Gupta uranium mine tour goes with a bang

WITH half a dozen bodyguards, big black vehicles and journalists in a helicopter gallivanting around, it is clear this is no ordinary mine visit — as the politically connected Gupta family show off their uranium mine outside Klerksdorp.

Varun Gupta, nephew of Atul Gupta, took over as CEO of Shiva Uranium from George van der Merwe about a month ago and decided to show the media around what could be one of the biggest uranium mines in the world, with the highest yield.

Shiva is the key asset of the group’s listed vehicle, Oakbay Resources & Energy, which owns the fifth-largest uranium ore body in the world.

Uranium powers nuclear reactors. Last month, President Jacob Zuma said South Africa’s nuclear power planning process was at an “advanced stage” and that the multibillion-dollar tender process should be completed by the end of this financial year.

The Zuma family have close ties with the Guptas, with twins Duduzane and Duduzile Zuma most notably taking seats on several Gupta businesses.

South Africa intends to build a nuclear fleet that could generate 9 600 megawatts of power at an estimated price tag of R1-trillion, with the first set of reactors coming online in 2023.

That could open up a world of opportunity for uranium producers.

But Varun, who looks more like a rock star than a mining CEO, said the nuclear fleet was “far off”. Shiva was ready to start operations in about 18 to 24 months from the time they “press go”.

Shiva Uranium has built one of only seven reverse-pressure leaching plants in the world that can deliver up to 92% in yields, with a replacement cost of between R1-billion and R1.5billion. “This is what makes us different to the other producers,” said Varun.

The gold being produced as a byproduct of uranium mining would discount Shiva’s production cost of uranium to only $20 a pound, he said. This would make the company one of the lowest-cost producers in the world and, with demand set to outstrip supply as early as 2018, there is a lot of cash to be made even without South Africa’s nuclear build programme.

The uranium price has been falling from prices above $70/lb at the start of 2011 to as low as $27/lb. The price was hammered most when three nuclear reactors in Japan were left in meltdown by an earthquake and tsunami. However, interest in nuclear reactors, viewed as “cleaner” than coal power stations, has picked up and uranium is trading close to $37/lb.

Japan will reintroduce its nuclear reactors by year-end and there are between 45 and 75 reactors being built around the world, including in Russia, China, Europe and the US.

As the Shiva uranium mines undergo development and build stockpiles, Varun said the price would bounce back to about $70/lb within the next two years — in line with analysts’ predictions.

Varun said Shiva had no offtake agreement for its uranium, but was in negotiations with a couple of parties.

He said the group was extremely “upbeat” about uranium and Shiva as a company.

And he is not alone. Oakbay Resources & Energy listed in November last year at R10.08 a share. On May 15, the share was trading at R11.15 and shot up to R50 a share in less than three days. The price has since tapered down and the share is trading at R30.

To get the mine to full production, Varun and his team need to raise about R800-million. The company did not conduct an initial public offering when it listed, but financial director Trevor Scott said it would consider undergoing a capital-raising exercise in the coming months.

A cloud of dust rises into the air as the company blasts open a gold mine that it has discovered on the site, and brings one to the realisation that the Gupta family — however flashily or differently they do things — might just have a solid uranium business in hand.