UPDATE 3-Areva signs uranium deal with Niger, delays new mine

Mon May 26, 2014 11:58pm BST

Quotes

   

* Areva says Imouraren mine to start when prices rise

* Agrees to new production deal at existing two mines

* Mines under 2006 law that cut exemptions, upped royalties

* Areva to spend 90 mln euros on new road to mining town (Adds quote from mines minister)

By Abdoulaye Massalaki

NIAMEY, May 26 (Reuters) - French nuclear group Areva agreed to a reduction in tax breaks and a rise in royalty rates at its uranium mines in Niger on Monday but said the start of production at its giant new Imouraren mine would be delayed until prices improve.

Under the terms of a long-awaited deal to renew its production agreements in Niger, the state-owned French company also agreed to pay 90 million euros ($123 million) to rebuild the road to its mines in the northern town of Arlit and to invest 17 million euros in a local development project.

Acceding to pressure from President Mahamadou Issoufou's government, Areva pledged to build a new headquarters for its mining operations in the capital Niamey at a cost of 10 million euros. It also committed to naming Niger nationals at the head of its two mines in the country - Somair and Cominak - by 2014 and 2016 respectively.

Areva and Niger have been locked in talks for two years but failed to reach a deal before the previous 10-year production agreement expired on Dec. 31, requiring its temporary extension.

Niger, the world's fourth-largest uranium producer and one of the world's poorest countries, won its battle to extract higher tax payments from the French group under the terms of a 2006 mining law that reduces exemptions and raises royalties rates.

Under the new deal, which lasts for five years, Areva's rate of mining royalties - a tax based on the market value of the minerals produced - will rise from a current level of 5.5 percent to as high as 12 percent depending on profitability, under the terms of the 2006 law.

Areva had long argued this would make its mines in the West African country unprofitable. Somair and Cominak together produce more than 4,000 tonnes of uranium a year.

"The two parties will take the necessary steps to ensure the economic and financial profitability of these companies and to safeguard employment," read a joint press statement issued after the signing.

REASONABLE DECISION

Areva's Imouraren mine, which would more than double Niger's output of uranium to around 9,000 tonnes a year, had been scheduled to start production at the end of next year after a series of delays linked to security concerns in northern Niger.

President Issoufou had been keen for the mine to start production before he seeks re-election in 2016, but Monday's agreement recognised that the mine was not profitable at current uranium prices. Niger and Areva will create a strategic committee to decide on a timetable for its start up according to market conditions, it said.

"We're going to follow the evolution of the market with the objective of restarting Imouraren by Jan. 1, 2017 at the latest, as soon as the world price allows it," Mines Minister Omar Hamidou Tchiana later said on state television.

The March 2011 meltdown at Japan's Fukushima atomic plant triggered a slump in uranium prices, which have struggled to recover ever since.

"Our decision on Imouraren is a reasonable one," Areva CEO Luc Oursel told a news conference. "In the current context, neither Areva nor Niger are interested in dumping uranium on the market that would not find a buyer."

France depends on nuclear power for three-quarters of its electricity supply - the highest ratio in the world.

According to an industry source, Niger accounted for around one fifth of the uranium supply to France's nuclear reactors last year, though this figure should decline to around 10 percent this year as Areva and EDF diversify supplies.

($1 = 0.7336 Euros) (Additional reporting by Geert de Clercq; Writing by Daniel Flynn; Editing by Diadie Ba, Pravin Char, Mark Potter and Lisa Shumaker)