SLIDE 1 - Welcome
Members of the Media
It gives me great pleasure to be here today and talk to you about Rössing Uranium, at the time of the launch of our Report to Stakeholders 2018.
I am especially pleased to meet you, as you may know that I joined Rössing Uranium in October 2018. I am very honoured to again join the Rössing team after a short stint at the Rössing mine in 1997 as an engineer.
We have been a feature of the Namibian economy for more than 40 years and therefore I believe that Rössing is well versed in the nation’s mining business and has made significant contributions to the development of Namibia, and we are still moving forward with confidence.
In Working for Namibia, Rössing Uranium continued to make significant contributions to the development of our country in 2018.
SLIDE 2 - Discussion points
For us, transparency is the key to building trust, so we regularly publish our performance results. My discussion with you today is based on information available in our annual report to stakeholders.
I would like to cover the following topics:
- Our view on the long-term sustainability of Rössing Uranium
- Challenging uranium market
- Our business prospects
- Our employees and keeping them safe; and
- Our corporate social investment and the broader contribution of Rössing Uranium to the Namibian economy
SLIDE 3 - Moving forward with confidence
As you know Rössing Uranium is part of the Rio Tinto Group of companies, and Rio Tinto has been a global mining company in operation for more than 140 years.
Over that past few years Rössing Uranium has experienced challenging operating conditions and challenging uranium market conditions.
In November 2018, Rio Tinto, Rössing’s majority shareholder, announced the signature of a binding agreement with China National Uranium Corporation Limited (CNUC) for its shares held in Rössing. It was the culmination of an extensive review of Rio Tinto’s strategic options in relation to Rössing as it continued to focus on its core assets. The transaction is subject to a number of conditions to be met and we expect it to be completed in the first half of this year.
The only condition pending to allow for the completion of the transaction is the approval from the Namibia Competition Commission. All other approvals have been successfully obtained and conditions met pertaining to the agreement.
SLIDE 4 - Moving forward with confidence
Dear members of the media, I want to assure you that the announcement of the sales transaction of the majority shareholding is seen as very positive, giving certainty to the survival of the operation at least until 2025 and potentially extending the mine life beyond that.
The deal will bring an aspect of vertical integration into the Chinese nuclear market and in particular with the strongest player in that market.
SLIDE 5 - Challenging uranium market
Rössing Uranium, one of the longest-operating uranium mines in the world, supplies its material via Rio Tinto to electricity companies located in all four major markets namely North America, Europe/Middle East/Africa, Japan and Asia. Almost all of our production is marketed through long-term contracts with a diverse selection of customers worldwide.
In 2018 Rössing Uranium produced half of the 8.2 per cent uranium produced by Namibia as part the world’s primary production of uranium oxide. This is a significant achievement for both Rössing Uranium and Namibia.
At the end of 2018, uranium prices stood at US$28.82 per pound, up 21 per cent from the end of 2017, but then dropped to US$25.22/lb. The long-term indicator price rose to US$32 per pound, an increase of 3 per cent.
Global inventories remain at record high levels, around 950 million pounds or approximately five years of forward utility requirements.
While demand is expected to grow in the long term, the rate of growth remains uncertain due to its significant reliance on China’s nuclear build plans. In February 2019, China’s government gave preliminary approval for the construction of four new domestically designed reactors, ending a two- year long hiatus from approvals of new reactors.
In short, it is still a very challenging time for the uranium production industry as a whole and not just for Rössing Uranium. All producers will need to keep costs low in an overly-saturated market.
SLIDE 6 - Our business prospects
In 2018 we achieved a lot:
- We increased uranium oxide production by 17 per cent - we produced 2,479 tonnes of uranium oxide compared with 2,110 tonnes in 2017 - this helped us to counter the effects of the lower price on our cash flow.
- Revenue increased by 5 per cent compared to the previous year, due to a combination of higher sales price and more favourable exchange rate.
- Our cost saving initiatives unlocked some N$310 million.
The combination of these three achievements had a positive impact and resulted in a net profit after tax of N$166.5 million compared to the N$1.9 million profit the previous year.
If we achieve our production and cost targets, and with the assistance from our prospective new majority shareholder, our business will remain feasible.
SLIDE 7 - Building the local economy
By sharing information about the value Rössing Uranium adds through its operations and business activities, the mine aims to bring into focus all aspects of the impact the company makes on the economy of the region in which it operates, as well as on the country's economy as a whole.
As a major employer and purchaser of goods and services, we make a significant annual contribution to economic development in the Erongo Region, in particular, and to Namibia at large. Rössing Uranium gives rise to a significant ‘multiplier effect’ — the phenomenon whereby spending by one company creates income for and further spending by others.
Despite the current financial strain under which we operate, Rössing’s total expenditure for goods and services for our operations was N$2.49 billion during 2018. As was the case during the previous reporting year, most of it was with Namibian-registered suppliers, amounting to N$1.9 billion, accounting for 78 per cent of our total procurement expenditure.
We spent N$305 million of total procurement with international suppliers, representing 12 per cent of our procurement expenditure, while we spent N$250 million with South African suppliers, representing 10 per cent of our total expenditure.
The bulk of what we spend in Namibia remains in the Erongo region at 44 per cent and Khomas region at 45 per cent of our total procurement spent.
We remain committed to support Government development initiatives and policy frameworks. During the reporting period, we purchased N$100 million worth of goods and services from historically disadvantaged Namibians and local small- and medium-sized enterprises.
Although Rössing paid no corporate tax in 2018, and I am referring to a recent newspaper article which to our mind was creating an incomplete view about the mining industry’s tax payments, one should always include the value additions that are created by mining companies. In 2018 Rössing’s contribution to Government and related enterprises amounted to N$551 million.
I have highlighted a few of these value additions in this slide and the next slide, but please have a look at our Value Addition statement, reflecting the wealth created through the sale of our uranium oxide production, payments for services to suppliers, taxes to the Namibian Government, payments to employees and the investments made in the communities that are our neighbours.
SLIDE 8 - Creating jobs & training opportunities
Our people are the most important asset of our business. In order to sustain and expand our operations, we need a safe, healthy and engaged workforce.
Aspiring to be an employer of choice, Rössing Uranium provides long-term and rewarding employment by investing in our people throughout their careers.
We believe that through employment creation we are making significant contributions to society and the economy, and contribute positively to our partnerships with local communities and other stakeholders. We recognise the importance of attracting, developing and retaining people with diverse backgrounds in our business and realise the benefits of developing the skills of others.
At Rössing capacity building and development of our people is a critical process aimed at enhancing productivity and organisational performance.
The figures on this slide are testimony to our hard work in our aim to be the employer of choice in Namibia.
SLIDE 9 - Keeping our workforce safe
For Rössing Uranium, the health, safety and well-being of our employees come first. We understand that our operational environment may be hazardous. For this reason, the identification and management of risks is a crucial principle in our business approach.
Our aspirations for 2019 are a fatality-free Rössing Uranium mine with an engaged and empowered workforce. We will continue to improve our safety foundation, as our primary priorities remain to prevent harm to our people and the environment, whilst staying profitable.
We are committed to zero injuries and have put in place rigorous processes to ensure that every employee and contractor finishes his or her work day as safely and as healthy as they were when they reported for work.
On this note I would like to update you about the health study. As you may know a health study commissioned by Rio Tinto on the potential effects of low level occupational radiation exposures on mine workers started in 2015 in cooperation with the Centre for Occupational and Environmental Health at the University of Manchester in the UK.
The collection of data and subsequent analysis was expected to take approximately two years, after which the study will be submitted for publication in the internationally peer-reviewed scientific literature.
Completion date has been delayed and the results are expected mid-2019.
An external advisory committee, consisting of members of the Mineworkers Union of Namibia, the Namibian Uranium Association, the Ministry of Health and Social Services and the Ministry of Mines and Energy, has been appointed to provide community oversight and input to the project.
Kindly visit the Rössing website for regular updates on the health study.
Radiation safety is and continues to be a discipline that employees and the public are deeply emotional about. With the multitude of allegations and stories abounding, it is often difficult for people to differentiate between rumours and facts. It is therefore important to continuously inform both employees and the public about the perceived and actual risks posed by radiation exposures resulting from the mine, and empower them with sufficient information to assess the risks for themselves.
For public information we have launched a series of reports, fact sheets and information pieces on our website, www.rossing.com, under the ‘Reports & Research’ tab.
SLIDE 10 - Protecting the environment
As a resource-intensive industry, Rössing Uranium’s operations impact on natural resources and the environment. For this reason, the mine evaluates, plans and manages such impacts on an ongoing basis and at all stages of its activities. We continually report on our environmental performance in a transparent manner.
Every year, as part of our continuous improvement focus, we set demanding goals for ourselves in protecting the environment in which we operate, and our conservation measures at the mine are taken seriously.
We manage our operational activities to ensure that all impacts, whether on the biophysical or socioeconomic environment, are reduced to acceptable limits. Our operations are governed by applicable national legislative and regulatory frameworks and controlled by way of an integrated HSE management system.
SLIDE 11 - Investing in the community
Rössing is a major player in the Namibian economy, with significant contributions in sourcing of goods and services, taxes, training, development as well as community investment.
In addition we strive to build enduring relationships based on open, respectful, and trustworthy communication, which promote better understanding of our impact on the social and physical environment and ensure a significant contribution to economic and social development.
One key investment in the neighbouring town of Arandis remained a focus area for our community activities, with a major partnership initiative between Rössing, the Rössing Foundation and the Arandis Town Council, was the implementation of the Arandis Roofing Project to the value of N$28 million over a three year period. This is for the removing and replacing of the hazardous asbestos roofing sheets of 823 houses and two primary and secondary schools - we believe this asbestos roof replacing initiative at this scale, is a first for Namibia.
To this end, we align our community and social investment focus with the requirements of Namibia's Mining Charter. The Charter, overseen by the Chamber of Mines of Namibia, is aimed at positively and proactively addressing sustainable and broad-based economic and social transformation in the Namibian mining sector and is grounded in key Government policies such as Vision 2030, the National Development Plan and the Harambee Prosperity Plan.
SLIDE 12 - Closing message
As we work our way through the current challenges of our business environment, I am confident that Rössing will continue to be a major supplier of energy to the world, as well as delivering value to our shareholders and other stakeholders.
Rössing remains a considerable contributor to the Namibian macro-economy.
As a low-grade uranium mine, it will remain at the higher end of the cost curve.
With the uranium market not expected to make a significant recovery in the short to medium term, the reducing contract portfolio will not provide sufficient mitigation for the high unit cost.
The vertical integration into CNNC through its subsidiary CNUC, opens many opportunities for both Rössing and its stakeholders, securing a bright future to which we can go forward with confidence.
I wish to reiterate that the proposed transaction under CNUC offers the best possible future for Rössing building on its strong and proud history and further aims to continue securing employment for Rössing’s employees in the near and long term beyond the original closure plan of 2025.
With these words I proudly commend the Rössing Report to Stakeholders for 2018 to you - which is also available on our website www.rossing.com.
Managing director Rössing Uranium Limited
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Issued by / Enquiries:
Manager: Partnerships, Communication & External Affairs
Rössing Uranium Limited, 28 Hidipo Hamutenya Avenue,
Private Bag 5005, Swakopmund
T: +264 (0)64 520 2288 M: +264 (0)81 6392950