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Uranium becoming a spearhead of Namibian mining

GAME CHANGER The Husab mine will nearly double  Namibia’s current uranium production

GAME CHANGER The Husab mine will nearly double Namibia’s current uranium production

15th May 2015

By: Dylan Stewart

Creamer Media Reporter

  

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Uranium has played a leading role in driving the Namibian mining industry, says audit, tax and advisory services provider KPMG Namibia senior partner Robert Grant.

The mining industry contributes about 12% of the country’s gross domestic product (GDP), which has been growing at a rate of about 5% a year for the past four years.

Grant tells Mining Weekly that Namibia’s uranium mining industry is the fourth- largest in the world, noting that its position is expected to improve even further with the introduction of several large uranium mines currently under development.

Miner Swakop Uranium’s Husab mine, expected to produce its first yellowcake in the first quarter of 2016, will produce 15-million tons a year at full production and is set to be the second-biggest uranium mine in the world.

Other Namibian uranium projects under development include exploration and development company Bannerman Resources’ 80%-owned Etango uranium mine, and exploration and development company Forsys Metals’ wholly owned Valencia uranium project.

Grant points out that Namibia has three uranium mines, with two currently in opera- tion – global mining major Rio Tinto’s Rössing uranium mine, which produces more than five-million pounds of uranium a year, and uranium production company Paladin Energy’s Langer Heinrich mine, which produces 1.3-million pounds a year. Nuclear energy company Areva’s Trekkopje uranium mine, which is yet to produce its first uranium, has been mothballed until uranium prices recover.

The China Connection

Grant points out that China has a major role to play in providing capital investment to fuel Namibia’s uranium development, as well as instigating a change in the global prospects of uranium.

Uranium reached an absolute low of $28/lb in June 2014. While it has since recovered to about $39/lb, the price is still comparatively low when the pre-Fukushima high of more than $70/lb is taken into consideration.

However, Grant agrees with other speculators that there is a price recovery on the horizon. This optimism, he says, is largely fuelled by China’s massive drive towards nuclear development, with 23 reactors under construction.

In January 2014, State-owned China General Nuclear Power Group paid $190-million to buy a 25% stake in the Langer Heinrich uranium mine. China General Nuclear Power Group is also a 45% owner of the Husab mine, together with China Africa Development Fund (45%) and Epangelo Mining Company (10%). Grant believes that China’s interest in uranium is fuelled by having to meet its own resource requirements.

He suggests that this imminent new demand for uranium and the development of the Husab mine will drive the uranium price and encourage the development of other uranium mines.

Mining Diamonds
Diamond mining is the other primary force in Namibian mining. Grant explains that this sector has made a recovery since the global economic crisis that was detrimental to the demand-driven diamond industry.

The demand and, therefore, the prices reached for Namibian diamonds, which Grant notes are mostly high-quality, alluvial diamonds sold for decorative purposes, have been increasing.

He highlights that Namibian diamond mining is mainly dominated by Namdeb – the 50:50 joint venture (JV) between diamond company De Beers and the Namibia government.

Owing to government’s participation in Namdeb and the high taxation on diamond mining companies, Namdeb is a big contributor to fiscal revenue in Namibia, says Grant.

He also notes that, while the 55% corporate tax rate on diamond mining, in addition to royalty taxes, resulted in criticism over the past two years from stakeholders in Namibia diamond mining, government has shown no intention to reduce taxes.

New Entrants

Grant says two significant new mines that have entered the Namibia mining space within the past year will increase mining’s contribution to the country’s GDP.

The Otjikoto gold mine, operated by Vancouver-based gold producer B2Gold, is ramping up towards producing 200 000 oz/y of gold, and the Tschudi copper mine, owned by copper producer Weatherly International, is due to produce 17 000 t/y by 2017.

Grant mentions that China has taken an interest in mining rare earths, but that this is still at an early stage.

Unprocessed Royalty
Grant states that a significant point of contention in the Namibian mining industry is government’s plans to implement royalty taxes on unprocessed minerals to encourage local, value-adding beneficiation.

“This raises a challenge because Namibia’s biggest problem is a severe lack of skills, which is a requirement when adding value to products. Added to this difficulty is a lack of infrastructure and training programmes to enhance skills development.”

Namibia’s current unemployment rate is about 30%, according to the narrow concept of unemployment, which excludes discouraged workers. Grant notes that, although the mining industry is growing, such growth offers few jobs, particularly uranium mines, as they are capital-intensive industries.

Meanwhile, in 2009, the Namibia government created State-owned enterprise Epangelo Mining to secure local benefit from the high capital investments in the country’s mining projects, he says.

From 2011 to 2012, foreign direct investment in mining in Namibia amounted to more than $1-billion; however, owing to the lack of jobs, this did not do much to improve Namibian communities, Grant adds.

He explains that the Namibia government has defined diamonds, copper, gold, uranium and rare earths as strategic minerals and, therefore, any new project aiming to mine these minerals must be undertaken through a JV with Epangelo.

Infrastructure
Grant notes that big infrastructural developments are under way in Namibia in key areas related to mining, as well as large investments in infrastructure to improve power and water supply, as well as upgrades to the country’s ports.

He explains that Namibia has good road and rail infrastructure, but that rail is poorly operated. Mining companies, therefore, tend to transport their commodities using roads, which is more expensive and leads to faster deterioration of the roads.

Further, in terms of water supply, Namibia public enterprise Namwater is trying to secure N$1-billion in investment to upgrade its water infrastructure. Grant notes that Namibia’s lack of sufficient water supply poses a significant challenge to the country’s mining operations.

To address this situation, Areva established a desalination plant in 2012 along the coast to supply water to its Trekkopje uranium mine. The Husab mine also has plans to use the desalinated water produced by the plant.

Meanwhile, as Namibia sources most of its power from Zambia, Zimbabwe and South Africa, the challenges facing South African State-owned enterprise Eskom are also impacting on the Namibia mining industry; Grant believes that Namibia’s power supply should still be secure for the next two years.

Namibia State-owned power utility Nampower has a short-term plan to use gas to create 250 MW of additional power capacity by the end of 2016.

Grant explains that there are plans to generate power in Namibia, such as the Baynes hydropower project, which should generate about 600 MW of electricity and will be shared between Angola and Namibia. The Kudu gas power project is, however, struggling to get off the ground and needs an investment of more than N$10-billion.

Grant concludes that mining in Namibia has great promise but significant obstacles must be overcome to realise this promise.

Edited by Leandi Kolver
Creamer Media Deputy Editor

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