Mining in Namibia
Michael Schwartz sings the praises of Namibia, Africa’s most attractive mining jurisdiction.
Namibia gained independence from South Africa in 1990, although Walvis Bay only became part of independent Namibia in 1994. While this article was written too early to incorporate the Fraser Institute’s latest survey of mining confidence among mining executives, last year’s edition saw Namibia pip perennial African favourite Botswana into second place. Namibia was voted 25th most favourable administration anywhere in the world but first in Africa, with Botswana finishing 26th worldwide and second in Africa.
Namibia’s attractiveness to mining senior executives is matched by the variety of minerals that it produces, among them gold bullion, lead concentrate, blister copper, special high-grade zinc, uranium oxide and diamonds. The country’s Chamber of Mines numbered 115 members at the end of 2015.
A friendly environment
Namibia is certainly regarded as an attractive environment for mining. KPMG, in its country profile for Namibia, highlights its significant place within global mining. At its most crucial, KPMG notes, Namibia is Africa’s fourth-largest exporter of non-fuel minerals. It is also one of the world’s ten top diamond producers (despite a boundary dispute with South Africa around the Orange River).
Then there is uranium, a sector that goes back 50 years in Namibia. Indeed, the World Nuclear Association believes that Namibia’s mines can provide at least 10% of global supply from its proven 5% of global recoverable resources, and that its authorities remain committed to expanding the nuclear sector.
Of the 115 companies mentioned as belonging to Namibia’s Chamber of Mines, 10 also support the Namibian Uranium Association (NUA). The NUA aims to help senior executives shape the context in which their industry operates, and advocates policy changes to allow uranium to compete on its merits.
One company active in Namibia and highly sympathetic to operating there is Dundee Precious Metals (DPM), a Canadian-based, international mining company operating in Armenia, Bulgaria, Namibia and Serbia. The company is engaged in precious metal properties from acquisition to processing, taking in exploration, development and mining. On the subject of Namibia being mining-friendly, Janet Reid, Manager of Investor Relations at DPM, commented, ‘Namibia is familiar with and receptive to the mining industry. Namibia is the world’s fifth largest producer of uranium and ninth largest producer of diamonds. Some of the larger mining companies that operate within Namibia include Rio Tinto, Anglo American, DeBeers, Paladin, B2Gold, and Weatherly Mining.’
In 2010, DPM purchased the Tsumeb smelter in the far north of Namibia through its subsidiary Dundee Precious Metals Tsumeb (DPMT), where there was a legacy of tailings and also skin disorders among the local population. There was thus an immediate and urgent need to ‘clean up’ the plant. Since that clean-up, it has converted the smelter into a specialty copper concentrate toll smelting facility. The combined ambitions are one of creating a facility that can meet market demand as well as meeting modern environmental standards. Official opening was planned for the first week of April, 2016.
A capital investment programme exceeding US$400 million has been applied. The result was the installation of a sulphuric acid plant commissioned in July 2015, designed to capture gaseous sulphur dioxide emissions from the smelter, converting them to a saleable sulphuric acid product and selling the acid to Namibian uranium and copper producers. Further to the acid plant, new and larger copper converters will reduce and remove bottlenecks at Tsumeb and provide greater flexibility in operations.
Increasingly large amounts of copper concentrate are being processed at Tsumeb, with 2014’s throughput of 198,000t 30% higher than 2013. The target for 2016 is 240,000t. If a second-stage expansion is authorised, throughput may even run to 370,000t.
Janet Reid summarises DPMT’s products, ‘The smelter produces copper blister bars that are sent to refineries within Europe for final processing and refining. Due to the arsenic content in the complex concentrates sent to the Tsumeb smelter, the smelter also produces arsenic trioxide (As2O3), which is sold to third party customers. The newly constructed acid plant produces sulphuric acid (H2SO4), which is sold as a commercial product predominantly to Namibia’s uranium mines for use in their ore-leaching processes.’
DPM stresses that developments such as Tsumeb in the mining sector lead to expansion within the up-stream and services sector, whereby spin-offs are created in other sectors of the Namibian economy.
Solving infrastructure issues
One highly significant element for the success of mining in Namibia is the Trans-Kalahari rail link currently under construction. While this railway has its eastern terminus in the Botswanan capital Gaborone, it runs westward to Walvis Bay for 1,500km. Indeed, any train traveling the Trans-Kalahari has to cross the massive areas of semi-arid and sandy savannah within the Kalahari desert.
Of considerable importance is the fact that the signing of the agreement between Namibia and Botswana for the link took place at Bird Island close to Walvis Bay. It is here that the North Port Bulk Container Terminal (NPBCT) will be constructed by the Namibia Ports Authority to store coal conveyed by the new railway, which is scheduled for completion in 2019.
Construction of the NBPCT is expected to cost around US$9.2 billion. Beyond Namibia and Botswana, the combination of a railway, a coal terminal and related loading infrastructure will assist Southern African Development Community (SADC) countries, such as Zambia, Zimbabwe and Malawi, by providing a transport alternative to South Africa’s ports. In a personal briefing by the Hon Walter McLean, who represents Namibia in Canada, Materials World learned that the Walvis Bay Port Authority’s capacity is now being enlarged, further enhancing the port’s status by ensuring it does not lose days to weather (by contrast, Cape Town loses 30 days to weather each year). In addition, Walvis Bay will soon be able to take large ships traveling from the Panama Canal and entering Namibia. The result is that railways and roads originally designed for connection with South Africa will be directed to Walvis Bay, covering not just Malawi, Zambia and Zimbabwe but also Southern Angola, the Western South African provinces, and the Caprivi Strip.
Reid commented on the developments, ’Yes, we will see this further investment in rail and port infrastructure in Namibia as beneficial to the economic interest in Namibia and as helping out business, particularly as it relates to improvements in the port facilities at Walvis Bay for bulk materials handling and transport.’
Another key factor affecting Namibia's mining sector is how it obtains its energy. Chris Baisako of Sorren Energy Holdings said, ‘Namibia is dependent on imports from neighbouring countries for meeting its electricity needs. It imports between 40-70% depending on the time of the year. With the neighbouring countries also facing electricity shortages, there certainly is, and will be, an electricity shortage going forward if some of the planned generation projects don't materialise on time.’ Sorren Energy Holdings itself is venturing into electricity generation, mainly looking at renewables.
The fiscal framework and CSR
Namibia offers a healthy mining tax regime and investment climate as of July 2015. For example, 100% foreign-owned companies are allowed in Namibia without any compulsory government share.
Royalty rates are set at 10% for rough diamonds, emeralds, rubies and sapphires but just 3% for nuclear fuel minerals gold, copper, zinc and other base metals, and 2% for semi-precious stones, industrial minerals such as fluorspar, and non-nuclear fuel materials. Corporation tax rates vary from 33–55% but capital gains tax does not apply. In addition, exploration and development costs can be 100% deductible.
Corporate social responsibility (CSR) and sustainability are taken extremely seriously by the mining industry in Namibia. The NUA, for example, is keen to protect environmental values in those areas where uranium is explored and mined. It then oversees the social and cultural needs of surrounding areas, as well as those employed by the uranium industry. Zero harm is a guiding principle.
Crucially, the uranium industry accepts CSR as a core business interest and not as a philanthropic concern. The member companies continue to invest directly in education, training, youth support and economic uplift for socially-disadvantaged Namibians. This is attained through bursary schemes, whereby NUA members support young Namibians to undertake additional studies (especially in engineering fields) and the in-service development of recently qualified graduates.
DPM, too, is committed to CSR. Reid stated, ‘Shortly after purchasing the smelter in 2010, DPM established a community trust, which is a separate legal entity and is governed by leaders from the community of Tsumeb. Since 2010, the trust has invested approximately US$1.1 million in the community.
‘The major categories of investment are education, social services, health services, small-medium size business funding and cultural activities. DPM also entered into a public-private partnership with the Namibia Housing Enterprise to build affordable houses that are owned and occupied by our employees.’
It is clear that Namibia is a highly attractive environment for mining. The Trans-Kalahari rail link and Walvis Bay expansion represent great opportunities for those investing in Namibia, as does a sympathetic tax and royalty regime.