Mining remains an important contributor to Namibia’s economy – and in 2020, it contributed 10.1% to the Gross Domestic Product.
Although some individual mineral sectors were negatively impacted by the Covid-19 pandemic, mining was recognised as a key sector to drive the domestic economy, which has been crippled by the loss of tourism and other non-essential sectors.
According to the Chamber of Mines of Namibia, the industry recorded a negative growth rate of 14.9% in 2020 due to reduced diamond output as a direct result of the Covid-19 pandemic, and a sharp reduction in the production of valuable Special High-Grade Zinc, owing to the suspension of operations at the Skorpion Zinc mine. The Chamber’s CEO, Veston Malango, noted that despite the reduced output recorded by most operations, increasing prices for base metals towards the end of 2020 as well as the historically high price of gold throughout the entire year actually improved the overall profitability of the industry.
“In combination with a mineral commodities market that is vastly improving, the mining sector is, thus, in a far better position/standing as compared to previous years, where declining life of mines and reduced exploration were concerns for the longevity of mining in Namibia. At present, existing mines are investing in mine expansion and exploration, driven by the higher prices of gold, base metals and for some industrial minerals,” Malango told New Era.
Commodity markets
He added that restrictions on logistics and the supply of goods impeded the global trade for commodities, which resulted in the prices of base metals to fall in the first quarter of 2020.
The demand for diamonds also plummeted as a result of the pandemic, as reduced salaries and wages meant that consumers changed their spending patterns away from luxury goods to essential items.
Malango noted that sight holder sales were, thus, concluded with excess supply, creating an overflow in the diamond value chain, stating that rough diamond sales were also negatively impacted by frequent closures of major diamond cutting and polishing factories in India, and the major trading centre in Belgium. This, in turn, resulted in bottlenecks along the entire value chain, causing diamond mining operations to curtail production, including Debmarine Namibia.
Said Malango: “As a safe haven asset in times of uncertainty, the price of gold soared to US$2 067 per troy ounce in August 2020, reaching its highest level in recent history. During a time when emerging market currencies, stock markets and most major markets were in negative territory, the bull gold market was a favourable and stable investment option. This was also a result of increased liquidity in global markets created by supportive financial conditions and accommodative monetary policies”.
Uranium was the other top performing mineral commodity in the first half of 2020, which increased to US$34/lb in June due to Covid-induced supply disruptions at the Cigar Lake mine in Canada and a three-month production cut from Kazakhstan.
In the second half of 2020, a slowing rate of Covid-19 infections, rapid vaccine developments, and improved health infrastructure and capacity, led to a gradual lifting of restrictions and easing of lockdown measures. Global trading thus resumed, along with normal commercial activity, and this propelled the recovery of some economies, particularly in China.
An uptick in global economic activity, combined with increased liquidity in global markets, boosted the prices of base metals in the last quarter of 2020.
The copper price traded above US$9 000 per tonne in December 2020, and hit US$10 747 per tonne in May 2021, a level not seen before the last mineral commodities super cycle of 2010-2011.
Many analysts are of the opinion that this could be the start of the next super cycle, which is being driven by the electric vehicles boom, a global drive towards clean energy supply and battery storage technologies, in combination with supply deficits for major consumer countries.
Mining industry highlights
Malango said it was exciting to note that both of Namibia’s gold mines are investing in mine expansion through the development of underground operations.
“Navachab is assessing the feasibility of developing underground mining operations, and increasing the capacity of its processing plant by 20%. B2Gold is also progressing ahead with the development of its underground Wolfshag deposit that will add significantly to output from the Otjikoto Mine,” said Malango.
Meanwhile, Trevali is assessing the feasibility of expanding operations at the Rosh Pinah Zinc Corporation (RPZC) mine at an investment of N$1.5 billion to potentially increase the current production by 86%.
Also, Trigon Metals Namibia is currently redeveloping the Kombat copper mine, which is expected to re-commence with production towards the end of this year. Deep Yellow is embarking on a Definitive Feasibility Study at its Tumas uranium project and exploration has generally intensified in preparation for the anticipated rebound of the uranium price.
Mineral beneficiation
Malango explained that minerals are generally not exported in ‘raw’ form otherwise known as ore.
“Most mined commodities are subject to some form of processing before they are shipped out of a country, or sold onto their customers, as the costs of transporting mass or bulk material in the form of ore would not be economical for all operations. Minerals are thus processed to produce a form of concentrate for further refining and processing. For example, Namibia produces processed uranium, called yellow cake (U3O8 – Uranium Oxide), for further processing along the uranium value chain, and used to produce copper concentrate for export to produce blister copper. Namibia produces gold bullion (92-98%), which is further refined into refined gold bars (99.9999%) at the Rand Refinery in South Africa.
He continued that Namibia used to produce refined minerals such as Special High-Grade Zinc from the Skorpion Zinc Mine, and Copper Cathode from the Tschudi Copper Mine. Copper cathode and Special High-Grade zinc are London Metal Exchange (LME) grade at 99.9999% pure metal. These pure metals would then enter the manufacturing sector as feedstocks, for example, in copper fabrication plants or the zinc galvanising industry.
Skorpion Zinc, which was placed on care and maintenance as a result of geotechnical instabilities in the main pit, is assessing options to mine the remaining ore body safely. Skorpion’s owner, Vedanta, is also building a viable case to repurpose the plant to process oxides from external operations, and convert the refinery, which would produce Special High-Grade Zinc from zinc sulphides produced by the neighbouring Gamsberg Mine in South Africa.
The Tschudi Copper Mine has also recently been placed on care and maintenance due to depletion of the main ore body; however, significant exploration is ongoing to determine the viability of mining the surrounding satellite oxide deposits.
Finally, blister copper is produced by the smelter at Dundee Precious Metals Tsumeb, which produces 98.5% blister copper. The operation is a toll smelter, which processes imported copper concentrates from Bulgaria and Latin America.
Mining investment
Since Namibia fell from first to fifth for investment attractiveness in 2019, Malango believes the main policy interventions that would improve this score is the finalisation of the Namibia Investment Promotion Act (NIPA) and the New Equitable Economic Empowerment Framework (NEEEF).
“The delay in their finalisation is perpetuating uncertainty, and deteriorating Namibia’s overall investment attractiveness,” Malango stated.
Also, the Value Added Tax (VAT) challenges for exploration companies is another major concern to investors, as these companies need to be able to register for VAT and also be eligible for refunds on input VAT claims. According to the Chamber, this is currently not the case at Inland Revenue; however, the Chamber is engaging the Ministry of Finance and indications are that this matter will soon be resolved and may not affect Namibia’s Fraser rankings anymore.
The Chamber CEO added that it is very likely that copper, lead, zinc and gold will be Namibia’s top performing exports for 2021, in relative terms, considering that these are produced in much smaller quantities as compared to diamonds and uranium, which have different values. “Exports of copper, lead and zinc in 2021 will mostly be driven by significant infrastructure expenditures in China and the USA, the electric vehicles boom and clean energy supply technologies. Gold is also likely to be a top-performing export, in relative terms, as this is still a highly sought-after safe-haven asset in times of uncertainty,” Malango concluded.