In 2018, we experienced challenging operating conditions, even though we could capitalise on the higher ore grade we currently mine. In our ambition to be the best in the industry, we continuously focus on two areas that we must be best in – safety and productivity. High on our priority list was also the need to contain our operational expenditure in an environment where we have to continue investing in growth and preserve cash to maintain our operations.
Sustaining our business
In 2018, we increased our production with 17 per cent: we produced 2,479 tonnes of drummed uranium oxide compared with the previous year’s production of 2,110 tonnes. However, the total mined tonnes were 24 per cent below our target following a mining slow down to curtail the impact of water supply interruptions. This significantly contributed to below plan milling output of 8 per cent, while full year production was approximately 9 per cent below the target.
Revenue increased by 5 per cent compared with the previous year, due to a combination of a marginally better sales price achieved and a more favourable exchange rate.
Our cost saving initiatives unlocked N$310 million, which mitigated other cost increases from above inflationary utility price increases and imported consumables priced in foreign denominations.
The combination of the above had a positive impact and resulted in a net profit after tax of N$166.5 million (2017: net profit after tax of N$1.9 million) from normal operations.
We will continue to look for ways of improving operating cost efficiencies, reducing capital spend and improving our working capital position.
As a major employer and a purchaser of goods and services, Rössing’s contribution to the economic development in Namibia, and more specifically in the Erongo Region, is significant. In 2018, our total expenditure for goods and services for our operations amounted to N$2.49 billion, of which 78 per cent was spend with Namibian-registered suppliers. The bulk of what we spend in Namibia remains in the Erongo (44 per cent) and Khomas (45 per cent) regions.
Our safety performance in 2018 was disappointing: the mine recorded an All-injury Frequency Rate (AIFR) of 0.83 for the year, against a target of 0.35. However, we had five months with no recordable injuries – an indication that zero harm is possible and achievable.
Sale of shareholding
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 is expected to be completed in the first half of 2019.
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.
Although global uranium oxide inventories remain high, uranium prices witnessed the best performance among commodities last year. This performance was driven by a downward shift in expected supply growth in the medium term and a renewal of investor interest in the market.
The price rise last year was underpinned by a decision of Cameco – one of the world's largest publicly traded uranium companies based in Canada – to suspend production at its McArthur River mine for an indeterminate period of time. In addition, the world’s largest uranium producer, Kazatomprom, announced further reductions to its production growth plans. These two actions sparked renewed investor interest in uranium for its long-term fundamentals.
For the next year, Rössing will have a large exposure to the spot market. However, the potential shareholding sales transaction will facilitate the sale of its production into a vertically integrated off-taker in the Chinese nuclear market. With China being the only country aggressively expanding their nuclear fleet, this is seen as a positive development for the mine.
Going forward, in addition to delivering on our production plan, we will continue our consolidation and cost-saving efforts in 2019 and beyond, along with focusing on maximising our resources. It is imperative that we must maintain a culture of cost discipline, but above else, we must prioritise safety and in all aspects of our business strive to create a safe and caring workplace. It is vital that we consistently engage our people, as good engagement leads to good safety performance.
Therefore, in 2019, our health, safety and environmental improvement plan will focus largely on maintaining effective control of all health, safety, security and environmental critical risks. This improvement plan will take us closer to the goal of zero harm, even in challenging times.
We cannot be complacent if we want to deliver and add real value to our stakeholders and neighbouring communities. Therefore, and as in the past, we endeavour to work smarter and harder, always mindful of working safely, whilst staying committed to making a difference in Namibia.
30 April 2019