The suspended Kayelekera uranium mine—in Karonga earned Malawi $40.4 million (about K17 billion) in 2014, a sharp drop from $169.9 million (about K73 billion) in 2013 represents 320 percent drop, Business News has learnt.
The drop in the earnings from Malawi’s biggest mining investment—worth $600 million (about K260 billion)— is a big blow to Malawi’s efforts to diversify the economic base and composition of the export buffer, currently dominated by tobacco foreign currency.
Operations at the mine ceased in February 2014 when the miner placed the mine on care and maintenance following plummeting of global uranium prices on the international market.
Paladin Energy Limited is keeping its fingers crossed to see uranium price rebound from around $30 per pound to a range of between $70 and $75 per pound.
Uranium was trading at $ 110 per pound when the mining license to develop the Kayelekera site was granted in 2007.
Later in May, 2014, Paladin ceased the uranium ore exports to the international market.
And by the time mining ceased at Kayelekera in February 2014, uranium was trading at just $36, according to our Internet search yesterday.
“The performance of this sub-sector suffered from weakening international demand for uranium ore, exacerbated by the lack of low cost and reliable grid electricity at Kayelekera, which resulted in production becoming uneconomical,” according to a World Bank latest report.
The bank, through its blue-print called Economic Monitor, says the global slump in uranium prices means that production is unlikely to resume in the immediate future.
Malawi government awarded the Australian firm, Paladin, a mining license in April 2007 to exploit uranium deposits at the Kayelekera site .The move raised hopes that mining might facilitate the process of diversification.
According to World Bank, the volume of production from the mine reached 1 134 tons in 2013, with the annual value of exports of uranium ore peaking at $170 million in 2013, accounting for 11.6 percent of the total value of exports.
“With this move [closure of the mine], it seems that the hopes for uranium to become a key export commodity for Malawi must be put on hold per pound,” reads the report.
The bank says the feasibility study on the mine assumed a minimum price of $60 per pound throughout the productive life of the mine.
By the time the mine was commissioned in January 2009, the report says prices had already halved to $51 per pound, with global supply exceeding the weakening level of demand.
“Next, the Tohoku earthquake in Japan and the meltdown at the Fukushima Nuclear Power Plant in March 2011 triggered changes in the level of demand for uranium for civil nuclear power generation across the developed world, which exacerbated the decline in prices.”
It says whether or not the mine at Kayelekera eventually resumes operations will depend primarily on future prospects for global uranium prices, for which the immediate outlook is uncertain.
In an interview yesterday, chairperson for the Malawi Natural Resource Justice Network Kossam Munthali said continued delay by Paladin to resume production confirms the fact that the firm is no longer interested to return to Malawi to pursue further mining.
Said Munthali: “It is a clear symbol that they are no longer interested to resume mining. To us, Paladin has yielded what they wanted. We are not seeing any hope from Paladin and government is just chasing the direction of the wind.”
Recently, Paladin (Africa) Limited resident director Greg Walker said it was encouraging that spot price for uranium has been increasing in recent weeks, but said any consideration of a likely resumption in uranium production at Kayelekera Mine in Karonga was still way below.