Private internet publishing company, Mbendi Information Services, which supports business and political decision-makers the world over, cites the importance of Namibia’s mining industry to the country’s economy.
“Mining products produce up to 50% of Namibia’s annual export earnings,” states the company’s mining profile on Namibia, citing diamonds, uranium, gold, zinc, copper and lead as the country’s main resources.
This is supported by information on the website for the Chamber of Mines of Namibia (CoM), which represents the interests of all the major mining and exploration companies active in the country and boasted 78 members as of December 2009. Most of these are active along the country’s infamous ‘skeleton coast’ but others do protrude inland through the deserts and alongside the borders with Botswana and Zambia.
According to CoM, the mining industry makes up 15.8% of Namibia’s GDP and in 2008 accounted for 61% of merchandise exports, while the country is “a world-class producer of rough diamonds, uranium oxide, special high-grade zinc and acid-grade fluorspar as well as a producer of gold bullion, blister copper, lead and zinc concentrate and salt”.
An international mining presence
While there are challenges facing foreign investors, the potential rewards make it an inviting prospect for international mining firms, evinced by the established presence of a number of major international players utilising state-of-the-art mining and processing technologies.
These include the world’s second- and third-largest mining companies – Rio Tinto and Anglo American – which produce uranium oxide at the Rössing mine and special high-grade zinc at the Skorpion mine and refinery respectively.
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AngloGold Ashanti owns Namibia’s only gold mine, the open pit Navachab mine near Karibib, while the world’s number one diamond producer, De Beers, works with the Namibian government in the 50:50 JV Namdeb, which produced 2.13m carats in 2008 and the expertise of De Beers Marine Namibia has seen the percentage of diamonds obtained from offshore deposits escalate dramatically.
In his 2009 annual review speech, made in May 2010, CoM President Mike Leech lauded the progress made by the industry, saying, “Namibia’s mining industry has become truly international involving important players from a wider range of countries – South Africa, France, the UK, Canada, Australia, Brazil, Russia, China – listed on an equally wide range of stock exchanges.”
Leech continued by firmly endorsing the economic role the mining industry continues to play in the form of foreign investment. “Yet again, the mining sector spent more on fixed investment than any other sector of the economy with the exception of government,” Leech said, adding that this was the equivalent of almost 20% of all fixed investment in Namibia.
In fact, he stated that this figure should be higher: “We continue to believe that a good deal of exploration expenditure has not been included in this figure. As our review shows, exploration companies have been spending significant sums of money on their activities during the year.”
JOGMEC enters Southern Africa
Japan Oil, Gas and Metals National Corporation (JOGMEC) recently announced an agreement with Namibia to explore and develop mineral resources: the first time the Japanese state-backed company has entered into this type of deal with a Southern African country. The deal represents a major step towards bolstering the Namibian mining industry’s increasingly important position within the region and the international mining community as a whole.
Set up in 2004, JOGMEC’s main role is to help secure oil, gas and mineral supplies for Japan all over the world in light of ever-increasing global competition for a variety of resources. Japanese engineers were sent to Namibia in August to assist in the joint development on remote sensory and analysis technology for potential mines, while JOGMEC released a statement signalling its intent: “We hope to explore new mining fields including rare earth, and accelerate joint venture projects with private mining firms to help secure stakes in rare metal resources.”
As far back as 2007, JOGMEC’s joint venture (JV) with Japanese company Itochu – CIECO-Namibia – was already channelling investment into Namibia’s mining industry, paving the way for the ongoing uranium rush in the country.
At the time JOGMEC loaned ›4bn (just over £30m) to Itochu for the project and highlighted the importance of the JV by saying, “We believe this project will contribute greatly to the stable supply of uranium needed for the use of nuclear power generation, which is vital for Japan’s efforts to cut carbon dioxide emissions.”
Diamonds in decline
At a mining industry briefing meeting on December 1, 2010, CoM General Manager Veston Malango addressed various concerns and recommendations to Minister of Mines and Energy, Isak Kitali, not least being the state of the diamond industry.
“Of strategic concern is the sustainability of the mining industry post global financial crisis, particularly the diamond sector,” asserted Malango, adding, “The Chamber is calling for a review of the fiscal regime for the diamond industry to ensure its continued role in the national economy.”
Namibia is still one of the world’s largest producers of gem-quality diamonds, but in recent years diamond production has tailed off relative to the growing importance of other resources, and one in particular: uranium.
Uranium fuels mining investment
Increased focus on alternatives to coal, oil and gas has brought nuclear power back into the spotlight and resulted in renewed interest in uranium, leading to uranium exploration deals across the globe, like those being conducted in Namibia’s Erongo region.
According to CoM, Namibia currently provides about 10% of the world’s uranium and in 2008 became the fourth largest uranium producer in the world.
This position is likely to improve even further in the future when two new mines being developed at Trekkopje (by AREVA) and Valencia (by Forsysmetals / Westport Resources) come online to complement the Rössing mine and Paladin energy’s Langer Heinrich uranium mine.
Malango emphasises, “The outlook (for Namibia’s mining sector) is positive, thanks to the growing uranium industry that is poised to take centre stage as the major source of state revenue.”
Leech also points to swelling interest in the country’s uranium deposits, pointing out, “Developments in our uranium industry have not gone unnoticed by the rest of the world and Namibia has enjoyed a stream of potential uranium investors over the past year from a variety of countries including Japan, South Korea, Russia, India and China.”
Challenges facing foreign mining investors
Some mineral deposits are found near or in protected wilderness areas pivotal to the country’s tourism sector. As the two most important sectors of the Namibian economy, it is vital to balance economic gains from the mining industry with the protection of biodiversity hotspots and National Parks, which themselves also attract foreign investment and interest in the country.
According to Mbendi, water and power supply infrastructure is poorly developed across most of the country, making this the major hurdle to overcome, as companies wanting to advance a mining project need to also consider how they are going to install this supporting infrastructure.
The flip side of this coin is, of course, that mining projects can benefit the country as a whole even further by supplying support infrastructure that can be used as a base to expand industry, uplift communities and create jobs, thereby catalysing the entire economy.
Colin Kubank, MD of international engineering firm AMEC Minproc’s African operations, is quoted on the CoM website claiming that the potential gains to be made from investing in the Namibian mining industry outweigh its inherent challenges.
“Despite the challenges companies are confronted with when mining in Namibia, the country’s rich supply of mineral resources and positive government attitude make it a popular destination for investors,” relates Kubank.
As 2010 draws to a close, industry players believe that the Namibian mining industry will continue to go from strength to strength, with demand for uranium at the heart of its expansion.
Leech quotes Namibia’s Central Bureau of Statistics’ findings that 2008 was the first year since 1990 when the contribution of non-diamond mining to GDP exceeded that of the diamond mining sector. Indeed, the value of uranium exports alone surpassed the value of the country’s diamond exports.
“Namibia is expected to remain an attractive destination for mining investment as a consequence of its mineral resources, political stability and government, which is keen to develop its mining potential. Consequently, AMEC Minproc sees a bright future for the Namibian mining industry and our opportunity to participate in it,” Kubank explains.
“The mining industry has weathered the storm (of the global economic crisis) and we look to 2011 with optimism… With expansion programmes at existing mines, one mine under construction and new mines on the horizon pending the granting of mining licences, the mining industry shall continue to play its vital role in the economic development of Namibia,” Malango stresses.