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Chamber of Mines speaks on 2021, sector developments and outlook for 2022

February 07, 2022
Chamber of Mines speaks on 2021, sector developments and outlook for 2022

Namibia’s mining sector is emerging from the coronavirus pandemic-induced crisis that saw it contracting by nearly 15% in 2020. The Brief (TB) caught up with Chamber of Mines of Namibia CEO, Veston Malango (VM) to discuss the performance of the country’s mining sector in 2021, new developments and its outlook. Below are excerpts of the interview.

TB) How do you view the performance of the country’s mining sector in 2021?

VM) Full year production figures for 2021 are not yet available, however, according to the Bank of Namibia December 2021 Economic outlook, the mining sector was expected to grow by 1.2% in 2021 as compared to a sharp contraction of 14.9% in 2020. The sector’s growth for 2021 was predominantly driven by strong growth in uranium output, and a moderate increase in diamond output.

Gold production is also expected to contribute to growth, as the B2Gold mine posted record annual production in 2021, an 18% increase from 2020. The contribution by base metals is expected to decrease in 2021 due to the early closure of the Skorpion Zinc refinery from which there was some production in 2020 and the Tschudi copper mine being on care and maintenance.

TB) What were the major challenges faced by the sector 2021?

VM) Some of the main challenges facing the sector were mostly a result of the COVID-19 pandemic, especially during the 3rd wave and the most recent 4th Increased infections during the 3rd and 4th wave created staff shortages and disrupted operational shifts. Sadly, the mining sector also suffered a great loss of personnel in 2021 due to the corona virus, with a total of 39 deaths as at 31 October 2021.

Another challenge for the industry in 2021 were some of the continued regulatory uncertainties. The final NEEEF/B and NIPA Bill are yet to be finalised and enacted. These are two vital pieces of legislation that will shape Namibia’s investment climate and have been pending for more than 5 years. This has a negative impact on future business decisions as it is not certain what the final pieces of legislation will entail, and whether they will be conducive for investment in Namibia generally and the mining sector. These are the main factors contributing to Namibia’s poor performance on the Fraser annual surveys and Reports which ranks countries according to their investment attractiveness. 

TB) In terms of regulation reforms for the sector, do you think enough was done to create an attractive and conducive environment for the sector in 2021 by government?

 VM) Yes, in 2021, the Ministry of Finance worked on some positive changes to the VAT Act based on the Chamber submission to rectify the deficiencies in the VAT legislation. The draft changes now make provision for exploration companies to register for VAT and also be eligible for VAT refund claims. The current VAT act does not make provision for exploration companies in this regard, which has increased the cost of exploration in Namibia during the last five years as companies have not been able to claim VAT refunds from Inland Revenue.

Another positive regulatory development in 2021 were the administrative reforms made by the Ministry of Mines and Energy to bring about a more effective and efficient licencing procedure. The reforms were made in a timely manner, and the Chamber hopes to see this facilitate increased exploration especially in a highly conducive commodity price environment. The reforms also include an increase of licencing fees, which the Chamber views to be a positive development as such fees have not been increased since independence, and is a valuable and viable source of resource rent for government from Namibia’s minerals.

TB) What regulatory reforms are you looking forward to in 2022?

VM) The Chamber will continue to engage Government on the pending legislation, including NEEEF and NIPA, and other pending matters that need to be resolved with the Ministry of Mines and Energy such as the 15% ownership retention and other items.

TB) There are allegations that some of your members are flouting regulations by exploring for resources without having the pre-requisite licences. What is your comment on this?

 VM) Not exactly sure what is meant by this question, or which members are being referred to. All of our members have legitimate licences, and are required as such to comply with Namibian laws and also with the Chamber of Mines Constitution, Code of Conduct and Ethics.

TB) We have seen a lot of acquisition and investment into Namibia focused companies last year especially Canadian listed entities. Of what impact does this have on the sector and its growth going forward?

VM) Generally, this is very positive for industry as most of these developments have occurred in the exploration space. Increased investment by Canadian listed entities raises the probability of discovering and developing new mines.

However, this comes with a caveat in that some licence holders, and these are not only Canadian entities, may not intend to meaningfully contribute to exploration, but rather look to raise money on stock exchanges through the licences they hold for individual gain as opposed to advancing exploration projects in Namibia. It is against this background that MME has reformed administrative procedures to prevent renewal of licences to non-performing EPL holders.

TB) What is the Chamber’s view on government’s drive for the development of the country’s green hydrogen sector in the country, green hydrogen in general and has they been consultations on the drive with you as a body?

VM) The Chamber is supportive of government’s drive for the development of the country’s green hydrogen sector as Namibia is indeed well positioned and endowed with renewable energy resources required to develop such an industry, which would be highly beneficial for the country. There are also some exciting linkages that exist in the production of green hydrogen within the mining sector. The industry has started to invest in renewable energy, and there are opportunities for the mining sector to benefit from the establishment of IPPs to support a green hydrogen industry in the South, and vice versa.

Secondly, there are also exciting opportunities to support a potential steel industry, which could materialise from Namibia’s increased output of iron ore from Lodestone’s operation. To produce green steel through recently developed technologies, it is possible to use hydrogen instead of coking coal in the steel making process.

The mining sector is participating in research for transforming haul trucks into green hydrogen driven mining equipment. The research is spearheaded by German technology firms in collaboration with UNAM. Moreover, since green hydrogen will be converted into liquid ammonia for ease of transportation, there is potential for production of ammonium nitrate which would increase benefits to mining as this product is the primary ingredient for explosives in mining operations, in addition to its use as a fertiliser for the agriculture sector. In short, green hydrogen industry has the potential to be integrated with other sectors of the Namibian economy, in and addition to being a primary export.

However, the Chamber is cautiously optimistic that such an industry will be developed in the five-year time frame that has been earmarked by Government, as it is recognised that major investments are required for this industry, and for this industry to flourish, regulatory and policy frameworks still need to put in place. Moreover, the industry is still very much in the research and development phases, especially on how to store and transport green hydrogen in a cost effective and carbon neutral manner.

TB) There are increased calls for countries to do away with fossil fuels. What is the Chamber’s views on that, amid resistance from African countries and does that not impact investment in your domain and activities of some of your members?

 VM) The Chamber believes that it is important to minimise the carbon footprint of mining operations. Mining operations around the globe, including members of the Chamber are increasingly pursuing new green technologies and investing into renewable energy sources to minimise their carbon dioxide emissions. This forms an important part of their reporting and governance structures which incorporate ESG standards and metrics.

However, it must be remembered that African countries generally have low carbon footprints, and more specifically, Namibia is a carbon sink meaning that it absorbs more carbon dioxide than it emits. It is not economically viable for most mines to use 100% renewable energy, and thus be carbon neutral. The economic losses versus the environmental gains thus carefully need to be assessed when restricting the use of fossil fuels or eradicating them entirely. The global transition to a green economy should be gradual, rather than abrupt.

TB) Finally, what is your outlook for the sector in general for 2022 and its contribution to the country’s economic recovery?

VM) The Chamber holds a strong view that the mining sector will continue to support Namibia’s economic recovery in 2022, and record another year of growth. 

The outlook for the diamond sector is particularly favourable, as production is forecasted to increase from Dembarine’s new vessel, the AMV3, which is scheduled to commence operations along the Namibian coast in the second half of this year. Secondly, the old Kombat copper mine has been brought back into production by Trigon metals and will ramp up production this year. The mine produced the first shipment of copper concentrate during December last year.  

The outlook for mining is extremely positive in a commodity price environment that remains favourable for investment into mining, not to mention the consistently improving uranium price that has been observed in the last 5 months. There are some prominent gold exploration projects that have proven viable resources for mine development, as well as advanced uranium projects that will likely enter mine development once the incentive price of 65US$/lb is reached.

 

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Last modified on Tuesday, 08 February 2022 16:51
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