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Namibia’s mining profitability improves

Mining sector in Namibia recorded an improvement in 2020, contributing 10.1% to the Gross Domestic Product despite the Covid -19 pandemic.

The sector was recognized as a key sector to drive the domestic economy, which has been crippled by the loss of tourism and other non-essential sectors. According to the Chamber of Mines of Namibia, the industry recorded a negative growth rate of 14.5% in 2020 due to reduced diamond output as a direct result of the Covid-19 pandemic, and a sharp reduction in the production of valuable Special High-Grade Zinc, owing to the suspension of operations at the Skorpion Zinc mine.

The Chamber’s CEO, Veston Malango, noted that despite the reduced output recorded by most operations, increasing prices for base metals towards the end of 2020 as well as the historically high price of gold throughout the entire year actually improved the overall profitability of the industry.

Global trade for commodities

“In combination with a mineral commodities market that is vastly improving, the mining sector is, thus, in a far better position/standing as compared to previous years, where declining life of mines and reduced exploration were concerns for the longevity of mining in Namibia. At present, existing mines are investing in mine expansion and exploration, driven by the higher prices of gold, base metals and for some industrial minerals,” said Malango.

He added that restrictions on logistics and the supply of goods impeded the global trade for commodities, which resulted in the prices of base metals to fall in the first quarter of 2020. The demand for diamonds also plummeted as a result of the pandemic, as reduced salaries and wages meant that consumers changed their spending patterns away from luxury goods to essential items.

Malango noted that sight holder sales were, thus, concluded with excess supply, creating an overflow in the diamond value chain, stating that rough diamond sales were also negatively impacted by frequent closures of major diamond cutting and polishing factories in India, and the major trading centre in Belgium. This, in turn, resulted in bottlenecks along the entire value chain, causing diamond mining operations to curtail production, including Debmarine Namibia.

Uranium was the other top performing mineral commodity in the first half of 2020, which increased to US$34/lb in June due to Covid-induced supply disruptions at the Cigar Lake mine in Canada and a three-month production cut from Kazakhstan.

Copper price traded above US$9 000 per tonne in December 2020, and hit US$10 747 per tonne in May 2021, a level not seen before the last mineral commodities super cycle of 2010-2011. Many analysts are of the opinion that this could be the start of the next super cycle, which is being driven by the electric vehicles boom, a global drive towards clean energy supply and battery storage technologies, in combination with supply deficits for major consumer countries.

 

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