Hi Jesse: Another article (not too good though)
The Northern Miner Vol. 83 No. 25 August 18, 1997
World Wide and Kazakstani government reach uranium stalemate
By John Cumming
World Wide Minerals (wws-t) has run into major problems in Kazakstan, where the national government has ostensibly cancelled the firm's management contract to operate the Tselinny Gorno-Khimicheskii Kombinat (TGK) uranium project in Stepnogorsk, in the north of the country.
"The government saw no prospects for further co-operation with [this] company,"said Birzhan Madiyev of the Kazakstani finance ministry's state property department. He made the comment Aug. 5 at a news conference covered by Reuter's news agency in Kazakstan.
"The government has chosen to sidestep what the contract says," said Paul Carroll, World Wide chairman, in a conference call on Aug. 6. "It would be tantamount to expropriation.
"The management agreement contains, as any commercial agreement normally does, a default mechanism and a provision for arbitration, if that applies," continued Carroll. "But we didn't go to Kazakstan to get into a lawsuit; we went to Kazakstan to make money in the uranium business. And that, at the moment, is our primary focus."
Under the agreement signed last October, World Wide's 95%-owned subsidiary, KazUran, has been operating the TGK project, which consists of two underground uranium mines and a uranium processing mill. KazUran also holds the rights to the Semisby uranium deposit, which is exploitable by in situ leach methods, as well as an option to buy a 90% equity and 100% voting interest in the TGK project.
Under another agreement, signed with the state uranium agency Kazatomprom, KazUran has the right to enter into a 50-50 joint venture to develop at least three in situ leach-exploitable uranium deposits in the south of the country.
World Wide envisions these deposits as among the lowest-cost uranium producers in the world.
World Wide's original management agreement also states that KazUran is entitled to market internationally all uranium produced or processed at TGK at world prices and to participate freely in the international spot and long-term markets. But the right was always subject to the obligation of obtaining the necessary export licences required to
ensure compliance with international treaties and agreements to which Kazakstan is a party.
Notwithstanding this right, after signing its first sales contract in March 1997 with a U.S. nuclear power utility, KazUran was refused an export licence needed to ship uranium to the U.S. The sales contract lapsed last month.
"We have not been given a satisfactory reason as to why the export licence has not been granted," said James Wade, World Wide's president, during the same conference call. "We suspended operations at TGK on the basis of: If we can't sell what we make, why make it?'" Under the management agreement, KazUran was required to pay some of TGK's accrued and unpaid wage and pension benefit obligations and to provide some working capital. To the end of July, the maximum of
these payments should have been no more than US$12 million. Additional working capital was to have been provided from the processing of stockpiled uranium ore and the sale of uranium concentrates. The sale to the U.S. utility was part of the plan.
$23-m investment World Wide says its direct and indirect investment in the TGK project to date has been about US$23 million. The direct portion is about US$17 million, including some coal supplier credits arranged by KazUran for TGK. The direct portion of the investment has been made by way of an interest-bearing demand loan, which is secured by a mortgage granted by the Republic of Kazakstan on all TGK's assets, including the mining licences, mine infrastructure, uranium processing mill, TGK power plant and fertilizer plant.
"The government presented to us a table, unsigned and undated, in which they demanded we meet certain commitments by July 25, one of which was that we pay about US$1.3 million for two months' back wages and salaries," said Wade. "We stood our ground, saying we would not do that. July 25th rolled around, and we did not make a payment. On July 26, they made the payments to the workers.
When they spoke to us on the 19th, they told us that if we didn't make a payment on the 25th, they'd make a payment on the 26th and then cancel the contract.
"Our position has not changed," continued Wade. "We're prepared to go forward, but we have to negotiate."
The firm is still trying to raise additional financing for the Kazakstani projects, and continues to market Kazakstani uranium internationally. "This turn of events is not helping that," noted Carroll.
Meanwhile, World Wide is reactivating the Dornod uranium mine in Mongolia (T.N.M., July 7/97). The mine will be brought into operation at an initial annual production rate of 800,000 lb. of U3O8. Initial deliveries will be made in January 1998 under sales contracts with U.S. utilities totalling some US$45 million. |
