as Namibia has been.their properties. Either could be the first, but we
China is eager to capitalize upon the continent'sbelieve both should become winners in the uranium
uranium resources before Russia outmaneuvers thembull market. Because China has carefully aligned with
as has been accomplished in Central Asia.UraMin, or at least shown an inkling to do so, we
According to an email we received from TradeTech'ssuspect Russia might begin to look more carefully at
Gene Clark, after presenting at the China Power &Forsys Metals. This is purely speculation based upon
Alternative Energy Summit on May 18th, he told usour premise of 'uranium Politiques.' We do not have
China's official target for nuclear power capacity wasany 'inside track' on this matter.
'40 GWe by 2020 and another 18 GWe in theFortunately, we had the opportunity to chat with
following five-year plan.' This confirms China'sForsys chief executive Duane Parnham late last
aggressive plans to acquire sufficient uranium toweek. His company had announced the completion of
reach this capacity, and would be foolish to rely onthe pre-feasibility study on the company's Valencia
just Australia.uranium deposit in Namibia. We missed the company's
Typically, China has built its energy portfolio throughconference call, but were allowed the opportunity to
numerous deals across multiple regions. This pastdiscuss his company's prospects and future plans
October, Yang Changli, vice president of Chinaduring a telephone call.
National Nuclear, said it would seek uranium not onlyThe company's pre-feasibility study was prepared by
from Australia, but from Canada, Kazakhstan, SouthAustralia-based Snowden Mining, which used the
Africa and Namibia. In an interview Yang gave duringguidelines of Australia's JORC code. Subsequently, the
the 15th Pacific Basin Nuclear Conference, he said,Valencia uranium mineral reserve was classified as
"China won't rely on any single supplier of uraniumProbable Reserves. These were calculated at 24
because of energy security considerations.million pounds U3O8.
Namibia is the First African Focus of UraniumWe asked about production. "We are now modeling
Politiques2.4 million pounds per year," Parnham told us. He
On May 14th, Russia's second-largest bankexpects to payback in less than two years. With
Vneshtorgbank and Russia's state-run nuclearForsys as with all near-term producers, some early
exporter Tekhsnabexport announced they wereconversations have begun about pre-selling the
considered a joint venture to operate in Namibiacompany's uranium production after production has
through licenses they directly hold and throughcommenced.
investments in other companies which have obtainedHis company's news release talked about six month
licenses in Namibia.of stripping during the initial part of the operation so
In March Russian Prime Minister Mikhail Fradkovwe started there. "We'll start when we get a mining
announced his country was prepared to buildinglicense and then looking at production." When will the
nuclear plants in Namibia. Neighboring South Africa hadcompany complete its ongoing environmental
previously warned Namibia to expect reductions inassessment? "We are hoping to have an
energy supplies. Namibia is dependent upon Southenvironmental decision by year end," Parnham told us.
Africa for electricity and has forecast an energy"We are hoping to have enough data to apply for a
deficit of 300 megawatts within the next threemining license in early 2008. If that's successful, then
years.obviously the decision to go forward will be made at
On May 10th, Russia and Kazakhstan signed anthat time."
agreement to set up the International UraniumFor the time being, the company plans to expand its
Enrichment Center, anticipated to come onstream byresource. "The pre-feasibility is just the first snapshot
2013. As part of this announcement, Sergei Kiriyenko,of the situation," he said. "We are finding the pit
head of the Federal Nuclear Power Agency, said,optimization study is only looking at a very small
"Any country can become a member of the centerportion of the overall resource." Does that mean the
by signing an intergovernmental agreement granting itresource is actually larger, then? "It's a heck of a lot
guaranteed access to uranium enrichment services."bigger," he told us. "It's just a function of how much
We conclude Namibia may wish to participate in thisdata you have available to punch into the model.
arrangement.Then, how much does the model give you back?
Enter CNNC on Sunday night. The Chinese company'sThe evaluation process is ongoing. You'll probably see
deputy general manager for uranium procurementa change in the pit design very shortly because we
announced to Bloomberg News that CNNC andhave the ability to move more resource into the
UraMin will start 'more formal' talks this week.reserve category."
UraMin is a prime acquisition candidate for the ChineseWe talked about his company's horse race with
because of its uranium prospects in both Namibia andUraMin. How does it look? "Neck and neck, toe to
Niger. The company also has holdings in South Africatoe," Parnham said. "I think it shows there's
and the Central African Republic.opportunity in Namibia, and that's good that there are
We are now facing a new era of uranium politics ora number of us working for a common goal."
rather 'Uranium Politiques.' And there is good reasonFinally, we asked what has emerged as the key
for this to escalate. Yesterday, the U.S. Energyquestion: Is Forsys a ripe plum for the picking. He
Information Administration issued 'International Energyoffered both sides of the coin. "Where the real
Outlook 2007.' The report announced, "Worldopportunity lies is putting a property into production,"
marketed energy is expected to grow by 57 percenthe responded. "The operation isn't all that difficult so
between 2004 and 2030."it's not a deposit that our expanding team couldn't
The most rapid growth in energy demand isput into production." And then Parnham left the door
anticipated in non-OECD Asia. The majority of thisopen. "Anything can happen. It's an open market, and
energy demand growth would come from China andwe are a public company. But, we are certainly
India. This was the reference case - the middlegeared toward putting this into production."
ground of growth.And from what we've seen among the recent,
Also on Monday, leading Russian nuclear expertsignificant consolidations, those companies who have
Yevgeny Velikhov, head of the Kurchatov Institute,commenced production, and those closest to
told reporters at a news conference that the recentproduction, are the prime acquisition candidates. Why
surge in uranium prices "may still grow by anothershould companies developing projects in Africa
order of magnitude." He believes the uranium price willbecome the exception instead of the rule? Especially
continue to rise as global uranium demand soars whilewhen two super powers are both eagerly trying to
supplies remain tight. "The global energy market isestablish stronger uranium footholds in this continent.
very turbulent," Velikhov said. "The uranium price canCOPYRIGHT© 2007 by StockInterview, Inc.
hit any mark at a time of crisis." Ironically, both crisisALL RIGHTS RESERVED.