Namibia is a top-class mining destination — Leon Louw shares some of his first-hand experiences of this country.
|Projects to look out for in 2019|
|There is a renewed interest in Namibia’s exploration sector, with a notable increase in the number of active projects in the country.
Source: The Namibian Chamber of Mines
Namibia’s mining history dates back many, many years. Diamonds were discovered on the coast at Luderitz more than a century ago, and the country has become a thriving diamond producer, with the Namdeb Diamond Corporation and De Beers Marine Namibia leading the way. Uranium was first discovered in the 1920s. In 1966, global mining giant Rio Tinto secured the mining rights for a massive deposit at Rössing, in the Erongo region, about 70km from the coastal town of Swakopmund, and the company started production 10 years later.
Although a consistently low uranium price since 2011 (when the Fukushima nuclear disaster happened in Japan) has caused considerable pain for the Namibian uranium sector and for the economy in general, the country still boasts three of the top uranium mines in the world: Rössing (which Rio Tinto recently sold to the China National Uranium Corporation), Paladin Energy’s Langer Heinrich, and Swakop Uranium’s Husab operation, all located in the Erongo region, are mega projects. When one considers that Orano Mining’s (previously Areva) Trekkopje mine is on care and maintenance, it is an exciting prospect to envision all four uranium mines in full production once the uranium market recovers.
At current uranium prices, however, these mines are not at full capacity. The depressed market recently resulted in Paladin’s Langer Heinrich uranium mine being placed on care and maintenance. Namibia, however, finds itself in a unique position as Swakop Uranium’s Husab mine is owned by a Chinese parastatal, which is using the yellow cake (uranium concentrate) for direct use in its nuclear reactors. The new mine, which entered into production at the end of 2016, is expected to reach full production in 2019 and is set to become the world’s second-largest uranium mine.
A proliferation of exploration
According to Lauren Davidson, economist at the Namibian Chamber of Mines, there has been a significant increase in exploration projects over the past two years, and in 2017, NAD300-million was spent by exploration companies in Namibia, which is expected to increase significantly in 2019.
“There has been a proliferation of exploration projects in the country over the past two or three years and most of it has been driven by an increase in demand for battery minerals and minerals required for the manufacture of new technologies. These minerals consist of lithium, graphite, rare earth elements (REEs), cobalt, copper, and tin, most of which are used in energy-saving batteries or other components in electric vehicles,” Davidson tells African Mining.
Several companies are, in fact, already mining some of these minerals, or are in the final stages of bringing their projects into production. Despite running into trouble in the latter stages of 2018, mostly due to price fluctuations, Canadian company Desert Lion Energy delivered its first shipment of lithium to a Chinese off-take partner in 2018. There are also several prominent projects for REEs and a recently discovered cobalt deposit, in the north of Namibia.
Not only does Namibia seem to be replete with several minerals that could have some sort of use in the Fourth Industrial Revolution, but many exploration geologists regard it as one of the best countries in Africa to look for new deposits. The geology is fascinating, the infrastructure first class, and the ease of doing business is a little bit easier compared to other countries in Africa.
Find a geologist
When driving through the remoteness of Namibia, trying to understand the geology and the country’s mining industry, it is best to find a well-versed geologist to drive with you.
Traversing the arid landscape is a lesson in geology from day one. Its wide, open spaces, inselbergs, sedimentary deposits, sandy plains, and windy valleys tell a story of rumblings, volcanic outbursts, and endless erosion. African Mining had the opportunity to drive with Tim Marais, geologist at AfriTin, to the company’s new project close to Uis, about two hours north-east of Swakopmund. Iscor mined the Uis tin deposit from the 1950s, but when sanctions were lifted in South Africa in the early 1990s and it became cheaper for South Africa to source its tin globally, the company was forced to suspend operations at the mine. Marais has done exploration work in several different countries throughout Africa and regards Namibia as the best by far.
Walking through the numerous pits (and there are many) left by Iscor at the historical mine of Uis, is an astonishing excursion. The black tin spots are scattered across the host rock, and although low grade, the deposit is larger than one would expect it to be. Marais says a lot of exploration still needs to be done, though. “It is well known that the pegmatites and tin are found in a massive belt that stretches south-west for about 120km all the way from here [Uis] to Henties Bay on the coast,” says Marais.
AfriTin has recently acquired more exploration licenses in the area, and it will be interesting to see what their exploration work uncovers in the future. The improved tin price has made it possible for AfriTin to relook the mine and the company has enough exploration data to prove a viable project. A pilot processing plant is currently under construction, with first production scheduled early in 2019.
These pegmatites in the Uis area might also host the sought-after new mineral on everybody’s lips: lithium. About 50km north of Uis, as the crow flies, Tony Harwood’s Montero Mining (Canadian listed) might have stumbled upon an interesting deposit at Soris, where they have done preliminary drilling. Harwood says Montero will start operating next year and although a lot still needs to be done before then, it is something to keep an eye on.
Search for pegmatites and lepidolites
The Erongo and Omaruru regions are a geologist’s dream, particularly if you are interested in pegmatites. Pegmatites are formed when granitic magma cools down and produces exceptionally large crystals in the final stages of crystallisation. These crystals sometimes contain rare minerals like lepidolite, which is used to produce the necessary oxides in the production of lithium. The lepidolites further south-east from Uis (about 180km) at Karibib, halfway between Swakopmund and Windhoek, does, in fact, contain lithium, which another Canadian company, Desert Lion, is currently looking to develop.
During our visit to Namibia, African Mining visited Desert Lion Energy’s license area, which includes two main mining sites: Helikon and Rubikon. Two smaller pits are associated with Rubikon, while more than seven smaller workings are found close to Helikon. In addition, about 32 historical stockpiles are scattered throughout the entire license area, on top of even more artisanal workings, tunnels, and open pits.
Unfortunately, the lithium price took a hit in August 2018, which currently makes it unprofitable to mine the stockpiles on site. “The plan was to generate enough material from the surface stock to supply Chinese off-take partner and lepidolite converter Jaingxi Jinhui Lithium Company for a full year or so, from which enough capital would be generated to start mining from the open pits. Desert Lion Energy delivered its first shipment of 30 000 tonnes of lithium concentrate to the Port of Walvis Bay in April last year,” chief operating officer Johan Coetzee tells African Mining.
Lithium market disrupted
A proliferation of lithium mines in Australia and an oversupply in China have temporarily disrupted the market. Desert Lion Energy had to suspend all mining activities just after African Mining visited the project and soon after, the company was awarded with its mining license by the Ministry of Mines and Energy of Namibia, which meant it could start mining in situ material.
Nonetheless, Tim Johnston, CEO of Desert Lion Energy, assured us during a follow-up phone call that the lithium market remains strong, with growth of 12–14% year on year. “We remain hopeful that the market will turn and that the project will be back on track soon. We will continue developing the asset and we are in discussions with our Chinese partners Jaingxi Jinhui, as product pricing will dictate the form in which we restart the operation,” Johnston said.
Desert Lion Energy’s mining license has been granted for an initial 10-year period and covers an area of 68.7km², which includes the area where the Rubikon and Helikon mines are located.
With the development — and success — of Canadian company B2Gold’s Otjikoto gold mine close to Otjiwarango in the Otjozondjupa region of Namibia, gold mining has received renewed focus in the country. B2Gold, another mine recently visited by African Mining, runs a tight ship at Otjikoto and has continuously recorded successes at the mine. Otjikoto consists of two open pits about 200m deep, and boasts recoveries of more than 98%, which makes it an outstanding producer in the global mining community.
Gold mining is not foreign to Namibia. Most of the country’s gold is produced from trace amounts in sulphide minerals. Gold was first discovered near Rehoboth in 1899, and the metal was mined at Golden Valley in the Rehoboth district for many years.
Though, from 1917 to 1963, gold exploration work in Namibia focused on the Ondundu goldfields in Damaraland; an area which today is targeted with renewed vigour by B2Gold’s exploration team and where Namibia’s third gold mine is most likely to arise. New technology and exploration methods have enabled exploration geologists to relook some of the historical gold mining areas in Namibia, as well as to search for new discoveries. Several exploration teams have set up base in the country.
Talking about mining to old-timers in the Erongo region always elicits conversation about the great unknown gold and copper deposits closer to the Angolan border. It might not be too far-fetched, not only for gold and copper but also for cobalt, as Gecko’s Opuwo cobalt project in the Kunene region proves. Results at this project have been really promising, confirming sediment-hosted copper-cobalt mineralisation at 15km of strike.
A company called Osino Gold Exploration is also doing good work in the central and northern regions of Namibia, and their results, in pursuit of gold deposits, have been positive.
New hope in Karibib
Meanwhile, exploration work is ongoing in the marble-and-lepidolite-dominated region of Karibib, an area known for its gold deposits. Namibia’s first major gold producer, Navachab, set up shop between the hill, hummocks, and marble quarries of Karibib. Although the mine is still in production today, it has faced a number of challenges, and a new discovery might just revive hopes for Navachab, which at one stage was operated by mining giant AngloGold Ashanti.
Navachab was originally owned by the Erongo Exploration and Mining Company (70%), in partnership with the Metal Mining Company of Canada (20%) and Rand Mines Exploration (10%). AngloGold acquired a 70% interest in the mine in 1998, after which it bought all the shares in 1999. In 2004, AngloGold and Ashanti merged to form AngloGold Ashanti.
AngloGold Ashanti sold the mine to QKR, a private company in which Namibia’s state-owned mining company Epangelo is a partner. QKR still operates the mine today.
Hopes are high for a new gold discovery in Namibia, and all the geologists whom African Mining spoke to, are confident that with new technology, two or three new deposits might be on the cards in Namibia soon. In addition to the areas mentioned above, minor gold prospects have also been identified in the Windhoek, Swakopmund, and Luderitz regions.
Challenges in Namibia
There are many exciting new projects in Namibia, and the country certainly lends itself to develop as a major mining destination. The roads in Namibia are first-rate, it boasts one of the best ports in Africa (Walvis Bay is currently being expanded — read more on page XX), the geology is fantastic, regulations favour exploration, and electricity should not (for now, at least) be of concern. But like most countries in the world, there are risks and challenges.
Davidson says that the other challenge facing mining operations in the country is the disintegrating railroad infrastructure. “The country has a brilliant port, good roads, and airports, but the rail network is in serious need of refurbishment and upgrading to accommodate the volumes that are required to be transported by the mining sector. This has been one of the major challenges and has affected mines, particularly in the central to northern regions,” she says.
Coetzee, the previous president of the Namibian Chamber of Mines, says the biggest challenge for most mines in Namibia is the fact that they are so remote. “They are not only remote from town, but also remote from all the suppliers. This means they have to look at the stockholding of critical spares very carefully, and also at the lead times when ordering these spares,” he says. “Most of the spares are sourced from South Africa, and the lead times are long. With the business environment weak, suppliers are also not keeping stock, so it becomes a logistics and supply chain challenge more than a mining challenge,” he explains.
Commodity price fluctuations can wreak havoc with any country’s mining industry, so that is certainly not a unique challenge for Namibia. The persistently low uranium price has been a major challenge for the country’s mining industry over the past five years, which has hamstrung potential for uranium projects and existing mines, except for Swakop Uranium’s Husab operation. Namibia is blessed with huge uranium deposits, and if the price had been more favourable over the past five years, the industry would be thriving today.
Namibia has four prominent uranium projects that are geared to enter production once the uranium market recovers. For these operations to be profitable, they require a price of USD65 per pound. In July last year (just before African Mining visited Namibia), it was still hovering around USD20 and has subsequently risen to USD29 per pound as a result of supply disruptions in the markets “Even this small increase was good news, but there is still a lot of uncertainty. However, the general outlook generally remains positive,” says Davidson. The uranium price will pick up again; unfortunately, it is a matter of getting the timing right.
According to Angula Kalili, chief operating officer at Swakop Uranium, there are enough local suppliers in Namibia to service the mines; however, the scale of the mines’ requirements can be a risk to business continuity from a surety of supply and timely delivery of required quantities. “When Husab needs pumps, for example, we often need more than one pump, while the size of the equipment is unlike anything your everyday supplier in Namibia is used to. But, it is part of our social improvement commitment to support local businesses, and we try to assist them where we can,” says Kalili.
Another challenge is the lack of relevant skills, which is not always available in Namibia. “As a result, we’ve brought in a number of expatriates for some of the functions, but we try to keep these numbers as low as possible. Currently, about 95% of our workforce is local and only 5% are expatriates, mostly from South Africa, Zambia, and China,” says Kalili.
Water is key
Access to water is another possible risk when operating in Namibia. The country is water scarce, with the mines in the southern and central regions being most vulnerable to water supply risks. Water security for uranium mines in the coastal region is a smaller risk, as they have guaranteed water supply from Orano’s desalination plant.
At the moment, Orano Mining’s desalination plant is pumping 12 million cubic metres per year into the public utility NamWater’s supply (see the article on page XX of African Mining). The plant is capable of producing about 20 million cubic metres of potable water per annum.
According to Kalili, water is critical. “If Trekkopje decides to mine, we are stranded. The quantity of water that we require only they can provide us with; we don’t have enough capacity from local sources. So yes, it is a significant risk for us. We are, however, working at mitigating that risk. NamWater has the same problem,” says Kalili.
Kalili says that uranium mining is water intensive and to source enough water in a desert environment is problematic. “We use about 0.6 cubic metres per tonne. This is all part of the risk that we need to evaluate and assess,” he says.
In some areas of Namibia, the electricity supplier, NamPower, is not able to connect remote mines onto the national grid, which has resulted in some mines generating their own electricity. B2Gold’s Otjikoto gold mine, for example, uses HFO generators and recently installed a large solar plant to add to its current power supply.
The cost of building transmission lines to remote areas are exorbitant and most mining operations try to avoid these costs. During the visit to Desert Lion Energy’s site, all the mobile plants were run by generators, but Coetzee said that the company is in continual discussions with NamPower to tap into the national grid in the future. Once connected, though, the cost of using electricity is expensive. The largest percentage of Namibia’s electricity is supplied (at great cost) by neighbouring South Africa’s government utility Eskom, which, in itself, has been under pressure to keep its coal-fired power stations burning, and that exposes Namibia’s consumers to additional risk.
As we enter 2019, Namibia should really be close to the top of any investment inventory. Despite the lure of massive, high-grade deposits in other parts of Africa, which promises big rewards, the risks in these countries might just be too great for the liking of big funds and financiers. In comparison, Namibia’s geology is fascinating, and although some ore bodies are large, the reality is that they are more often than not low-grade deposits. However, they are good enough to outweigh the risks the country presents. Namibia is ‘Africa Light’, as the CEO of one of the operating mines in Namibia once told me, and it deserves the attention of more exploration companies.