Namibia’s lithium revenues, based on Simonis Storm estimates, could exceed all other commodities combined, and could therefore improve the country’s trade and current account balances as well as gross domestic product growth rates.
This is according to a Lithium Report compiled by the local stock brokerage and released this week. “Given our estimates, the local lithium sector’s revenue to government would be the largest, compared to all other commodity mining operations in Namibia”, it stated.
In the report, SS cautions about a long-term view on lithium, given a threat of new entrants to the battery and Electric Vehicle (EV) market. “It can well be that lithium is not the preferred mineral for battery, renewable energy, equipment and electronic consumer goods production in the long run,” Simonis Storm observed. The report noted that restarting lithium production in Namibia after 1998 can be a good development for the local mining industry and the country’s economy. SS pointed out that given the capital-intensive nature of general mining, it is not expecting lithium to contribute to major boosts to socio-economic indicators such as employment, but does view the renewed interest in Namibian lithium mining as a positive for export earnings and government revenue.
The local stock brokerage estimates the value of the local lithium industry as high as US$770 million (6.7% of GDP) to US$364 million (3.2% of GDP), with total taxes paid to government at US$240.1 million, and royalties of US$34.3 million in the extreme case.
“Using an average rand to USD exchange rate of 18, these figures are as high as N$13.9 billion in terms of the sector’s value, N$4.6 billion in revenue to government (taxes and royalties combined) in the extreme case and N$1.7 billion in the conservative case”, the SS report states. Prices for lithium more than doubled last year, as demand from the electric vehicle industry outstripped supply.
In comparison, mid-year estimate figures for the current financial year show diamond mining companies could pay N$1.6 billion in taxes and N$1.5 billion in royalties. For non-diamond mining companies, taxes paid are estimated at N$576 million, and royalties at N$618 million. The Simonis Storm
report further stated that timing and ore grades are big considerations in mining. An opportune time to invest, whether as a mine or individual investor, is usually once the bubble has burst, which it stated the global lithium price data shows has occurred.
“It is important to note that Namibia’s estimated lithium reserves have grade concentrates far below the global standard of 6%. So, Namibia’s lithium exports will fetch a lower global price per tonne and so the estimates above could be overstated,
unless better grade concentrates can be discovered,” the SS report continued. Lithium is a soft, silvery-white alkali metal. Under standard conditions, it is the least-dense metal and the least-dense solid element. It is highly reactive and flammable. Lithium is an essential component in modern lithium-ion batteries since it has the highest electrochemical potential of all metals, and the highest specific capacity. Compared to other battery types, lithium-ion battery technology currently has the highest energy density, the longest cycle life, the widest temperature range tolerance and the lowest self-discharge rates. Because of the auto industry’s shift towards EVs, brought about by proposed bans on fossil-fuel cars beginning at the end of the decade, lithium prices and demand have soared.
China is the world’s top lithium refiner, and a leading producer. However, Western governments and companies are trying to challenge that, and see Africa’s lithium reserves as an opportunity. Africa’s lithium production is set to rapidly increase this decade. From 40 000 tonnes this year, the continent will likely produce 497 000 tonnes in 2030, commodities trader Trafigura estimates, with the bulk of that coming from Zimbabwe.
That country in December imposed a ban on raw lithium exports, a measure aimed at stopping the smuggling of lithium ore, and spurring mines to process in the country.
Namibia will follow that example.
“We are saying to ourselves, if you have got the minerals that everybody wants now, you need to make sure that at least you probably mine those minerals differently, and not in the usual manner,” Namibia’s mines minister Tom Alweendo told Reuters in an interview at the ‘Investing in African Mining’ Indaba in Cape Town in February.
“We are going to insist that all lithium mined within the country has to be processed in the country.” Meanwhile, the local stock brokerage emphasised that lithium
exploration in Namibia has expanded significantly in the last two years. The report reads: “Two lithium mines were operational prior to Independence are now taken over by new investors, who are looking at restarting these operations. If current explorations realise in actual production operations, Namibia will essentially be adding a whole new commodity market to its local mining industry by restarting lithium mining since 1998. Two of the biggest and most progressed lithium operations in Namibia include Lepidico and Andrada’s operations”.
The SS report noted that Karibib is fully permitted for the re-development of two open pit mines at Rubicon and Helikon 1, which will feed lithium mica ore to a central mineral concentrator. During 2022, phase one of the project estimated ore reserves at 9.4 million tonnes and a life of mine of 19 years.
Drilling at Helikon 2 and 3 commenced in February 2023, with the objective of extending the life of mine to over 20 years.
Drilling results at Uis from Andrada’s tin mine surpassed expectations in terms of lithium grades, and reinforced their belief that Uis hosts one of the largest lithium resource deposits globally. Andrada’s estimates indicate a higher ore grade than Lepidico.
“In February 2023, the company announced a 30% increase in estimated reserves to 81 million tonnes. An advantage for the Uis mine is that Andrada can progress to commercial production much faster than new greenfield lithium resources being pursued elsewhere in Namibia. The company is in the process of constructing a pilot facility to process large amounts of lithium and secure an off-taker,” the SS report added.
“We exclude other lithium operations in our calculations as they are still in the exploration phase, and given that no credible information around Xinfeng can be found. We, therefore, only use publicly-available production estimates from one local mine and apply this figure to other mines, and further assume that no other lithium mine
becomes operational in 2025,” the SS report clarified. -ebrandt@nepc.com.na