Beginning***Africa

Namibia (1) -- Analyses -- 2010

Crisis, diamonds and uranium

01.01.2008

Namibia’s economy contracted 0.8 percent last year, after expanding 4.3 percent a year earlier, as mining output halved. Diamond production plunged to 929,006 carats from 2.22 million carats a year earlier, according to the central bank. Demand for the gems plunged as the worst recession since World War II deterred buyers of luxury items like necklaces and earrings.
“The uranium sector is on the verge of surpassing the diamond industry as Namibia’s biggest,” Luise Nakatana, a mining analyst at Investment House Namibia, a Windhoek-based brokerage, said in an interview on May 18. “If all the proposed projects come on stream, the uranium sector will play a significant role in the country’s economic growth.”
Namibian output may quadruple by 2015 as new mines are opened by companies including Extract Resources Ltd., more than doubling uranium’s contribution to the economy, according to IHN. The industry accounted for 5.6 percent of Namibia’s gross domestic product last year.
The southern African country is the world’s largest producer of offshore diamonds, most of which are mined by Namdeb, a joint venture between the government and De Beers, the world’s No. 1 diamond company. Last year, uranium sales totaled 4 billion Namibian dollars ($530 million), beating diamond sales of 3.8 billion Namibian dollars for the first time, according to Old Mutual Plc’s Namibian unit.
Uranium companies are planning to spend more than $3 billion starting operations in Namibia, he said. In 2008, the country became the world’s fourth-biggest producer, up from sixth. The Moscow-based State Atomic Energy Corp., known as Rosatom Corp., said last week that Russia is prepared to invest about $1 billion developing uranium deposits in Namibia.
The Namibian government is also likely to become a direct participant in the industry, after forming exploration and mining company Epangelo late last year. Epangelo may form joint ventures with foreign investors, Energy Minister Erkki Nghimtina said in December. While Namibia has had a moratorium on awarding new uranium exploration licenses since 2007, that’s “not holding back the industry,” said Willem Odendaal, coordinator of the Land, Environment & Development Project at the Legal Assistance Centre in Windhoek, adding that mining licenses are still being awarded and projects are going ahead. “If the government is using the time to put the best policies in place to ensure the best use of income from non- renewable resources, then it’s doing the right thing,” he said. Processed uranium, or yellowcake, traded at $41.25 a pound on May 21, having declined 7.3 percent so far this year, according to Metal Bulletin data on Bloomberg.