Paladin Energy Limited, a dual-listed Australia-based mining group, which closed its Kayelekera Uranium Mine (KM) in Karonga in February, will likely resume mining in 2016, an online publication has reported.
Jason Karaian, writing on Quartz Online publication in an article titled ‘A uranium price collapse has made mining companies radioactive to investors’, says Paladin considers that uranium demand will likely begin to outstrip supply in 2016 and not next year.
“Although Paladin reckons that uranium demand will begin to outstrip supply in 2016, it has also been trimming its price outlook. In March it said the price at which it makes sense to restart its mine in Malawi won’t be reached until 2016,” reads the article in part.
If the mine would resume in 2016 as reported by Karaian, the situation could see mining sector contribution to gross domestic product (GDP) reducing from the current 10 percent.
Prior to mining at KM, the mining sector was contributing less than three percent to GDP, according to official statistics.
On February 7 2014, Paladin announced in a statement that KM would be placed on care and maintenance due to the low uranium price and non-profitability of the operation thereby suspending production in the process.
The decision, according to the company, would preserve the remaining ore body until a sustained price recovery occurs and Paladin determines that production may be resumed on a profitable basis.
Paladin blames the plunge in the market price for the commodity, which has been hovering below $30 per pound, down from a peak of around $140 per pound in 2007.
Business News internet search shows that spot uranium price was reported at $34.50 per pound at the beginning of the 2014 first quarter before rising to $35.75 per pound in mid-February and retreating to $34 per pound by the end of March 2014.
Uranium prices have been thumped by a series of setbacks in recent years, such as the global financial crisis that dented nuclear power demand and the Fukushima nuclear disaster in Japan, which led to the shutdown of that nation’s nuclear power plants and triggered nuclear phase-outs in places such as Germany and Switzerland.
“Paladin is far from alone. As uranium prices have tumbled, others have been feeling the pinch. Indeed, for some 60 percent of global uranium production, the cost of extraction is higher than the market price for the commodity,” said Karaian.
Towards the end of last month, Paladin announced that it had completely stopped uranium production at KM which means ceasing supplying uranium to the global market.
It is estimated that the suspension of uranium production will take 3.3 million pounds of uranium per year off the market.
Local socio-economic commentators have cast fears that the suspension of uranium mining at KM would potentially dampen Malawi’s export growth in 2014 and consequently lower the country’s real GDP growth rate in 2014, considering the significant contribution of mining to Malawi’s GDP.