Dealing with Namibia’s exploration boom

Namibia has become one of the most exciting mining destinations in Africa. Lauren Davidson, Economist at the Chamber of Mines of Namibia, spoke to Leon Louw of WhyAfrica about the opportunities, challenges, and the outlook for mining in Namibia over the next few years.??

Lauren, the Namibian economy has recovered somewhat from the effects of Covid-19, although there are still many challenges? What are the risks to Namibia’s growth outlook?

The Namibian economy posted a growth of 2.7% in 2021, indicating a solid recovery post Covid-19. This was supported by a strong growth in the mining sector which grew by 10.1% and a recovery in the tertiary sectors. The IMF forecasts a growth of 3% and 3.2% in 2023 and 2024 respectively for Namibia, which will be supported by strong increases in diamond, uranium, and gold output as well as a rebound in tourism as Covid-19 measures and restrictions are relaxed around the world.

However, there are significant risks to Namibia’s favourable growth outlook. This includes its escalating public debt bill (which is forecasted to reach 78.9% of GDP by the end of 2022), as well as increasing inflation and interest rates with rate hikes expected to continue well into to 2023. If Namibia can effectively manage its public debt and some of the macro external pressures, it is well positioned to reap the benefits of new economic opportunities that include the development of a Green Hydrogen sector, major offshore oil discoveries and an improving minerals commodity market.

Despite Namibia’s economic woes over the past two years, the mining industry, and especially the exploration sector, is booming. What, in your view, are the reasons for the renewed optimism?

There are several reasons for the renewed exploration hype in Namibia. Primarily, this is because of an improving minerals commodity market, which is supporting increased capital inflows into exploration around the world. Namibia being a peaceful and stable jurisdiction, with a relatively favourable policy environment thus remains a competitive destination for capital inflows into exploration activity.

Supporting an improving minerals commodity market, and a very long-term favourable outlook in our view is the world’s transition to green technologies and an ever-increasing impetus on minimising environmental impact and reducing carbon footprints.

The evolution and development of green technologies require a range of battery minerals, rare earths particularly for storage as well as base metals. What makes Namibia an even more attractive destination for exploration is that it is home to an array of battery minerals, which include tin, lithium, tantalum, cobalt, and others, as well as base metals and recent discoveries of rare earth metals.

Lastly, the green revolution has?recently included a shift by prominent developing countries that acknowledge nuclear as a carbon neutral and sustainable source of energy. This shift by some prominent political leaders in Europe is also supporting a long-term improvement in the uranium price, in which demand is expected to outstrip supply.

Namibia is?home to some of the world’s largest uranium deposits, and the second largest uranium mine, and is thus also a very sought-after destination for this mineral.

The number of new exploration projects in Namibia must surely be at an all-time high? Are more exploration companies active in Namibia compared to four or five years ago?

We do not have official data on the total number of active exploration companies in Namibia. While the most prominent exploration companies are members of the Chamber, not all active exploration companies are within our ambit of which there are quite a few.

However, exploration expenditure by our members alone increased by 57.5% in 2021, a sure indication that exploration is at an all-time high and sets a very promising outlook for further potential increases in mining output.

In your view, which new projects should we keep an eye on over the next few years?

The first promising project to keep on the radar is AfriTin’s Uis tin mine which has redeveloped an old tin mine. AfriTin has established a processing plant, from which it is producing tin concentrate at a small scale. AfriTin is currently working on the expansion of the operation to produce 5,000 tonnes per annum, with the possible inclusion of lithium and tantalum as by-products.

Northern Graphite is also restarting the Okanjande Graphite mine just outside Otjiwarongo.

The prominent uranium projects are Bannerman’s Etango-8 project and Reptile Uranium’s Tumas projects which have both completed prefeasibility studies and displaying strong project economics.

Both companies are progressing work and finalisation of the feasibility studies for these projects, and have strong shareholder backing. Ultimately, their development is dependent on the favourable recovery of the uranium price.

Osino Resources is also quickly moving towards the development of Namibia’s next gold mine, the Twin Hills project, which has recently completed a Prefeasibility study, and the company is aiming to fast-track mine development in the next three years. \

Lastly, Namibia?has promising deposits of rare earths, and one project is already quite advanced in terms of resource definition. The challenge remains on the processing side for rare earths, for which there is significant test work being done to investigate economic processing and extraction technologies

Are you confident that most of these exploration projects will be developed into fully operational mines in the future?

Yes, I do believe that the advanced projects will come into development as the studies thus far demonstrate favourable economic parameters, and these are further supported by the positive long-term outlook for mineral commodities, especially uranium, battery minerals, and base metals.

Moreover, the projects are being explored by credible companies that have strong technical expertise and shareholder support, which have allowed them to secure a steady source of financing and capital for exploration and development work, making future financing for mine development easier to raise.

Does Namibia have sufficient infrastructure in place to develop its growing minerals and energy sectors (in terms of roads, rail, port, electricity) and what are the plans moving forward?

Namibia definitely has the necessary, and stable infrastructure to support a growing mining sector. The Walvis Bay Port is quickly becoming a preferred and competitive shipping and logistics hub, which has crucial connections to major towns and cities in the rest of Southern Africa and the continent either through road or rail infrastructure.

Namibia has security of power supply, although this may be imported predominantly from South Africa, and has reliable and well-established distribution networks. Moreover, Namibia is working hard to become energy independent, and even a net exporter of energy through its ambitious plans to produce green hydrogen.

With regard to water, there are challenges with the current water supply especially at the coast which is not sufficient to meet the future demand of new uranium mines and development.

Government has initiated plans to construct a second desalination plant through a PPP arrangement, however, the progress of confirming and finalising this investment remains uncertain.

The salt mines of Namibia are not always in the news. How significant are these mines and their contribution to the global supply of salt?

Although they may not be a massive revenue generator, the salt mines play a major role in supporting and driving growth of Namibia’s coastal economy.?Firstly, they create significant employment opportunities for local Namibians and generate revenue for Government through corporate taxes and royalties.

Moreover, one of the salt mines has major export markets in Angola, Brazil and South Africa and thus make use of dedicated storage facilities at the Walvis Bay Port, supporting the economic infrastructure and Namport.

There is also significant value addition taking place locally, in the production of refined salt and various types of table salt?which is sold locally and exported.

Further value addition opportunities exist for Namibia’s salt in the production of caustic soda which has possible applications and uses in the local chemical industry and in the processing of uranium.

What is your outlook for the mining industry in Namibia??????

I am extremely optimistic about the outlook for Namibia’s mining sector. In addition to the uptick in exploration activity that we are witnessing, a number of existing mines have made major capital injections to either expand??their operations or extend the life of mine, as we have seen with Debmarine’s impressive NAD7-billion Benguela Gem, B2Gold’s underground Wolfshag project, the Rosh Pinah Zinc expansion project and Navachab gold project.

This is supported by an improving mineral commodity price environment. As a peaceful and stable jurisdiction with strong supporting economic infrastructure, I do believe that Namibia is competitively positioned to take advantage of the increased flows of capital into exploration. However, this will require careful management by Government of the policy, regulatory and legislative aspects pertaining to Namibia’s mining sector so as to continue supporting the growth of its exploration and mining sector.?

Leon Louw is the founder and editor of WhyAfrica. He specialises in African affairs, the extraction and responsible utilisation of natural resources in Africa, and Africa’s political economy.?

WhyAfrica reports about, and publishes newsletters, magazines and research reports about natural resources and the primary sectors of African economies, and the infrastructure, equipment and engineering methods needed to extract and utilise these resources in an efficient, responsible, sustainable, ethic and environmentally friendly way, so that it will benefit the people of Africa.

Furthermore, WhyAfrica promotes Africa as an investment and travel destination, analyses the continent’s business environment and investment opportunities, and reports on how the political economies of African countries affect their development.?????????

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