The mining industry generated N$33.524 billion in 2019 with total revenue paid to government totalling N$4.803 billion, of which 10% was distributable cash. According to Zebra Kasete, president of the Chamber of Mines, 77.13% of distributable cash stayed within Namibia’s borders.
The Chamber of Mines in Namibia last week stated in its review for 2019 that its real growth fell, posting a contraction of 11% in 2019 due to a drop in diamond and uranium production. Fixed investment by mining also continued on its downward trend as no new mining projects were developed in the year under review.
Kasete said at the beginning of the pandemic, mineral commodity prices plummeted, particularly for base metals: “Namib Lead and Zinc mine was placed on care and maintenance as the price of zinc and lead dropped to below breakeven point and with social distancing it was not possible to be in a confined underground environment.” This adverse working environment resulted in 129 jobs being lost.
Meanwhile, Kasete said demand for diamonds has plummeted, being a luxury good amid the Covid-19 pandemic and this has dampened the flow in the diamond pipeline. According to him, diamond production is set to fall in 2020, negatively impacting government revenue and export earnings.
Furthermore, gold prices have risen above US$2 000/oz, the highest since 1975, which may offset some of the revenue losses to government and export earnings. Supply chain disruptions from the pandemic have impacted stock levels of inputs, consumables, and equipment spares.
Kasete noted that the mining industry supported government in the fight against Covid-19 in cash and in-kind to a tune of N$77.9 million. He said the industry is unable to import specialised skills in case of breakdowns of sophisticated equipment because of suspended international flights.
Commenting on the state of the mining industry, local economist, Klaus Schade, said: “We have seen copper and zinc prices gradually recovering from low levels recorded during April 2020. Average zinc prices in April 2020 were the lowest since May 2016 while copper prices were the lowest since Oct 2016. So far for August, both prices are above levels in August 2019 by 3.7% and 12.4% respectively.”
According to Schade, due to the depreciation of the Namibia Dollar against the US Dollar, prices in the domestic currency have increased substantially. Gold has performed extremely well since exceeding the US$2 000 per ounce mark at the beginning of August 2020 - the highest on record, due to its status as a safe haven.
He further stated that the high gold prices are a reflection of the continuous uncertainties in the global markets, not only because of the Covid-19 pandemic but because of increasing tensions between the USA and China. He said these uncertainties are expected to continue to weigh on other commodity prices, such as copper, zinc despite their recent recovery. Schade also said oil prices are expected to remain under pressure, due to suppressed global economic activities, restrictions on travelling (in particular air travel), and the continuous switch to renewable energy resources.
“Mining operations were suspended at Tschudi in February 2020 as the oxide ore body is depleted. Processing operations are expected to continue until the end of the year. In the meantime, 66 direct and 367 contractor jobs are lost,” explained Kasete.
He added that mining operations also ceased at Skorpion Zinc due to the depletion of the ore body. The early closure of the mine was enacted due to safety concerns from multiple slope failures and the refinery conversion project is currently underway. At Skorpion, 1 500 jobs (532 permanent and 968 contractors) were lost, but not because of Covid-19.
Meanwhile, the non-deductibility of royalties for mining entities was officially revoked as announced in the 2020/2021 budget speech and four new investment decisions were made, namely the Debmarine Namibia constructing AMV3 worth N$7 billion, Skorpion Zinc refinery conversion, B2Gold to develop underground mining operations and the Navachab Gold mine to develop underground mining operations.