Core of the business
Enrico Barbaglia, vice president of Mining in Southern Africa with energy solutions provider AREVA, talks to Jayne Flannery about the challenges of the business.
AREVA is the worldÔÇÖs largest uranium producer. It has a market share of about 15 per cent and is active in four out of the worldÔÇÖs five richest uranium producing countries. The extensive mining interests of AREVA cover exploration, extraction and the processing of uranium ore; and the reclamation of sites after production has finished.
However, Enrico Barbaglia, AREVAÔÇÖs vice president of mining in Southern Africa, is keen to point out that mining is emphatically not what this company is about. ÔÇ£The mining operations of AREVA have to be seen within a global context. Our mining operations in Southern Africa are part of a much bigger nuclear energy chain, or even more precisely, part of a larger energy production chain,ÔÇØ he explains.┬á
The company has a small interest in gold, but extracting uranium is what really matters. This is because uranium feeds the nuclear business of AREVA further down the line. It lies, quite literally, at the core of the business.
After the Mining Business Group has done its work, the front end of the group converts and enriches the uranium and designs the fuel for the nuclear reactors. Other business units deal with reactor design and construction and then there are the activities needed to commission and maintain the reactors. At the back end of the process is de-commissioning and clean-up. Lastly, there is the renewable energy unit that develops wind energy, bio energy, solar and hydrogen power solutions.
Barbaglia explains how this level of vertical integration and involvement in the full energy production cycle has shaped the mining group. ÔÇ£Unlike some mining companies who are only interested in extracting commodities at the lowest possible cost within the most immediate time frame, we take a much longer-term view. What matters most of all is that we can guarantee stability and security of supply throughout the lifetime of the reactors that are commissioned further down the line,ÔÇØ he says.
In response to global concerns about dwindling supplies of fossil fuels and their effect on the environment, as well as geo-political uncertainty, the nuclear industry is enjoying a renaissance. AREVA is circa 90 per cent owned by the French government and almost 80 per cent of FranceÔÇÖs domestic power supply is generated through its 58 nuclear reactors. Now, other energy-hungry countries are considering following suit and sharp spikes are anticipated in demand when a number of long-term nuclear projects finally come to fruition over the next decade. Demand is nothing if not buoyant. However, Barbaglia explains that the market for uranium is highly complex. ÔÇ£Last year was marked by the highest level of speculation we have ever seen. There is a producer and a user in an ideal worldÔÇöintermediaries inevitably have an interest in manipulating the market to their own ends,ÔÇØ he says.
At present, Barbaglia believes many new entrants are creating the illusion that a flood of uranium will hit the market at prices not worth taking out licences for. The hype which surrounds the oil market, he says, pales by comparison. ÔÇ£Hundreds of feasibility studies have been completed, but the vast majority will never see a gram of uranium extracted. Many junior players are more interested in talking up the market than in actual execution,ÔÇØ he says.
Barbaglia is of the opinion that a much more realistic relationship needs to be established between the cost of production and the market price. ÔÇ£The spot price is completely unrealistic at the moment, while the long-term price is generally projected as low. Despite the fact that we have lowered our production costs, it is simply not possible to mine at the long term prices which are being touted on stock markets at the present time.ÔÇØ
He is also keen to stress that for AREVA as a full cycle company, price is only one facet of the equation. Security of supply is everything and this means that geographical diversification is fundamental. As such, AREVA often operates in diverse countries with varying socio-political as well as cultural contexts. However, Barbaglia also points out that AREVAÔÇÖs differentiation allows for the group to adequately cover for both the technical and political difficulties it may face in the various countries in which it operates.
Barbaglia cites AREVA Resources Southern AfricaÔÇÖs relationship with the Namibian government as an example of where AREVA is successfully partnering with the government and relevant stakeholders in the country in order to meet its business objectives as well as the countryÔÇÖs. ÔÇ£Namibia is a very reliable trading partner with transparent business practices and a very high degree of political stability. We know we can make long-term business plans, which is vital for a company like ours.ÔÇØ
In Namibia, AREVA has a large scale emerging uranium project called Trekkopje Mine, in the vicinity of the town of Swakopmund. The Trekkopje deposit is a shallow, high tonnage, low grade uranium deposit hosted by calcretised palaeochannels. After commissioning next year, the Trekkopje Mine, which has a predicted lifespan in the region of 12 years, will process 100,000 tonnes of crushed ore per day.
Barbaglia is keen to stress that creating conditions of economic and environmental sustainability has a special relevance. ÔÇ£As a major industrial player with recognised expertise in the energy sector, it is our responsibility to establish and nurture positive relationships with the government and local institutions wherever we operate.ÔÇØ
For example, in Namibia, AREVA is building a desalination plant close to the planned mine. It is a highly innovative projectÔÇöthe first of its kind in Southern AfricaÔÇöand will have the capacity to produce 20 million cubic metres of potable water per annum. While featuring state-of-the-art technology with screen filtration, ultra filtration, reversed osmosis and chemical treatment, the plant will supply the Trekkopje mine with desalinated water, thus allowing AREVA to preserve NamibiaÔÇÖs water reserves. This project is a concrete illustration of the groupÔÇÖs commitment to environmental responsibility.
ÔÇ£Bringing our plans in Namibia to fruition is a major part of our strategy for the future. We have formed an exploration joint venture with the Namibian government which is working extremely well and we expect to undertake many other projects together,ÔÇØ he concludes.┬á
