The riddle of how French nuclear giant Areva blew 2 bln euros in mining meltdown

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When French publicly-owned nuclear giant Areva bought Canadian mining company UraMin in 2007, it boasted of having secured major uranium deposits in Africa. But five years on, no uranium has ever been mined there, and Areva has had to write off nearly 2 billion euros in its accounts. Here, Martine Orange investigates the roots of the fiasco and attempts to cover up what promises to become a major industrial scandal, along with the intrigue surrounding the company's sacked and furious CEO Anne Lauvergeon (pictured).

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When French publicly-owned nuclear giant Areva bought Canadian mining company UraMin in 2007, it boasted of having secured significant uranium deposits in Africa. But five years on, no uranium has ever been mined there, and Areva has had to write off nearly 2 billion euros in its accounts. Here, Martine Orange investigates the fiasco and the attempts to cover up what promises to become a major industrial scandal, along with the intrigue surrounding the company's sacked and furious CEO Anne Lauvergeon.

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Areva, the French state-owned nuclear firm, bought UraMin, a Canadian mining company which owned uranium deposits in Africa, amid much fanfare in 2007, paying 2.5 billion dollars, or some 1.8 billion euros.

But last year it had to mark down the value of UraMin’s uranium deposits to the tune of 426 million euros in its 2010 accounts. Then in December, Areva’s new CEO, Luc Oursel, 55, announced that they would be depreciated further, this time by a massive 1.5 billion euros.

Oursel replaced Anne Lauvergeon, who ran Areva for ten years, after the government refused to renew her mandate last June.

Following this latest write-down, UraMin, since re-named Areva Resources Southern Africa, is worth just 400 million euros in Areva’s balance sheet, a little over a fifth of its purchase price. "Areva bought thin air," commented a former executive of the company.

 © Reuters © Reuters
Besides the disappearance of almost 2 billion euros in write-downs, Areva’s finances are floundering because of costs due to delays in building an EPR, a new design of nuclear reactor, for Finland, and charges for plant closures prompted by safety concerns in the wake of the nuclear disaster at Japan’s Fukushima Daiichi plant last year.
As a result, Areva said on December 12th, it expects to report an operating loss for 2012 of 1.4 billion to 1.6 billion euros.

The cost cuts planned to remedy its losses are to be made after years of lavish spending during which the group already sold the bulk of its non-core assets. Thousands of jobs are on the line and sites could be closed.

The government will have no choice but to play its role as Areva’s main shareholder. An injection of fresh capital of at least a billion euros, perhaps more, seems inevitable – a hefty sum when the government is scrambling to raise cash from sources as diverse as taxing fizzy drinks or cutting benefits for industrial accidents to reduce its gaping budget deficit.
Since Areva’s announcement, business and political circles have been alive with speculation over how the jewel of France’s nuclear industry came to this sorry point. The affair has shades of the Great Oil Sniffer Hoax, in which oil company Elf Aquitaine lost millions in the late 1970s backing a system for detecting oil under the sea which turned out to be a scam. It was covered up by the government of then-President Valéry Giscard d’Estaing.

Lauvergeon, 55, has herself added grist to the mill. Last year she filed a lawsuit alleging violation of professional secrets and infringement of privacy after the investigative weekly Le Canard Enchaîné revealed that she and her husband, Olivier Fric, had been subjected to illegal phone tapping during a private investigation last September of Areva’s UraMin takeover.

She took the hostilities to a new level on January 11th, announcing that she had obtained a fast-track court hearing for February 3rd claiming a 1.5 million euro severance payment, despite the fact that she had said on leaving Areva that she gave up any such claim. The company retorted that any payment would depend on the outcome of inquiries into the purchase of UraMin. 

Last month’s announcement of hefty losses finally jolted Areva’s supervisory board into action. A committee of three board members was set up to shed light on the conditions under which UraMin was bought. A parliamentary report on how Areva has been managed, at the initiative of Socialist Party Member of Parliament Marc Goua, is also due to be published at the end of this month.

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