UraMin investigation prompts call for governance reform at Areva

15 February 2012

Areva's Supervisory Board, upon completing an analysis of the acquisition of mining company UraMin, has turned up no evidence of fraud - but has set out a plan of action to improve corporate governance practices at the company.

At the time of purchase UraMin was a junior uranium mining company which held stakes in deposits at Trekkopje in Namibia, Bakouma in the Central African Republic and Ryst Kuil in South Africa. Areva bought UraMin for $2.5 billion in May 2007, however a collapse in the uranium spot price and an increase in production cost estimates led the company to book a provision for loss of €1.46 billion ($2.03 billion) late last year.

Areva's Supervisory Board has listed six distinct actions designed to reform governance at the company. It has asked the Executive Board to:

•recommend "that the by-laws of the company be modified to make the Supervisory Board's prior approval of investments, stake acquisitions and acquisitions mandatory above a threshold of €20 million;"
•"finalize in the shortest possible time frame the internal procedure applicable to the review and validation of the various projects and decisions creating a commitment, and the procedures for monitoring their execution;"
•thoroughly document its internal deliberations;
•install a resources and reserves committee under the Supervisory Board’s direct authority; and
•study the transformation of the legal form of the company into a limited liability company with a board of directors.

On its own resources it has resolved to set up an ethic committee within itself to make sure the proper rules of conduct are followed.

Despite this extraordinary devaluation, the Supervisory Board determined that the UraMin purchase was "well within Areva's strategy" at the time, recognising the uncertainties surrounding Areva’s other deposits and the need for them to ensure stable supply. The price was acknowledged as being high, with a premium of about one third paid above and beyond the intrinsic value of the asset, but this was justified given the rapid increase in uranium prices worldwide and a consolidation trend within the uranium mining industry that was seeing junior uranium companies and their deposits being bought up by the larger players.

However, the Supervisory Board was critical of communication shortfalls that plagued the purchase. Key presentations failed to sufficiently highlight uncertainties expressed by technical teams – while for another important transaction neither the Executive nor Supervisory Boards were consulted. In addition they noted that the review procedures leading to the purchase did not provide adequate supporting documentation for their decision, which along with exceptionally brief minutes of key meetings obviously frustrated the attempt to review the decision.

No evidence of fraud

Responding to media reports which have suggested fraud around the deal, some of which have pointed the finger at former CEO Anne Lauvergeon and her husband, the Supervisory Board commented "While certain rumours suggested that Areva might have been the victim of fraud, the committee had no knowledge of any element that would lend credibility to such a theory. It should also be noted that the investigation of insider trading initiated by the Canadian stock market authorities in 2009 has yet to yield any action."

Researched and written
by World Nuclear News

Filed under: France