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 The 1973 OPEC oil embargo changed that. France embraced nuclear
power to free itself from reliance on foreign oil and overnight this
remote corner of Africa became crucial to its national interests.
Arlit has grown into a sprawling settlement of 117,000 people, while
France now depends on nuclear power for three-quarters of its
electricity, making it more reliant on uranium than any country on
earth.
Niger has become the world's fourth-largest producer of the ore
after Kazakhstan, Canada and Australia.
But uranium has not enriched Niger. The former French colony remains
one of the poorest countries on earth. More than 60 percent of its
17 million people survive on less than $1 a day.
Arlit is a dusty and neglected place, scoured by desert sandstorms
and barely touched by the mineral wealth it ships off to Europe each
year. "There are neighborhoods which go without water for three
weeks at a time," said Deputy Mayor Hassan Hamani. "There are
schools where the pupils have to sit on the floor or study in straw
huts."
Now Niger's government is demanding a better deal from Paris, and
specifically from state-owned nuclear company Areva. The two sides
began talking more than a year ago but failed to clinch an agreement
before Areva's 10-year mining contracts expired on December 31.
Areva suspended production at its two sites in Niger in
mid-December: the open-cut Somair mine at Arlit and giant
underground Cominak pit nearby. The company says the closure was for
maintenance but Synamin, a union that represents mining workers,
called it a negotiating tactic. Production resumed at the start of
February.
Areva and Niger's just-expired agreements have never been made
public. But Reuters has reviewed documents which reveal that Areva's
mines pay no export duties on uranium, no taxes on materials and
equipment used in mining operations, and a royalty of just 5.5
percent on the uranium they produce. A spokesman for Areva declined
to confirm the authenticity of the documents and did not comment on
their contents.
Niger's President Mahamadou Issoufou says the deals are a throwback
to the post-colonial era, when France played a dominant role in the
economies of its former African territories. His government wants to
cut the tax breaks and raise the royalty rate its largest source
of income from the mines to as much as 12 percent.
That would be more than the 5 percent charged by most Australian
states, but bring Niger into line with the 13 percent charged by
Canada's uranium-producing province of Saskatchewan over the past
decade. In Kazakhstan, the official rate is 18.5 percent. Areva
produces uranium in both Canada and Kazakhstan but would not detail
the royalties it pays in those countries. (It explores for uranium
in Australia but does not mine it there).
Mining Minister Omar Hamidou Tchiana, leading the negotiations for
Niger, told Reuters the government wants to increase uranium
revenues to at least 20 percent of the budget, from just 5 percent
at present.
"For 40 years, Niger has been one of the world's largest uranium
producers, but it's still one of the poorest countries on the
planet," he said. "At the same time, Areva has grown to be one of
the world's largest companies. You see the contrast?"
Areva, which produced nearly one fifth of the world's uranium in
2012, says a higher royalty rate would make its business in Niger
unprofitable.
With uranium prices down about 70 percent from their peak in 2007, a
diplomatic source in Paris said Areva would not agree to a big
increase in what it pays Niger. "Niger needs to take into account
that Areva is not in great financial health and that the uranium
price is low and not about to increase anytime soon," said the
source.
TAX BREAKS
A new deal is important for Areva, but vital for Niger.
With global revenues of 9.3 billion euros ($12.56 billion)in 2013,
the French firm is almost twice as big as Niger's entire economy
according to the IMF. Loss-making and with net debts of nearly 4
billion euros, it is still Niger's biggest private employer and its
largest exporter.
Areva does not provide a profit breakdown for its operations in
Niger but says its current deal with the country is fair. It says
that over the past 40 years Niger has received around 80 percent of
direct benefits' taxes and dividends from its two uranium
mines, with Areva taking the rest.
It estimates that its mines paid a total of 82 million euros to
Niger in dividends and taxes in 2011, and 123 million euros in 2012.
However, the Extractive Industries Transparency Initiative (EITI), a
global coalition of governments, including Niger's, and of companies
seeking to improve the accountability of natural resource revenues,
estimates Areva's mines paid a total of 66.3 million euros to Niger
in 2011. 2012 figures are not yet available.
The latest contracts show Areva received a range of tax breaks and
benefits in Niger, some of which were standard under Niger's 1999
mining law. Signed on November 9, 2001 and effective for 10 years
from January 1 2004, the contracts state that Areva was:
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Exempt from any export duties on its uranium production.
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Exempt from all entry taxes, customs duties and value-added
tax, on materials, equipment, machines, parts and petroleum products used in
mining operations, including everything from sulfur and other chemicals used
to process ore, vehicles, and even protective clothing.
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Protected by a stability clause so that an increase in
royalties tax under a new 2006 mining law did not affect them.
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Protected so that if another uranium miner negotiated better
terms, Areva would automatically benefit from the same conditions.
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Guaranteed that any audit of the mines ordered by Niger will
remain strictly confidential.
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Granted an exoneration of up to 20 percent of corporate
income tax to help fund future prospecting.
Areva held a monopoly over uranium mining in Niger until 2007. Its
sole competitor, Somina, a joint venture between the government and
the overseas arm of the China National Nuclear Corporation, was
launched a year after the introduction of a 2006 mining law that
sharply reduces tax breaks.
Mining Minister Tchiana said Areva's tax breaks cost the government
23 million to 30 million euros a year in potential tax revenue, and
any new contracts will have to adhere to the 2006 law.
The Areva spokesman said the tax breaks were important to encourage
research and development in the mining sector and to allow its mines
to continue production despite depressed uranium prices and rising
production costs. He said the mining companies pay the standard
corporate tax rate of 30 percent.
Unions in Niger and transparency campaigners say Areva has also
become more aggressive about minimizing its profit and thus its
tax bill in the country in the past few years.
A confidential Niger Mining Ministry document seen by Reuters shows
production costs at the Somair mine doubling in just five years,
from 19,783 CFA francs ($40.75) per kilogram in 2006 to 40,146 CFA
francs per kg in 2011. At Cominak, costs per kg rose from 27,277 CFA
francs to 45,603 in 2010, the undated document showed.
"Our objective is to lower these production costs so that Niger can
profit more," said Minister Tchiana, adding that the government had
commissioned an independent audit of Areva's Niger operations. The
report, by Netherlands-based consultancy BearingPoint, has not been
made public.
Areva strongly denies artificially hiking costs. It says higher
charges are due to the complex technical characteristics of new ore
deposits that have helped increase production by one-third in the
last five years, as well as to a rise in the cost of fuel for
vehicles and machinery and of sulfuric acid used to process uranium.
[to top of second column] |
"THE EXPECTATIONS OF THE PEOPLE"
At the Somair mine outside Arlit, lumbering yellow trucks work round
the clock hauling grey-green ore from the bottom of vast
100-metre-deep pits. The ore ends up in a processing plant where it
is turned into yellowcake. At night, stadium lights illuminate the
pitch-black of the desert, while the metallic clanging of the
plant's grinder cuts the silence.
The just-expired contracts state that Areva would provide
electricity and water to Arlit and help maintain the road linking it
to the town of Tahoka, more than 300 miles to the south. Yet the
road is all but impassable for long stretches, forcing trucks to
drive in the desert sands, where some wrecks lie rusting. Areva says
it has given 1 percent of the revenues from its mines annually to a
government body responsible for maintaining the road, meeting the
terms of its contract.
By night, much of the town is in darkness. An Areva water tower does
supply the town, though residents who are not entitled to free
water or power under the terms of Areva's contract pay the state
water company.
Some in Arlit feel angry that the mine has not brought greater
prosperity. Around 2,000 mine employees live in neat estates, with a
clubhouse and restaurants. The rest of the city is dirt-poor, with
unpaved streets and ramshackle mud-brick homes.
Officials and NGOs often point to high levels of corruption as a
reason for poor delivery of services. Local governments which
benefit from a 15 percent share of the royalties tax under the 2006
mining law complain that payments are more than two years overdue.
Local officials say the mining companies pay the royalties to the
central government every month, and the delays are Niamey's
responsibility.
Mining Minister Tchiana declined to comment on this, saying it was a
finance ministry issue. A spokesman for the ministry did not respond
to requests for comment.
Niger has a turbulent political history marked by rivalries and
coups, and even though Issoufou's government has made progress in
tackling corruption, the country still ranks 106th out of 177
countries in Transparency International's annual corruption
perceptions index.
Still, Rhissa Feltou, mayor of the regional capital Agadez, says
Areva's two mines do too little for development in the north.
"These companies are not paying enough in tax," said Feltou. "We are
bitter about the presence of extractive industries here ... Mining
is not responding to the expectations of the people."
In his office in Niamey, Niger's capital, Minister Tchiana said the
country's 2010 Constitution stated that extractive industries must
be transparent and serve the interests of the country. "Instead of
mountains of waste in Arlit, we want buildings, homes, hospitals and
investment," he said. "After more than 40 years Areva has not even
built a headquarters in Niger."
The firm says it does plenty, spending 6 million euros a year on
health and economic development projects in Niger. There is no
public hospital, but the mines allow residents access to their
clinics free of charge. Areva has also built and renovated local
schools.
"We contribute directly through the jobs we are creating and we
generate taxes for the state budget. This is our contribution, but
we cannot do everything," Areva chief executive Luc Oursel told
Reuters.
"THE POWER OF FRANCE"
One key sticking point is how to calculate the official price of
uranium. That is used as a basis for all royalties, taxes and
profits and Niger wants to set it as high as possible.
For the past two years the agreed price has been 73,000 CFA francs
($150) a kg, nearly double the current spot price of around $80.
Areva wants the new deal to be based on a formula using spot market
and long-term contract prices, rather than political negotiations,
according to the leaked minutes of a 2012 meeting signed by both
sides. The price would change depending on the spot price on world
markets, according to the minutes, which say this is Areva's
proposal. Areva has not confirmed the authenticity of the document.
Niamey does seem to have had some success in squeezing extra money
from Areva. The minutes of the meeting show that Areva agreed to pay
Niger an extra 35 million euros over three years from 2013 in
compensation for delays to a giant uranium mine it is building at
Imouraren in northern Niger.
President Issoufou insists that mine, which will provide thousands
of new jobs, must start production before he runs for re-election in
2016.
Areva's Wantz said publicly in March that the fee was to pay for
security even though the current contract says the safety of the
mines is Niger's responsibility.
Security is certainly a big concern. Seven people connected with a
Somair project were kidnapped in 2010 by al Qaeda's local wing,
though all have since been released. In May, the Somair mine was
attacked by al Qaeda-linked suicide bombers, and the region is now
crawling with military.
Some European contractors have pulled out altogether and northern
Niger is considered a no-go zone for Europeans. The Islamist threat
has placed a huge strain on Niger's budget, upping the stakes in the
talks.
"We need to control the north of Niger more and, for that, we need
infrastructure for which we must be aided by our international
partners," Foreign Minister Mohamed Bazoum told Reuters.
The question for Issoufou is how hard he pushes President Francois
Hollande on a new deal. Trained in France as a mining engineer,
Niger's president is a longtime democracy activist who has known
Hollande since their days in the Socialist International together.
Issoufou even worked for Areva at one of the mines between 1985 and
1992, including as Secretary General.
Issoufou started pushing for a better price for Niger's uranium
almost as soon as he was elected in 2011. But despite what the
French diplomatic source describes as a "relationship of trust"
between Issoufou and Hollande, Niger's new demands have raised
hackles in Paris.
"The climate that has developed between the two parties is not very
good," the diplomat said.
Issoufou said in December that the talks were progressing "normally"
but has suggested Niger may turn to other countries he did not say
which to help extract its mineral wealth. The contract
negotiations are front page news in Niger and there have been
strikes and demonstrations against Areva.
A glance at Niger's budget explains why it matters. Western aid
accounts for nearly 40 percent of the state budget, much of it from
France; as a percentage of GDP, Niger's tax revenues are the lowest
in West Africa according to the IMF.
"Today Niger is faced with the power of France. Niger is not
negotiating with a company," said Ali Idrissa, head of ROTAB, the
local arm of transparency campaigner Publish What You Pay.
Areva is prepared to play hardball. The firm threatened to shut
production at Somair in October after Niger failed to find a buyer
for its small share of 2013 production. ($1 = 0.7402 euros) ($1 =
485.5160 CFA francs)
(Flynn reported from Arlit, de Clercq
from Paris; edited by Simon Robinson and Sara Ledwith)
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