Ground Breakers: Rio’s uranium clean-up bill is getting out of hand and Sandfire closes MATSA deal
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Between getting its iron ore mines back on a growth track, labour shortages, fixing its broken workplace culture, decarbonisation, heritage and ESG issues, Jadar and Oyu Tolgoi, Rio Tinto (ASX:RIO) has plenty of Brussels sprouts to clear off its plate before it can eat dessert.
Add to those now a major cost blowout at its listed uranium subsidiary Energy Resources of Australia (ASX:ERA).
ERA was the operator of the Ranger uranium mine in the Northern Territory near the World Heritage listed Kakadu National Park where it mined the nuclear fuel for 31 years and processed it for 40 between 1981 and January 2021.
It now has until January 2026 to clean up the joint and restore it to a state similar to that of the adjacent Kakadu.
That ain’t happening. Previously scheduled to cost $973 million, the revised cost of the spend dating back to January 2019 is now $1.6-2.2 billion, and rehab isn’t going to be complete until between the fourth quarter of 2027 and December 2028.
ERA needs an amendment to an actual act of parliament, the Atomic Energy Act 1953, to extend that deadline.
ERA warned further changes to the cost and project schedule could emerge later, but said they are expected to fall in the re-forecast range.
It will need to review its rehab provision, with $699 million in cash funding as of December 31, with the Commonwealth Government also holding $125 million in bank guarantees.
In a statement Rio said it is committed to working with ERA to complete the rehabilitation.
Sandfire Resources (ASX:SFR) is officially the owner of MATSA copper complex in Spain, capping its transition from an Australian mid-tier to a global producer of the red metal.
The deal comes as copper remains near historic highs at upwards of US$9500/t, amid expectations burgeoning green demand will keep support for the commodity high in the decade to come.
The 100,000tpa operation, which includes a 4.7Mtpa central processing facility surrounded by three underground mines, will become the cornerstone of Sandfire’s business over the next decade and potentially more.
While it has an initial mine life of 12 years based on known reserves and resources which can be converted, Sandfire boss Karl Simich has been open in his belief additional resources around the MATSA project could establish a mine life of 20 years or more.
The closure of the $2.6 billion deal, which Simich travelled to Spain last week to complete, comes as its flagship DeGrussa mine in WA enters its final nine months as an economic mine barring a major new discovery.
“Today marks the beginning of an exciting new era for Sandfire, with our business expanding to an organisation with a workforce of around 3,800 direct employees and contractors around the globe,” Simich said.
“This is an incredibly exciting moment for everyone involved with our business, and I would like to take this opportunity to thank everyone who has worked so hard to bring this transaction to a conclusion.
“Our vision for Sandfire is to become an international diversified and sustainable mining company, and the completion of this transaction represents a major step closer to realising this aspiration.
“With the acquisition of MATSA, Sandfire immediately becomes one of the largest copper-focused producers on the ASX, with high-quality operations in Spain and Australia and an impressive growth pipeline and exploration portfolio that we believe will continue to drive our growth for many years to come.”
Sandfire also owns the Motheo copper-silver project in Botswana, where first production is due next year.