MAC: Mines and Communities

Russian billion dollar roulette fails to pay off

Published by MAC on 2017-07-14
Source: (2017-07-08)

It's surely a project almost completely undeserving of support:

  • A uranium mine, bought by a Russian state company just three months after Japan's Fukishma disaster;
  • It's located on a protected Game Reserve, albeit one whose boundaries were changed by UNESCO;
  • It's hosted by a government which has been striving to revise (even revoke) existing contracts, to provide more control over its mineral riches, and gain appropriate revenues from them.
  • Added to which, uranium market prices have toppled in recent years - and are not expected to recover at all soon.

Little wonder, then, that Rosatom has announced the suspension of the Mkuju river project for at least three years.

Russian state corporation suspends $1.2 billion uranium project in Tanzania

Vladimir Basov

8 July 2017

Russian state nuclear corporation Rosatom suspends Mkuju River uranium project in Tanzania for at least three years due to depressed uranium market. Rosatom, which previously hoped to start construction and mining uranium at Mkuju River project in 2013, 2016 and in 2018 respectively, decided to suspend the development of this project until the demand for uranium is restored, which is expected not earlier than 2020.

Another reason for this postponement is the major overhaul of Tanzania’s mining industry commissioned by the local authorities in March of this year. Recent bills, which aimed at providing the state with a greater share of revenue from the country’s natural resources, imposed fresh challenges for mining companies operating in Tanzania, including Rosatom.

This controversial project faced challenges and delays from the start. In December 2010, Rosatom agreed to buy Mantra Resources Ltd. for A$1.16 billion ($1.15 billion), giving it the Australian-based company's Tanzanian assets, including Mkuju River uranium deposit. ARMZ Uranium Holding Co., – a Rosatom’s subsidiary, completed this deal in June 2011.

Some experts say that Rosatom likely overpaid for Mantra, because completion of this deal occurred three months after the Fukushima nuclear disaster of March 11, 2011, and uranium market collapse could have been easily predicted. Uranium prices have since fallen three-times.

In July 2012, the UNESCO World Heritage Committee approved a special excision of proposed uranium mine site from the protected Selous Game Reserve, which was a part of the Reserve for a long time. This decision caused a wave of uproar among international wildlife protection community and other NGOs.

Additionally, there is an increase in the number of elephant poachers who actively use a road built by Rosatom to the uranium deposit to access the Selous Game Reserve.

Moreover, Rosatom is facing many claims, demands and even lawsuits from the Tanzanian authorities concerned about multiple delays of the project.

As for the project, it has been on the advanced stage of development for some time now, with a key mining licence granted back in April 2013. The operator of the project, Uranium One, has current activities at Mkuju River focused on licensing and permitting matters, and value engineering opportunities to optimize the capital and operating costs for open-pit operation.

In addition, an In-Situ Leaching test program started in Q2 2015 is still ongoing. ISL could prove to be an alternative extraction method for Mkuju River and similar ore bodies in the region in addition to or instead of the open-pit mining method.

There are still many unresolved issues and problems this project faces, and what can be said with certainty is that Mkuju River uranium project has a bumpy road ahead.

Rosatom loses hope in its international nuclear builds, eyes renewables

Charles Digges, Belona Foundation -

3 July 2017

Amid decreasing world demand for nuclear energy, Russia’s state nuclear corporation last week warned it would likely be receiving fewer requests to build nuclear power plants abroad.

The announcement marks a sharp departure for the corporation, which until recently has posed its contracts with other countries as the bread and butter of its bottom line – as well as a potent tool for broadening Moscow’s sphere of political influence.

But there’s a silver lining to the nuclear monolith’s recent disillusionment with its traditional lifeblood: A possible, albeit modest, shift in the direction of renewable energy and battery technologies.

Speaking at last month’s Tekhnoprom-2017 conference, a technical conference in the Siberian city of Novosibirsk, Rosatom’s deputy director Vyacheslav Pershukov called the market for nuclear power stations abroad “exhausted.”

“We see that the market is contracting, and for the sustainable growth of the corporation…we must make our money on something other than nuclear technology,” he said, according to the RBK news agency.

His remarks dovetail with a worldwide nuclear sag.

In the United States, renewable energy output eclipsed nuclear for the first time during March and April. Meanwhile, huge nuclear corporations are trying to stave off going broke. Exelon, the country’s biggest nuclear operator, has seen its share prices plummet by 60 percent since 2008.

Westinghouse, meanwhile filed for bankruptcy in March, and Toshiba, its parent company, is trying to sell of its computer divisions to cover the debt. France’s Areva was saved from financial peril by a huge taxpayer infusion into its owner EDF, but that bailout will only stop the bleed the company is experiencing thanks to huge cost overruns on an ambitious but delayed reactor build in Finland.

Pershukov told the Tekhnoprom conference that Rosatom would shift some of its efforts to providing nuclear power plant services abroad, primarily to those it’s in the process of building.

For the past several years, Rosatom has touted its VVER-1200 reactor packages to international capitols and has worked vigorously to sign up customers even – if not especially – those who can barely afford it.

On paper, the company has $130 billion in outstanding “memoranda of understanding” and other handshake type deals with foreign countries.

But many of the counties Rosatom counts among its potential contracts – like Jordan, Algeria, Nigeria and Bolivia, and most recently Uganda and Ethiopia – won’t have infrastructure to support nuclear power for decades.

In other cases, like Hungary, the Rosatom-built Paks-2 plant has been approved, but will leave Budapest’s right wing-government heavily indebted to Moscow for the $10 billion plant.

Another similar deal would have indentured South Africa to Rosatom for $76 billion, but that country’s high court torpedoed the deal before it got off the ground.

Other countries where Rosatom builds are already underway – like India’s Kudankulam, Iran’s Bushehr, China’s Tianwan and Belarus’s Ostrovets – are already familiar with Rosatom’s typical cost overruns and delays.

The company can pay for these huge loans because of the generous state subsidies it receives, but taxpayer injections are slated to dry up by 2020.

Oskar Njaa, a nuclear adviser with Bellona said curtailing Rosatom’s international nuclear ambitions represents a humbling moment for the company, and a dampening of its political influence abroad.

“This is an economic blow,” he said. “For Russia, reducing an ability to make other countries dependent on Moscow’s nuclear fuel and expertise for energy needs is a blow to its geopolitical interests as well.”

As such, Rosatom is casting a wide net for other avenues of influence and revenue. In May, the company appeared in Chile’s Lithium Call Roadshow, and is reportedly pursuing inroads with Santiago to become a player in cell phone and electric car batteries. Other reports say the company is making a foray into fiber-optics.

More optimistically, Njaa noted, the company also seems to have discovered a bent for the renewable energy sector. He noted Rosatom’s recent interest in small hydroelectric plants and wind energy.

“Investing in other, more environmentally friendly sources of energy would probably yield a higher profit, and require less state subsidies than Rosatom’s current endeavors,” Njaa said.

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