An operational review is under way at Rössing Uranium, a unit of Rio Tinto, to plot the way forward during continued economically challenging times for the uranium giant in Namibia.

“At the moment, our business is negatively affected and, along with poor productivity and high production costs so far this year, we are not making a profit and cannot cover our current costs,”

Rössing MD Werner Duvenhage said during the launch of the 2013 annual report to stakeholders in Windhoek last week.

Duvenhage said that the review would be a chance to “come up with the most feasible survival option”, that input from all the company’s employees would be required and that a plan would be formulated to “see us though this difficult period”.

Earlier this month, the Rössing board of directors gave the go-ahead to review business operations, “giving the company the opportunity to become more sustainable in the short to medium term”, Duvenhage stated.

He noted in his stakeholders report: “At this stage, we simply do not know what will be the outcome of this review exercise, but we do know that it will impact on us all in one way or the other.”

In 2013, the company laid off 276 employees as part of an overall cost-cutting initiative, following weakened demand for uranium globally.
The company currently employs 1 141 staff, 98% of them Namibian citizens.

It is not all doom and gloom, with Duvenhage noting that Rössing Uranium had “an excellent supply of uranium-bearing ore from our openpit, a number of sales contracts running beyond 2017 and also a reliable infrastructure in place, such as water and electricity supply, transport links and excellent standing in the community in which we operate”.

Duvenhage said, while 2013 was a challenging year, it nevertheless “secured our future”.

The uranium industry, he said, experienced tough times “because the uranium price continued to decline globally, putting substantial pressure on our business, even as recently as last week when the price dropped to under $30/lb”.

Nonetheless, Duvenhage praised the “resilience, commitment and creativity” of the Rössing workforce in overcoming the challenges during the past year and said: “We have made it through tough times in the past only because our employees accept and rise to the challenge.”
He added that the company’s “productivity improved significantly, [with the company saving] more than N$300-million in a wide range of cost-reduction activities across the mine”.

The mine produced 2 409 t of uranium oxide, down from 2 699 t in 2012. Duvenhage explained that this accounted for abut 3.4% of world production.

While there were improvements in uranium production and unit costs, however, the impact of lower prices strained the cash flow. Despite this, Duvenhage said, Rössing was able to report a net profit of N$32-million, after losses in 2010, 2011 and 2012.

“Our turnover in 2013 was N$2,96-billion, up from N$2,88-billion in 2012,” he added.

Duvenhage noted that the challenge remained to position the company to “withstand short- and medium economic challenges”, and that this had become the daily business driving force of the operation and “the pressure remains to drive operating costs to remain competitive”.

Rössing remains a big spender in Namibia. In 2013, the company spent close to the equivalent of R2-billion on goods and services, generated R83-million in royalty payments and R143-million in personal income tax payments, and R289-million in payments to State-owned enterprises. The company also paid R783-million in wages.

Despite its economic challenges, the company continued to show commitment to its corporate social responsibility programmes, and spent R131-million in social investment programmes.

Duvenhage concluded that the company would continue to work through the host of challenges it was facing and was confident Rössing would “continue to be profitable and continue to be a major supplier of energy to the world, as well as to deliver value to our shareholders and other stakeholders”.