November 11, 2008 / 10:43 AM / 11 years ago

UPDATE 2-Uranium One to lay off staff at SAfrica mine-union

* Uranium One to retrench 1,013 employees at shut mine

* Company shut Dominion mine on falling uranium price

* Closure of mine unlikely to affect spot uranium price

(Adds trader quote, details, background)

JOHANNESBURG, Nov 11 (Reuters) - South Africa’s Solidarity trade union said on Tuesday that Canada’s Uranium One UUU.TO UUUJ.J plans to lay off 1,013 workers at its shut Dominion mine in the country by January next year.

Dominion, which was to be the company’s flagship mine producing the commodity used to fuel nuclear reactors, was shut partly due to declining uranium prices, rising costs of inputs and its inability to meet its output targets.

Uranium One has said it would consider selling the mine, which was in pre-commercial production.

The company said it could not raise the required capital to fund development and subsequent production at the mine owing to the global credit squeeze, which has also affected other South African mining operations.

Dominion had been expected to produce 320,000 pounds of uranium this year and 1.1 million pounds in 2009.

It produced some 171,600 pounds or around 78 tonnes in 2007, less than 0.2 percent of world uranium output, according to data from the World Nuclear Association.

Spot uranium prices UX-U3O8-SPT have fallen sharply this year, partly owing to funds selling their holdings to cover losses in other financial markets, to around $48 per pound from a record $136 in June last year.

A uranium trader in Europe said the move to lay off staff was expected, and that Dominion’s closure would not have an impact on the spot price.

“All their staff have been striking so it wasn’t too much of a surprise really,” a European uranium trader said.

Another trader said: “I think the market has been expecting this since the announcement on October 22 to place the mine on care and maintenance.”

That decision reflected the significant deterioration in the project’s economics, the company said on October 22.

Prior to Dominion’s closure, Uranium One had suspended mining operations at the mine on Oct. 10 because of what it said was an illegal strike.

The company said unions were refusing to return to work despite a court order, and it would soon begin laying off the striking employees.

Some 162 workers would be retained at the operation, which will be placed under care and maintenance and cease production.

The mine, which produces mainly uranium, with gold as a by-product, is located in Klerksdorp in the North West Province.

“The mine (Uranium One) has also indicated that it will only pay out the minimum severance pay, of one week’s pay for every year’s service, to employees,” Solidarity said in a statement.

Reporting by James Macharia; additional reporting by Anna Stablum in London

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