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Mining a key component in Namibia’s economy
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18th May 2012
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Namibia’s mining sector generated $1.6-billion in mining export earnings during 2011, contributing about 11% to the country’s gross domestic product, with the country’s buoyed ura- nium mining sector forecast to be the single largest mining sector in the country’s mining industry by 2015, states a report by business research and consulting firm Frost & Sullivan.

In the same year, however, growth in Namibia’s mining sector was curtailed by lower production outputs at the country’s two largest mines, diversified mining group Rio Tinto’s Rössing uranium mine and Namdeb’s diamond mine. Namdeb is a joint venture between the Namibian government and diamond corporation De Beers.

This was a result of depleted diamond reserves in the onshore mines, which caused a marked decline in the contribution of the diamond mining sector to the Namibian economy since 2000.

“The depletion of diamond reserves, resulting in a declined contribution by the diamond sector, is owing to the global economic downturn, which affected revenues from the diamond mining industry in 2008. This also led Namibia’s government to diversify the country’s revenues from diamond revenues,” says Frost & Sullivan mining research analyst Christy Tawii.

She points out that the depletion of diamond reserves in Namibia gave way to the development and expansion of Namibia’s uranium mining industry as an alternative source of revenue.

“The prospects of Namibia becoming a uranium mining hub have since increased with the government’s sustainable economic growth objective, identifying uranium as a key commodity,” notes Tawii.

Frost & Sullivan’s mining report states that Namibia is currently the world’s fourth-largest uranium producer and Africa’s largest uranium exporter, with uranium production in the country expected to quadruple in the near term, owing to increased exploration and expansion acti- vities taking place in the Erongo region.

“About four new uranium mines in the Erongo region are expected to become operational by 2014,” adds Tawii.

Meanwhile, Frost & Sullivan reveals that Rio Tinto has invested about $285- million in the expansion of the Rössing Uranium Reserve Development project and the construction of a heap-leach processing facility.

Further, China Guandong Nuclear Power Corporation subsidiary Taurus Minerals’ Husab uranium mine expansion project, which Frost & Sullivan says is worth about $1.6-billion, is the highest- value project in Namibia’s uranium mining industry, accounting for 32% of total capital expenditure (capex) invested in the country.

Multinational mining business Areva’s Trekkopje uranium mine, which is expected to start production by 2013, accounts for 19% of the total capex invested in uranium projects in Namibia.

Other companies undertaking expansion projects in Namibia’s mining industry include Australian international uranium miner Marencia Energy’s uranium project, uranium exploration company Deep Yellow and uranium development company Bannerman Resources, among others, whose projects, have a combined value of $4.2-billion.

“Buoyed by the existence of significant uranium deposits in the country, increasing capital investment projects and new development and growth in international demand for nuclear energy, the Namibian uranium mining sector is forecast to significantly contribute to Namibia’s economy from 2015,” explains Tawii.

She says capex is predominantly aimed at expanding production capacity, improving processing facilities and adapting operations to comply with stricter environmental and safety regulations.

Challenges
Namibia’s Finance Minister, Sarah Kuugongelwa-Amadhila, announced in her 2012/13 Budget speech, that there are new taxes currently being tabled by government.

“These taxes comprise an export tax on natural resources, a revised corporate income tax for nondiamond mining entities and an environmental levy on environmentally harmful products, which is expected to negatively impact on uranium mining operations,” states Tawii.

Frost & Sullivan further notes that Namibia’s Ministry of Mines and Energy aims to own a 27% share in all local mineral and energy businesses by 2014/15.

Meanwhile, Tawii says, despite the expected growth, numerous constraints need to be tackled before the uranium mining industry will be able to sustain growth.

“The demand for power in Namibia has grown sharply in recent years owing to increased mining and processing acti- vities, while power supply has been constrained by South Africa’s State-owned power utility Eskom’s failure to export power to the country,” she points out.

The high level of uranium mining and exploration activities in Namibia is expected to further increase electricity demand and necessitate additional power supply from other power sources.

“The current electricity supply shortage in Southern Africa means uranium mining operations are faced with escalating energy costs. Government may attempt to mitigate the shortage that may be caused by uranium mining’s increased electricity demand, which will result in high operating margins,” adds Tawii.

Other challenges expected to further strain the growth of Namibia’s mining industry include infrastructure con- straints, environmental health and safety issues, as well as the shortage of skilled labour.

Tawii says to tackle the significant infrastructure deficit, the Namibian government has entered into public–private partnerships, which have allocated about $8.2-billion towards the development of road, rail, water, power and ports infrastructure in the medium term.

Namibia’s mining industry largely comprises commodities such as diamonds, uranium, copper, zinc and gold and is a key component of the Namibian economy.

Uranium Demand
The bulk of the uranium mined globally is bought by power utilities. The overall demand for nuclear energy is increasing as the need for energy independence from oil and coal increases, as well as the growing awareness of the negative effects of fossil-fuel-based power gene- ration.

Rising demand for nuclear energy in emerging economies, such as China and India, as well as the strong emphasis on decreasing carbon emissions, is likely to accelerate the development of uranium mining projects.

“Based on these demands, new capa- city will be needed by 2015 and beyond and, in an attempt to meet this demand, Namibia’s strong uranium exploration potential has attracted interest from various international mining companies.

“A total of ten expansion projects, valued at $5-billion, are planned for the uranium mining sector in Namibia and will account for 58% of the total value of uranium projects in Southern Africa,” says Tawii.

She adds that these include seven pre- feasibility and three construction stage projects, which will increase Namibia’s projected uranium production to about 12 000 t of uranium in 2013.

Edited by: Tracy Hancock

 

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CHRISTY TAWII The demand for power in Namibia has grown sharply in recent years owing to increased mining and processing activities
 

CHRISTY TAWII The demand for power in Namibia has grown sharply in recent years owing to increased mining and processing activities