Namibia Mining Report Q1 2013
Business Monitor International, December 2012, Pages: 59
We are downgrading our industry forecast to account for the current economic environment and the sharp crash in uranium prices that was experienced this year. The decline in prices has led to the postponement of several major uranium projects in the country and as a result, has pushed back investments. We expect Namibia's mining industry to reach US$4.4bn by 2017, an annual average growth of 12.5% from 2011 levels.
Diamond Prospects For Namdeb And Co.
In May 2012, Diamond Fields International (DFI) confirmed the renewal of its mining licence for the ML32 Concession offshore diamond deposit for a further 10 years to 2022. The deposit is situated north of Luderitz and covers an area of more than 17,600 hectares along the Namibian coastline to the Galdovia Reef. The deposit, which produces about 88,000 carats a year, has a potential inferred mineralised resource of 42mn cubic metres, making it the largest deposit in DFI's portfolio.
News of DFI's licence renewal promises some competition in a diamond sector otherwise almost exclusively under the control of market leader Namdeb. The company controls the largest alluvial and diamond mining operations in Namibia and accounted for virtually all of Namibia's diamond output in 2011, producing 1.34mct. Namdeb plans to increase production from its flagship Elizabeth Bay mine,
from 250kct (thousand carats) to 400kct by 2014, an increase that will be partly offset by the closure of Namdeb's Bogenfels mine, which produced 53kct in 2010.
We do not believe that the strong growth experience so far in Namibia is sustainable given the current diamond demand environment. We expect production to reach 2.2mct (million carats) by 2017, an average annual growth rate of 9.1% from 2011 numbers.
Regulatory Developments
H112 saw increased speculation regarding the possible introduction of a super tax on mining activity in Namibia, leading to the possibility of further friction between the Namibian government and the independent Chamber of Mines. In February, President Mark Dawe told Reuters that the chamber was in negotiations with the government regarding the implementation of the super tax, which would likely be introduced in 2012. According to Dawe, miners are in favour of a common super tax on all operations across the mining sector in lieu of a suggested government surcharge on the profits of some companies during periods of economic growth. The super tax is expected to place less of an administrative burden on companies operating in Namibia. The news follows strong lobbying by the Chamber of Mines in 2011,
which resulted in the government aborting plans to raise the corporate income tax rate for the nondiamond mining sector from 37.5% to 44%. Despite the outcome, the Chamber believes controversy surrounding the tax has had a negative impact on foreign mining activity in the country, with Dawe indicating that 'a number of investors' had been scared away from the sector.
Key Players
The bulk of exploration and mining in Namibia focuses on diamonds, uranium and base metals such as copper, lead and zinc. A number of major players, including Rio Tinto and De Beers, have exploited the great potential for the exploration and mining of mineral resources. Diamond Fields International is a Canada-based mining firm involved in the exploration and mining of diamonds, nickel and gold in Liberia, Madagascar, Namibia and Zambia. Namdeb is a JV between De Beers (50%) and the Namibian government (50%), and is the nation's leading diamond producer. Vedanta Resources is a major Indiabased resources player with global reach. The company recently entered the Namibian market via the acquisition of the country's largest zinc mine, Skorpion Mine, through its subsidiary Sterlite Industries.
BMI Industry View 5
SWOT Analysis 7
Namibia Business Environment SWOT 7
Global Mining Outlook 8
Table: Recent Tax Increases 8
Africa Mining Sector Outlook 15
Table: Recent Government Intervention 16
Market Overview 20
Table: Namibia – Mining Industry Value & Production Forecasts, 2010-2017 21
Industry Forecasts 22
Uranium: Global Price Crash Puts Growth Potential At Risk 22
Table: Namibia – Uranium Exploration Projects 24
Table: Namibia – Uranium Production, 2010-2017 24
Diamonds: Short-Term Weakness, Long-Term Strength 25
Table: Namibia – Diamond Exploration Projects 25
Table: Namibia – Diamond Production, 2010-2017 26
Zinc: Forecasts Revised Following Production Drop 27
Table: Namibia – Zinc Production, 2010-2017 28
Regulatory Development 29
Africa Business Environment Ratings 31
Table: African Government Intervention 31
Table: Africa – Mining Risk/Rewards Ratings 32
Competitive Landscape 37
Company Profiles 38
Namdeb 38
Diamond Fields International 40
Commodity Strategy 42
Monthly Metals Update 42
Iron Ore: No Sustained Recovery 44
Steel: Temporary Relief 45
Aluminium: Respecting The Range 47
Copper: Relative Outperformer But Still Weak 49
Lead: Range-Trade Ahead 50
Nickel: Gains To Falter 51
Tin: Outperformance To Continue 53
Zinc: Little Room For Optimism 54
Table: Select Commodities – Performance & BMI Forecasts 55
Business Environment Ratings Methodology 56
Table: Mining Business Environment Indicators 57
Table: Weighting Of Components 58
Company Profiles
Namdeb
Diamond Fields International
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