China’s Way to Namibia’s Uranium Is Through Russian Diamonds

THE news released by information agencies about China’s readiness to buy a large amount of rough diamonds from Russia in 2009 and purchase virtually all ALROSA’s output assortment in 2010 creates a sudden intrigue and may have a pivotal impact on forecasts for the global rough diamond market.

The excuse for such a decision is evidently found in the political sphere – it is quite clear that without state assistance Western Yakutia may face quite real problems as soon as this autumn.

Why would China need such a purchase? Undoubtedly, among the countries that happen to be consumers of rough diamonds, China looks best.

In 2008, only online jewelry sales in China surpassed US$1.7 billion, while the annual turnover of the Chinese jewelry industry reaches about US$17 billion.

This success is particularly impressive on the background of decreased activity on the traditional trading floors – in Israel, Belgium and the United States.

If China really intends to purchase all the stocks from ALROSA (and maybe those of Gokhran) as well as buy all the Russian company’s output in 2010, such a deal cannot be explained by a growing domestic consumption of diamond jewelry in China and export breakthroughs of Chinese diamond cutters. Still, there is one explanation.

China is the largest importer of energy products and without imported oil, coal and uranium its economy may turn inexistent.

Since then the Chinese have significantly advanced in purchasing mining assets, but the resistance is growing and the scramble is less and less looking like using economic methods.

China’s own proved uranium reserves do not exceed 1.5% of the global amount, while its annual output reaching about 850 tons is not sufficient to cover all the current needs.

To make the vast nuclear industry under construction work without a hitch China needs control over appropriate amount of uranium minefields, which is utterly difficult to attain.

Uranium mining leaders are Australia, Canada and Kazakhstan, which account for 45% of the world uranium reserves. China buys from these three countries, but only in Kazakhstan it managed to get a share in the joint ventures to develop uranium deposits, which makes it possible to view Kazakhstan as a reliable source of uranium for China.

For the countries of the British Commonwealth the political aspect of interaction with China appears pace-setting and to acquire at least blocking stakes in the companies developing the Canadian and Australian uranium deposits seems unrealistic for China.

In 2009, Namibia occupied the fourth place on the global uranium market. This country has three very large uranium deposits capable to supply 10% of the world’s uranium output: Rössing developed by Rössing Uranium Ltd, a subsidiary of Rio Tinto (68,6%); Langer Heinrich owned by Paladin Resources Ltd; and Trekkopje.

China is extremely active in the uranium segment of Namibia. In august 2008, China signed a contract to supply uranium from the Rössing Minefield and two months later Guangdong Nuclear Power Corporation, a Chinese company, tied up a contract with Areva for purchasing a 35-percent stake in the Trekkopje Project.

by Sergey Goryainov