Uranium mining companies are operating in difficult environments in many jurisdictions, facing challenges ranging from regulatory compliance, environmental delays, rising costs, and labor relations. Over the last year, the labor challenges seem to have become more accentuated for African uranium mining companies, with several companies having reporting strikes.
Political context in Malawi
Workers at Paladin Energy Ltd.‘s (TSX:PDN,ASX:PDN) Kayelekera mine in Malawi demanded a 66 percent wage increase last week, following the country’s move to devalue its currency by 50 percent by depegging from the dollar. The devaluation of Malawi’s currency was designed to improve relations with the International Monetary Fund, boost tobacco exports – which account for around 60 percent of the country’s foreign currency earnings – and reduce demand for imports. The uranium plant is expected to operate at about 65 percent capacity until striking employees return to work; Paladin seems confident that the strike will not last long, having said it “remains confident of early resolution of this dispute, which essentially involves national rather than workplace-related issues.”
Namibia labor problems
Last August, Paladin experienced a strike at its much larger Langer Heinrich uranium mine in Namibia. While the Kayelekera mine represented approximately 1.3 percent of global uranium production last year, the Langer Heinrich operation produced 2.7 percent. The Namibian strike was initiated by the local workforce due to grievances related to impending layoffs.
In July 2011, Rio Tinto (LSE:RIO,NYSE:RIO,ASX:RIO) faced strike activity at its Rossing mine in Namibia after workers rejected an offer from management over production incentives. These issues were settled last October, and the Rossing mine is presently the seventh-largest uranium mine in the world, responsible for approximately three percent of global production last year.
Working conditions in Niger
Last month AREVA SA (EPA:AREVA) had union and labor relations problems at its Imouraren uranium mining project in Niger. A week-long strike resulted from a dispute with management over work conditions, including annual vacation allotments. The company was expecting this project to begin production of 5,000 tonnes of uranium annually within two years. When completed, it will make Niger the world’s second-biggest global uranium producer.
Last December AREVA was pressured by advocacy groups to observe the health of thousands of workers and residents exposed to its uranium mine sites in Niger.
Impact on broader uranium exploration interests and prices
The news related to both Namibia and Niger is potentially of the most interest as the countries host several significant uranium mines. Combined, they provided 16.5 percent of global uranium mining output last year, and they boast some of Africa’s highest-grade uranium ore. Conflicts with unions and management may have even larger impacts in the future, as global demand for uranium appears to be expanding, particularly in Niger. If labor disputes become more prominent and extend to all operators within these jurisdictions, global uranium supply will inevitably be impacted. Additional operating costs for producers and any additional supply constraints will inflate spot market uranium and future contract price appreciation.
Securities Disclosure: I, Dave Brown, hold no direct investment interest in any company mentioned in this article.
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