MAY 2019

MINING 1 JOURNAL

TOO LATE FOR

VALUE-ADDITION? Innovation ...Miners are not manufacturers boosts Chamber of Mines Debmarine performance EVOLUTION OF NAMIBIA’S MINING TOWNS NAMIBIA IS NOW CONTRIBUTIONS OF MINING TO THE NAMIBIAN ECONOMY LESS ATTRACTIVE mining journal INVESTING IN A BRIGHTER FUTURE FOR ALL NAMIBIANS

Debmarine Namibia is proud to be a significant contributor to the national treasury and the global leader in marine diamond recovery . MAY 2019 A PUBLICATION OF THE NAMIBIAN | MAY 2019 MINING JOURNAL 3 COMPILED BY Tangeni Amupadhi (Editor)

SUB-EDITORS Nick de Voss Matthew Dlamini Tommy Katamila

CONTRIBUTORS Adam Hartman Roman Grynberg Nghinomenwa Erastus Angelique Peake Indileni Nanghonga Lazarus Amusheke Paul Cooper PWC Chambers of Mines

COVER PHOTO Debmarine Namibia Embracing Innovation

DESIGN & LAYOUT Charlton de Waal Lotta Kaapanda

SALES Zack Sheehama Phozia Mouton Noriene Van Wyk Morina Britz Lo-Ammi Podewiltz Jezuva Keeja Dwight Links Anna Ndemugwedha

PRODUCTION Charlton de Waal MANAGER

PRINTERS CTP Printers

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Publisher: The Free Press of Namibia (Pty) Ltd.

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This is a free publication.

This special supplement can also be accessed on our website at www.namibian.com.na

mining journalmining journal a publication of the namibian Contents uranium ... keeping head above water a namibian industry34 At Kolmanskop, the sand-filled buildings of a former diamond mining town attract tourists by the thousands. ghost 42 town 4

namibia 18-19

now attractive less

promoting miners SMALL SCALE MINERS 20 OPERATING IN THE GEMSTONE small Inside... INDUSTRY P-6 foreword – minister tom alweendo P-8 simonis storm mining sector THANK YOU TO OUR review 2019 P-11 the goose continues to ADVERTISERS lay golden eggs P-14 too late for value addition ? COMPANIES P-20 small miners P-22 rmb mining expo 2019 • AFRICA PERSONNEL SERVICES • NAMIBIA SOCIETY OF ENGINEERS P-26 evolution of namibia’s • B2GOLD NAMIBIA • NAMPORT mining towns • CERALINE • NATIONAL PETROLEUM CORPORATION uranium industry • CYMOT • NHP P-34 • DE BEERS GROUP • NUST P-38 celebrating 50 years of • DEBMARINE NAMIBIA • OLD MUTUAL excellence – chamber of mines • DINAPAMA • OSINO RESOURCES CORPORATION • DUNDEE • PROTEA CHEMICALS NAMIBIA ,PTY, LTD P-40 women in mining • DUPWIES MANAGEMENT SERVICES • RENAISSANCE HEALTH P-42 ghost town • FIRST NATIONAL BANK • RÖSSING URANIUM LTD P-44 namdeb’s legacy • GIZ WINDHOEK OFFICE • SAT-COM • KOMATSU NAMIBIA • SIMUNYE TRAINING & DEVELOPMENT P-46 contributions of mining to • MANICA GROUP NAMIBIA [PTY] • SWAKOP URANIUM namibian economy – pwc • MINCON NAMIBIA (PTY) LTD • TAURUS MAINTENANCE PRODUCTS NAMIBIA [PTY] LTD P-52 de beers and the rush to gem • MINISTRY OF MINES AND ENERGY • TOTAL NAMIBIA • NAMDEB • ULTRA SCALES WINDHOEK quality synthetics • NAMIBIA NUCLEAR CORPORATION • VIVO ENERGY NAMIBIA

foreword

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Tom K Alweendo, MP Minister: Mines and Energy

IN 2018, the mining sector contributed 14% to our GDP, and that the mining sector will continue to be an important it is expected that by 2022 the sector’s share of the GDP will contributor to the economy only when we discover more exceed 15%. minerals. This huge contribution suggests that for the foreseeable The first thing is that we need to have a good understanding of future, the economy will be dominated by the mining sector. our mineral potential. We need to invest in a comprehensive Given the impact the mining sector has on the economy, it geological mapping. Fortunately, the emerging geological therefore goes without saying that we need to be pragmatic mapping technology has made it possible to obtain accurate in the management of the sector. mineral resource assessments. Because of the importance of the mining sector, it is no The second is to do everything possible to attract surprise that the Namibian people, who are the real owners investment, both local and foreign, in mineral exploration. of the resources, want to know how the mineral resources We also need to be aware of the fact that exploration is a are exploited and utilised. high-risk investment. It is estimated that the chances that an They have a legitimate expectation that the mineral exploration will lead to a successful mining operation is 1: resources are shared equitably. 1000 and the lead-time can be as long as between 10 and A common question being asked is whether the mining 15 years. sector can do more for the economy. Can we not add more In order for us to attract investment in exploration, we value to our minerals before they are exported in raw form? need to do a number of things. One of these things is to What about the mining industry sourcing locally produced periodically review our mineral licensing legal framework. goods and services as inputs for their mining activities? This is necessary in order to ensure that we continue to be What about local ownership of the sector and the issue of competitive in attracting investment, both local and foreign. economic empowerment? It is not helpful when it takes an inordinate long time for us My general answer to these questions is–yes indeed. There to finalise the processing of licensing applications. It will is no reason why we should continue to export all our be self-defeating when we impose impractical licensing minerals in raw form–some of which can easily have value conditions; or when our policies are unpredictable. added to them. Going forward in steering our mining sector to the next What is needed is a comprehensive dialogue between all level for an enhanced contribution to our socio-economic relevant parties, which takes place in an environment of development and prosperity, let us recognise that in this mutual trust. A dialogue that seeks to discover what is in the 21st century, things do not necessarily work like they used to. best interests of all parties. What will be required of us is to unleash the creativity and A dialogue will help us discover that value addition and the brainpower of our people, especially the youth. We also need to have an enabling investment environment are not need to venture into unexplored fields and do things no one mutually exclusive, as some want us to believe. has done before. I am happy to note that such a dialogue has been taking If we, as a collective, approach our challenges in the place between the mining industry and the Ministry of Harambee spirit and with creativity, innovation and Mines and Energy. courage, the mining sector will continue to be an important One important fact that must always be kept in mind is contributor to our socio-economic well-being.n

mining journal a publication of the namibian

ss - mining sector review 2019

8 Namibia Mining Sector Review 2019

“Exploring the key trends of 2019”

mining journal a publication of the namibian ss - mining sector review 2019

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FULL PAGE ADVERT ss - mining sector review 2019

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Ø golden eggs Goose continues to lay golden eggs

LAZARUS AMUKESHE 11 MINING companies made a record N$30 billion revenue in 2017, surpassing the previous highest figure of about N$28 billion. The high performance bucked the depressive trend of the Namib- WHY CHOOSE ian economy, cementing mining as the main player for the fore- RENAISSANCE HEALTH MEDICAL AID FUND seeable future.

The Fund offers a RICH BENEFIT STRUCTURE. From the N$30 billion, the government got N$5,5 billion in taxes,

with three fifths of it coming solely from Namdeb Holdings and its The Fund covers in excess of 31 000 LIVES (beneficiaries) subsidiaries. Namdeb, a 50:50 joint venture between the Namibian and is the 3rd largest open Medical Aid Fund in Namibia. government and diamond conglomerate De Beers, has been consist- ent as the single biggest taxpayer. The Fund is MEMBER OWNED and is managed by an independently elected and appointed Board of Trustees. Excluding Namdeb, other mines made N$18 billion revenue in 2017, and the state got about N$2,2 billion in an assortment of taxes The Fund is administered by Prosperity Health Namibia, the and dividends. This is according to information from the Chamber only 100% NAMIBIAN registered and 100% NAMIBIAN of Mines. The figures exclude Swakop Uranium’s Husab mine, a Chi- owned Administrator. nese-controlled mine said to be secretive about how much they earn Renaissance has one of the BEST DEMOGRAPHICS within and pay in taxes. the Industry which contributes to the stable environment and The figures show that the Namdeb group earned approximately lower increases. N$11 billion in 2017 and paid around N$3,3 billion of that to the government. An analysis further shows that of N$2,13 billion paid NATIONAL FOOTPRINT: Renaissance has the widest service footprint throughout Namibia which includes a head office as corporate taxes by all mines, Namdeb’s contribution was N$1,92 in Windhoek and branch offices in Walvis Bay, Ongwediva, Swakopmund, Rosh Pinah, Oranjemund, Lüderitz, Tsumeb billion, about 90%. and Keetmanshoop. Further dissection shows Rosh Pinah Zinc, who earned N$1,55 bil- lion, paid the second highest corporate tax at N$213 million. Thus, N$2,13 billion of corporate tax was paid by two entities with THE NEW a N$13 billion combined revenue, while other mines with a tally of BENEFIT WALLET REWARD PROGRAMME N$16 billion paid less than N$100 million. Renaissance Health is rewarding members for doing activities that On royalties –– all mines combined paid N$1,52 billion with Nam- promote their overall wellness. The reward programme encourages members to lead a healthy lifestyle by providing incentives and deb responsible for N$1,15 billion, and the remaining mines some rewarding members for managing their health. N$370 million. Bringing in Rosh Pinah Zinc again, who paid N$83 million in royalties, we have another indicator of only two entities –– Rewarding Low Claimers Namdeb and Rosh Pinah Zinc –– as major contributors to state coffers. Rewarding Preventative Health Behaviour Rewarding Chronic Compliance Data show that the rest of the mining companies with high revenue paid lower taxes because of losses incurred in 2017, mainly at urani- um majors Langer Heinrich and Rőssing Uranium, which had com-

bined revenues of N$3,7 billion. PAY FOR EARN MEDICAL These two, (Rőssing and Langer Heinrich) have not paid corporate tax BENEFITS COSTS for the last five years due to loss-making operations, though having earned more than N$20 billion in revenue. But the mining industry has been providing analysis arguing that contribution to the economy was significant despite them not being CONTACT RENAISSANCE NOW profitable to pay tax. FOR MORE DETAILS AND LEARN MORE ABOUT THE According to the finance ministry, there are 34 companies registered BENEFIT WALLET REWARD PROGRAMME. as mining entities. Data from the Namibian Statistics Agency show that N$29,4 billion +264 83 299 9000 www.rhmaf.com worth of minerals was exported from Namibia in 2017. Renaissance Health Medical Aid Fund rhmaf.nam Diamond mining companies are taxed at a higher rate. This could be an explainer why Namdeb contributes way more, but treausury has said mining companies too have been engaging in schemes to re- duce their taxable income. n mining journal a publication of the namibian ss - mining sector review 2019

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13 chamber of mines

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Too late for value-addition? ...Miners are not manufacturers – Chamber of Mines

NGHINOMENWA ERASTUS NAMIBIA is too late for large-scale beneficiation as many mines are average of 10% over many years, the report shows. now at the tail-end of their lifespans, and the country lacks worka- The world appetite for Namibia’s raw mineral riches keep increasing, ble strategies to turn policy desires into practice. and last year during the country’s depression and lower international That is the view of Roman Grynberg, senior economics lecturer at market prices, exports of raw minerals contributed about 25% to Na- the University of Namibia, speaking in an interview. His sentiments mibia’s income. are backed by the mining industry through the Chamber of Mines The report describes beneficiation as moving away from mere extrac- of Namibia and independent researchers on beneficiation. tion to fostering industrialisation through the restructuring of the Grynberg said zinc, iron and manganese have some potential to economy to ensure more employment and production of high-quality expand, together with a steel plant planned to be set up at Otavi. goods for export. Beneficiation helps the country to export high val- But in order to be competitive, it will require the country to produce ued products that will bring in more revenue/foreign exchange, and large volumes of these minerals. help to expand the manufacturing sector. Namibia has world-class diamonds, and huge uranium deposits. Oth- “Moreover, for it to work, it will require strategies and not just policies er minerals and metal deposits such as gold, zinc, lead, copper and in a paper. Otherwise, we will let the Asian giant China reap the bene- salt are also found, but the country has failed to transform them into fits of our minerals, as has been the case,” he added. an industrial base, like South Africa did. His comments come at a time that Namibia is drafting a beneficiation Downstream investments have been made in the diamond industry, strategy for minerals. with diamond polishing and cutting, but many of these ventures have The mining sector uses an extract and export model, leaving little, if collapsed over the years. By the time the report was compiled, 11 local any, industrial footprint in the country despite mining operations hav- entities were allocated 10% of the rough diamonds mined in Namib- ing been going on for as long as a century. ia to add value. Media reports have since claimed that more polishing This lack of beneficiation, despite several efforts across the sector, was operations have shut down. again highlighted as part of a “clean-up strategy” analysis in a 2017 The report stated that regardless of the long history of copper mining report by the Institute of Public Policy Research (IPPR) titled ‘Benefi- in Namibia, the country still exports copper blister to be refined in ciation in Namibia’. other countries into cathode, which is more consumable to industries. The report said Namibia’s balance of payments show that once cut and However, Dundee Precious Metals has the potential to create upward polished diamonds, refined copper and refined zinc (more beneficiat- beneficiation in the form of inputs to other industries through its ed products) are excluded, raw minerals – such as uranium, gold and sulphur plant. The sulphuric acid is used in uranium mines. Further manganese –– amount to roughly 80% of Namibian mining exports. downstream beneficiation to expand the smelter is hindered by the The poor value addition to exported raw minerals has not been glar- shortened lifespan of copper mines. ing, mainly because the mining industry remains the biggest and Low margins and long payback periods associated with refinery and most consistent contributor to Namibia’s gross domestic product, an the lifespans of gold mines is blamed for no value addition by the

mining journal a publication of the namibian chamber of mines mining industry

gold miners. Iron ore is a new addition to the mining sector, and has the potential to make Namibia a steel producer, as the metal is complementary in steel-making. But it will require access to capital and affordable power to bring it to industrial-scale beneficiation. In order to benefit from further downstream zinc beneficiation, a domestic steel industry will need to be developed, along with the already available 15 iron ore, manganese and coking coal processes. As for uranium, Husab mine is regarded as the second-largest uranium mine in the world. Rössing has been in operation for 40 years, and Namibia is now the third top producer of uranium in the world. However, processing the ore to yellow cake has failed to create remarkable beneficiation. The report said uranium enriching costs are too high, and value addition to uranium requires highly skilled engineers, a tall ask for Namibia’s educa- tion system. In 2011, in an effort to increase “value addition” for Namibian minerals, the Ministry of Finance proposed to hike taxes on the export of “unprocessed minerals”, including 15% VAT, a 5% export duty, and an increase in the min- ing (income) tax rate on profits. The government dropped a major compo- nent of this proposal, perhaps realising that taxes will not do the trick. Countries like Canada, Australia, China and Japan which are reaping the endowment of minerals, have used similar strategies of beneficiation as Namibia to transform their economies. The report says massive raw mineral exports, stagnant returns, commodity and foreign currency volatility, and the possibility of expanding the manu- facturing sector should encourage policymakers to focus on the opportuni- ties beneficiation should bring. The mining sector is guided by two acts of parliament, the Mineral Act and the Diamond Act, but only one is quite clear on beneficiation. Section 58 of the Diamond Act gives authority to the ministry of mines to oblige producers of rough diamonds to sell their output to Namibian dia- mond-cutters and polishers under terms and conditions that the minister may deem appropriate. Section 59, in an attempt to encourage domestic cutting and polishing, at- taches an export levy on unpolished diamonds. Moreover, diamond mining pays more corporate tax, effectively 55%, compared to non-diamond mining (37,5%) and non-mining corporate tax (32%). The diamond and other gem stones sectors pay more royalties of 10%, com- pared to metals such as copper, gold and zinc, which all pay less than 5% in royalties. The report points out that there was a hype as the number of mines in- creased and extractive activities became more over the years, with hopes that the unemployment headache would be solved. However, the sector only managed to employ 2,2% of the 676 885 employed population in 2016, and 1,7% of the 725 742 employed population in 2018. The report furthermore acknowledges how capital-intensive the mining sector is, “hoping that with value addition on the extraction through pro- cessing and manufacturing, more Namibians can be employed, as opposed to now”. The Chamber of Mines has challenged and often refuted the argu- ment about the lack of beneficiation shown by statistics, arguing that many operations carry out sophisticated beneficiation, which results in refined mineral products for export. “Miners: are not manufacturers. Forget manufacturing beneficiation from the miners, the country must rather try to attract investors to invest in man- ufacturing beneficiation,” the chamber explained.“Downstream beneficia- tion is not a task that mining companies would like to take on as they are specialised in the extraction and limited processing of natural resources,” the report concludes. n mining journal a publication of the namibian

namibia less attractive

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Namibialess is attractive ROMANnow GRYNBERG

INVESTMENT in Namibia’s mining sector over the last decade has gone through a roller-coaster ride. A decade ago, mining investment was anaemic. However, from 2013-2015, gross capital formation peaked in the country’s mining sector, where total invest- ment was over N$50 billion. Since then, investment flows have been declining to a trickle at N$4,8 billion in 2017. In 2018, the decline in overall investment was a further 14%. Namibia had several major mines opened, which included the huge Chinese investment in the Husab uranium mine, the B2Gold mine/Otjikoto Gold mine near Otavi, as well as Weatherly’s Tschudi copper mine outside Tsumeb. Since then, investment has continued to drop, as only a few major new mines have been developed.

If Namibia is to recover from the current general economic depression, then it will have to be led by private investment, and it will have to be the mining sector that leads the way, given the country’s state of devel- opment. Mining is a unique business. If you discover an ore body of base or even precious metals that has good basic economics, then you can reasonably expect that it will take at least eight to10 years before your initial discovery becomes a mine, and as much as two to four years when you are going through a

mining journal a publication of the namibian namibia less attractive

icy perceptions into consider- ation. Botswana (ranked 32) is the most attractive country in Africa for investors in exploration and mining, followed by South Africa (43), Zambia (45), Mali (50) and Namibia, ranking 60th out of 83 jurisdictions. Namibia ranked 21 in 2014, and since then has become less and less attractive for investors. 19 ramp-up, a pe- The Fraser Institute also publishes another index, the Policy riod when your cash Perception Index, which measures what investors, especially flow is still negative. There is explorers, believe about policy in specific jurisdictions. perhaps no other industry where you The results show a consistent trend, with Namibia losing put your money in and get it back in a decade, ground to other jurisdictions in Africa and around the world. if the gods are with you.It is for this reason that miners, On the Policy Perception Index, Botswana again ranks as the especially the junior miners who find many of the mineral de- best country in Africa at 12, and Namibia is a distant second posits, look at jurisdictions, and weigh them up as places to put with a rank of 36, followed by Zambia with 53. In 2014, Na- their money to explore and eventually invest. mibia ranked 19th, and was much more attractive for explo- The main reference on which countries are best to invest in ration. comes from Canada’s Fraser Institute. The institute is funded by Perhaps the most shocking result over the last five years has some of the largest and richest companies in the world, includ- been the deterioration of Namibia as a place to invest in terms ing ExxonMobil, and receives a large section of its funding from of minerals potential. In the final analysis, mining companies the Koch brothers, who set the libertarian free market tone of are willing to deal with many negative factors about a country the institute. if they believe the minerals potential is great. Every year since 1997, the institute has published an annual The case of Mozambique is perhaps the most relevant as it has global assessment of various mining jurisdictions, and it is on been a magnet for mining and energy company investment, the basis of this and other data that many companies make in- despite what is widely considered to be poor governance and a vestment decisions about exploration as well as development. lack of transparency. The highly propitious gas and coal depos- In 2018, the institute’s review covered the views of some 2 600 its more than compensate for other possibly negative aspects individuals in 83 different jurisdictions. This includes all conti- of the country’s management. nents (except Antarctica), and it importantly looks at Namibia, Another significant measure used by the Fraser Institute is the and what Namibia needs to do to stay competitive when other Mineral Potential Index, which has seen Namibia fall from be- Namibia is now jurisdictions are making investments easier. In the final analysis, ing ranked 31st out of 83 jurisdictions surveyed, to now being Namibia’s prosperity still rests to a very large degree on mining, down the bottom of the pile at 75. with mineral exports accounting for 54% of total exports in 2018. If you speak to those in the mining sector, many of the prob- lems that Namibia faces in terms of perception stem from a lack of understanding of process in the country, and the occa- sional issuing of laws and regulations that are counter-produc- tive in terms of attracting investment to the minerals sector. Namibia is going through its worst and longest recession in the nation’s history, and mining is one of the few sectors where it is widely perceived that foreign investment can be im- proved so as to emerge from the prolonged period of austerity. However, there clearly exists a perception problem that must be addressed, and the laws need to be reformed so as to make Namibia competitive. The Ministry of Mines and Energy has been traditionally re- ceptive to lobbying by the industry where there are perceived problems, but this has been done quietly and with little fan- fare. Change cannot only occur in Namibia to alter the perceptions The most important index that the Fraser Institute develops is of foreign investors about the country. Change must be very arguably the Mining Investment Attractiveness Index (see fig- publicly seen to occur. ure). The chart depicts the mining attractiveness of Namibia, This can only be done with the ministry leading the way, sitting compared to that of Botswana, for which mining is even more down with the industry and listening to where the problems important than Namibia. are, and what needs to be done to legislation to reassure miners Namibia is losing ground, and needs to carefully reconsider its that Namibia is and remains a place open for business.n policies to maintain the attractiveness of the jurisdiction for min- ers and explorers. *These are the views of Roman Grynberg, and not necessarily The investment attractiveness index takes both mineral and pol- those of the University of Namibia, where he is employed.

mining journal a publication of the namibian ADVERTORIAL Promoting

20 Small Miners

Another project to be launched is ‘Namibia Fair Gems’, a project on sustainable jewellery production. The projects fall under the Ministry of Industrialisation, Trade WHILE small-scale miners operating in the gemstone industry and SME Development (MITSMED) and the Gesellschaft für have the potential to support industrial development and growth Internationale Zusammenarbeit (GIZ)’s promotion of business in Namibia, they are still among the poorest socio-economic advisory and economic transformation services (ProBATS) groups in the country. initiative. Doufi Namalambo, the gemstone sector’s industry Two new projects will be presented to show how small-scale growth facilitator, said the objective is to enhance the con- miners can become part of the industrialisation strategy and ditions for entrepreneurial activity in Namibia, which would participate in the economy to expand their livelihoods. allow Namibian businesses to realise their growth potential. ‘Geopark Brandberg: Diversifying Livelihoods of Small-Scale Min- GIZ Namibia has been supporting MITSMED in the imple- ers in the Brandberg Region’ will be launched at the 2019 Mining mentation of the industrial growth strategies since 2017. Expo and is aimed at creating awareness on the challenges small- The facilitator said legislation suited to corporate mining scale miners in the gemstone industry face. enterprises has resulted in a large and informal small-mining market with conflicts over no rights to mine. “Small miners often lack appropriate equipment, access to finance and water supply as well as access to a formal market where they can sell their semi-precious stones. They risk their lives daily on steep mountain slopes or inside nar- row excavation sites. Due to the desperate need for income to make a living, they often sell their gemstones far below market value,” said Namalambo. Integrating tourism into the gemstone value chain is an opportunity to diversify the income of small miners, improve their livelihoods and formally structure the market, she said. “The small-scale miners are set to participate in this mining expo. Not only are we here showcasing the coloured gem- stone and jewellery value chain, but also to launch two initia- tives, which aim at creating opportunities for entrepreneurial activities and enhance the livelihood of small-scale miners.” ADVERTORIAL

During the past year, these initiatives were conceptualised and developed to be rolled out on a pilot basis.

PROJECTS OUTLINED

Geopark Brandberg This is an initiative linking tourism and the 21 small-scale mining sector, which could create a shift towards sustainability and improve livelihoods of small-scale miners in Namibia. A mining site called Goboboseb, located in the area known as Brandberg West, was selected as the pilot site and is not far from an accom- modation establishment. (From L to R) Debmarine Namibia CEO Otto Shikongo with R&D representatives Danie van This is an initiative owned and managed Wyk, Gustav Van der Merwe, Hendriena van der Walt, Gert Raubenheimer and James van by the small-scale miners in the area and Wyk in Barcelona, Spain. the Tsiseb Conservancy, and is supported by the Traditional Tsiseb Authority and local businesses. Innovation boosts Videos highlighting these initiatives will be broadcast during the showcase produced by Gondwana in collaboration with GIZ ProBATS. Debmarine Namalambo said: “The whole initiative is intended to demonstrate how the value chain can benefit Namibia in terms of employment performance creation and skills development, if Namibian coloured gemstones are not exported in rough A technology development project that boosts the performance of Debmarine format. Namibia was nominated for a prestigious Anglo American Applaud Award. Debmarine Namibia’s groundbreaking innovation, The Alternative Drillship Namibia Fair Gems System (ADS) tool, aided Debmarine Namibia recovery vessels to deliver an This pilot project on sustainable gemstone excellent production performance of 4% in 2018. mining, lapidary and jewellery manufacturing is meant to include a local tourism com- The ADS was a joint project between the Debmarine Namibia and De Beers ponent, allowing interested visitors to learn Marine South Africa research and development (R&D) team. The team was tasked about Namibian coloured gemstones and to research and develop a new tool and system that could enhance the efficient witness the benefits of sustainable supply recovery of marine diamonds, with limited changes to the existing infrastruc- chain arrangements. A shop-in-shop concept ture on their drill ships. This project has initiated in 2012. Indeed, the ADS was is designed to showcase a unique selection instrumental in Debmarine Namibia’s ability to deliver on its 2018 production of three lines of jewellery-manufactured prod- performance. ucts at the lodges. The concept will be piloted The team examined the previous Wirth tool that was used by all drill vessels and first at the Gondwana lodges, after which it tried to understand how it behaved during recovery in order to find and eliminate we will be made available to all interested any inefficiencies. They discovered that the Wirth tools were inherently unstable. lodges across the country. A concept design for a new tool was then developed and refined over a period of three years, undergoing a rigorous process of testing and simulation. The result The three lines are: was a new ADS tool that is a significant improvement on the previous Wirth tool. • Unique Namibia Debmarine Namibia chief executive officer Otto Shikongo said: “We are proud to • Namibia Classic receive the nomination to partake in the Anglo American Applaud Awards. Deb- • Wild and Rough Namibia marine Namibia is the world leader in marine diamond prospecting and recovery and R&D is an important contributing factor to the growth of our company. This is “It is expected that by the end of 2019, the pi- testimony that teamwork delivers the best results and that innovation is certainly lot project will be fully operational,’ Namalam- in our DNA.” bo said. The innovation team joined a wide range of industries across Anglo American Trade minister Tjekero Tweya will formally operations under the Operational Excellence category at an event hosted in launch these projects. This will also be an Barcelona, Spain, last month. The awards aim to recognise the organisation opportunity for the public to understand that has shown the best exemplary performance in developing technologies the value chain of the Namibian gemstone that enhance the company’s performance. The team received a second prize in sector. n their category. n mining journal a publication of the namibian advertorial RMB NAMIBIA MINING EXPO 2019

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ANGELIQUE PEAKE Exploring Namibia is a top-class mining destination. rail network is in serious need of refurbishment and up- Namibia is the world’s largest producer of marine grading to accommodate the volumes that are required diamonds, home to some of the world’s largest uranium to be transported by the mining sector. deposits, as well as vast deposits of rare earth minerals. The resources sector in Namibia is, however, at the Stumbling blocks moment in a vulnerable position due to fluctuating Another stumbling block for the mining industry in commodity prices, end of their life-of-mine periods, and Namibia is the lack of easily accessible information on systemic risks. Making the best of the country’s many prospecting. There is currently no reliable portal where (yet) unmined opportunities requires innovative funding, explorers or investors can obtain valuable information structuring, arranging and thinking. It requires exploring on prospecting licences. There is also not a proper new solutions across the industry. While mining ac- geological survey in place. Other challenges come in counted for more than 12% of Namibia’s GDP in 2017, the form of uncertainty over current legislation such as last year’s geo-political tensions between the United environmental regulations, the legal system and taxa- States and China, as well as concerns over a slowing tion regime, uncertainty concerning protected areas and global economy, have led to a drop in the prices of base disputed land claims, infrastructure, socio-economic metals and minerals. This resulted in some operations and community development conditions, trade barriers, being placed on care and maintenance. Other mines political stability, labour regulations, security, and labour are simply nearing the end of their life of mine, or expe- and skills availability. We need to explore how to ad- riencing serious systemic challenges. dress these, and become an even more investor-friendly destination. Good prospects At RMB, we are passionate about solving problems for The future is shining bright our clients, turning challenges into opportunities. Despite all the challenges facing the mining industry One such opportunity in the Namibian resources sector in Namibia, there has been a renewed interest in the has been the recent proliferation of exploration projects. exploration sector. All indications are that by 2022, the In 2017, N$300 million was spent by exploration com- mining sector’s share of GDP is expected to exceed panies in Namibia. That amount is expected to increase 15%. The expected stabilisation of the commodity significantly in 2019. Most of the exploration has pricing environment should fuel more equity listings been driven by an increase in the demand for battery across a number of commodities, while the rising minerals, and minerals required for the manufacturing demand for battery technology metals should boost the of new technologies. These minerals consist of lithium, industry. Namibia should soon be close to the top of graphite, rare earth elements, cobalt, copper and tin, any investment inventory. Despite the lure of massive, most of which are used in energy-saving batteries or high-grade deposits in other parts of Africa, which other components in electric vehicles. Electric vehicles promise big rewards, the risks in these countries might are set to rapidly increase demand for certain commod- just be too great for the liking of big funds and financi- ities, and lead to growth in the African mining sector in ers. In comparison, Namibia’s geology is fascinating, the next few years. and although some ore bodies are large, the reality is Many exploration geologists regard Namibia as one of that they are more often than not low-grade deposits. the best countries in Africa to look for new deposits. The However, they are good enough to outweigh the risks geology is fascinating, the infrastructure first-class, and the country presents. Namibia is without the challenges the ease of doing business is a little bit easier com- often associated with mining investment in Africa, and it pared to other countries in Africa. deserves the attention of more exploration companies. It is for this reason that RMB Namibia is committed to Infrastructure key to future of mining support the mining and resources industry by continu- The resource and mining industry can, however, not ing to implement Traditional values. n exist without proper infrastructure. While Namibia has a brilliant port at Walvis Bay, good roads and airports, the • ANGELIQUE PEAKE is RMB’s senior relationship manager.

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26 Evolution of Namibia’s mining towns

ADAM HARTMAN UNTIL about 20 years ago, Namdeb (or its predecessor CDM) gave its employees at Oranjemund everything they lived on. Fully furnished housing (including the dreadful contract labour hos- tels) was a given; some families got a domestic worker and a garden- er; maintenance was at the company’s expense, and even mundane things like replacing a light bulb, bread, milk, postal service and a newspaper delivered at their doorstep, free telephone, and the school fees of children were covered by the company (in Namibia or South Africa). Oranjemund and Namdeb were top of the pick, but other mining companies and their towns were also contenders for best employer award. Such were the mining towns, but a lot has changed, as companies began to focus on their core business, instead of looking after their employees’ needs and wants. The evolution has been drastic and dramatic within a generation. Although not all ‘mining towns’ come into existence because of a mine, they all share socio-economic benefits unique largely to min- ing operations, unlike towns which have no mines in their vicinity. Development is heavily dependent on the mine through employ- ment, investments by the mine for its employees and related com- pany interests, and, not to be taken for granted, a mine’s corporate social responsibility programmes.

miningmining journal journal a publication of the namibian evolution of namibia’s mining towns

REVIVAL ... AfriTin completed the first large-scale blasting of ore last December as part of a ramp-up to first production envisioned soon. CEO Anthony Viljoen said the company’s vision of bringing the Uis mine back into production and generating 27 revenues had taken a big step forward with the first blast. Uis is hoping the revived mine will see rejuvenated socio-economic development.

Namibia has several mining towns. Some are still governed solely people. Skorpion works with key stakeholders to develop and fund by the mining companies, such as Rosh Pinah, which is still run by various corporate social investment projects, the Skorpion Zinc and Rosh Pinah Zinc. majority of which are in education, in addition to skills development, Others were released to stand on their own feet, yet remain healthcare, sports and infrastructural development. mine-driven, such as Oranjemund. Then there are those which have been weaned off to a large extent, DIAMONDS FOREVER? trying to have a self-sustainable economy such as Arandis and Kari- Oranjemund was only recently proclaimed a town. It was estab- bib, which have been reliant on Rössing Uranium and the Navachab lished in 1936 to sustain diamond mining operations. It was run gold mine, respectively. by Namdeb (previously CDM- Consolidated Diamond Mines - until Otjiwarongo and Tsumeb are in another category, having long be- after independence). come autonomous localities. A few had their heyday in mining, but lost all when the main provid- The diamond company gave permission for access and the settle- er packed up and left, as in the case of Kolmanskop near Lüderitz. ment of anyone at Oranjemund, which was proclaimed as a town in Uis in the Erongo region refused to die, and there is renewed hope 2011 and officially opened to the public in October 2017. of a revival in their economy as mining operations by Afritin come Until then, Namdeb was the sole economic determinant. back on stream. Namdeb’s spokesperson, Pauline Thomas, said the company current- The mining towns are now at different levels of development. ly has a robust business plan which covers funding towards plans for the mine’s closure by 2030, and a strong focus on ‘social closure’ that ROSHKOR will encompass the transformation of Oranjemund. Rosh Pinah in //Kharas is under a shared administration called “Namdeb believes in continuing to create a positive legacy, and ‘Roshkor’, a company registered as a business, and co-owned by Sko- this is why efforts have been made in investigating various options rpion Zinc and Rosh Pinah Zinc at 50% each, solely to run the town. that will contribute to ensuring a self-funding and sustainable town Town manager Ronnie Slabbert reports to the two general managers which is successful as a result of diversified economies,” said Thomas. of the mines, who are both directors of Roshskor, together with two One of the initiatives is the OMD 2030 Hub, which is a community alternative directors from each mine. organisation with a mission to assist stakeholders with transforming According to Slabbert, Rosh Pinah is 90% owned by the two mines Oranjemund from dependency on one company and industry to an and 10% by private individuals. economically diverse and culturally rich town. “If the mines close, Rosh Pinah will become a ‘Kolmanskop’, as we are not sustainable as a town,” he said, adding that a study by the //Kharas Regional Council is underway to determine how to make CORRIDOR HUB Rosh Pinah self-sustainable and less dependent on the two mines. Although Karibib is considered the ‘baby’ of the Navachab gold Skorpion Zinc is the largest integrated zinc producer in Africa, and mine, Karibib chief executive officer Lesley Goreseb said assuming the eighth-largest zinc mine in the world. the town is dependent on Navachab “is a bit far-fetched”. Its corporate affairs and sustainability manager, Nora Ndopu, said Yet, he acknowledges that 90% of the mine’s workers live at Karibib, the mine is a significant contributor to the economic sustainability and the mine has properties in the town, and therefore pays rates of Rosh Pinah, especially considering that it employs about 1 900 and taxes.Ø

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WELCOME ... Although Aran- dis is welcoming investment to help it on its way to becoming independent from mines, the signs of mines pointing either way suggest it may still enjoy the privilege of being dependent on 32 mining’s direct local economic participation.

“It, therefore, contributes to the income of the council as most of the was handed over to the government in 1992 as an ‘independence other normal residents mostly default on paying for basic services,” gift’. It was proclaimed a town in 1994. The town is trying to diver- he explained. According to Goreseb, Karibib and Navachab have a sify to industrial development, education, tourism and renewable technical committee which looks into ways how the two stakeholders energy generation, but complete independence from several mines can cooperate in developing the town. around it may still be far off. Still, Karibib sees its own strengths for economic development, other It is not only Rössing which impacts the small town. Swakop Urani- than just depending on the Navachab gold mine. um’s Husab mine is there too, and hopes are pinned on the revival Goreseb said Karibib benefits by being a town through which all na- of Orano Trekkopje uranium to power Arandis, which is snuggled tional and international transport corridors (Trans-Oranje, Trans-Kal- between three of Namibia’s biggest mines. ahari, Trans-Caprivi, Trans-Katwitwi and Trans-Oshikango) pass, with Arandis officials do not want it to be considered a mining town any- traffic of about 1 000 trucks a day. This is an opportunity for develop- more, town council spokesperson Irene Jacobs said. ment, with possibilities in establishing a container terminal project, “We could survive without the mines, but we are better off with whereby containers can be transported by rail out of Namport and them,” she reasoned. collected by trucks at Karibib from different destinations, he pointed To date, Rössing has built the town, while being key to establishing out. world-class vocational and social support institutions such as the Karibib was also looking at developing its manufacturing and Namibian Institute for Mining and Technology, and Rössing Foun- fresh food production potential, which will create jobs to move dation. away from dependency on the gold mine. Navachab’s commu- In fact, there is continuous cooperation in education, SME develop- nications and community liaison officer, Tuafi Shafonbabi, said ment, sports and youth development, local authority capacity-build- the company, established in 1989, employs over 750 people ing, and the construction of a service station that acts as a catalyst for staying in the town of about 12 000 people. The mine also owns other economic projects. close to 240 houses, making it a significant rates and taxes con- Swakop Uranium vice president for human resources, Percy McCal- tributor. lum, said the Husab mine has about 1 650 permanent employees, Shafonbabi said Navachab’s socio-economic development strategy of whom 250 live at Arandis, 350 at Walvis Bay, and about 1 050 at is underpinned by its motivation that the communities around its Swakopmund. operations should be well-off because of the mine. He said last year, Swakop Uranium and Standard Bank signed an Navachab supports infrastructure, health, education and youth de- agreement, whereby its employees can apply for home loans at pref- velopment, as well as targeting small miners in the area. erential rates. The mine’s lifespan is estimated up to 2033, and as part of its closure “Many employees have houses in the three towns, some are renting. plan, Navachab intends to have very little negative social and envi- Thus, the employees support the towns overall. For the company, we ronmental at impacts in the area it operates. purchase from the local hardware stores and other outlets, thus sup- “Meanwhile, we remain committed to the socio-economic develop- porting local enterprises. ment of Karibib and the Erongo region as a whole,” she added. “We also have sound relationships with the town councils of all three towns, and assist them with donations through our foundation, such STAY OR GO? as school uniforms for the less privileged children and other pro- Arandis was started by Rössing Uranium Limited in the 1970s, but jects, particularly in education,” he explained.

mining journal a publication of the namibian evolution of namibia’s mining towns

COMMITEMNT ... In June last year, a vital milestone was marked in the history of Oranjemund when the long-await- ed memorandum of agreement was signed between the Oranjemund Town Council and Namdeb Diamond Cor- poration. The agreement focussed on transferring all mu- nicipal services, infrastructure, assets, sales of land and existing improvements, giving residents, local businesses and potential investors an opportunity to own private prop- 33 erty in the town. Pictured from left are Namdeb CEO Riaan Burger, Oranjemund mayor Henry Coetzee and Oranjemu- nd constituency councillor Lazarus Nangolo.

Photos: Contributed

McCallum said although the three towns are strongly supported by Anthony Viljoen. The mine belonged to South Africa’s steel giant the mine, they could “stand on their own feet”. Iscor, and was opened in 1960. It was a huge operation, but with “We supplement their well-being and economic progress,” he add- a very low yield in that every 85 000 tonnes of rock mined only ed. yielded about 1,4 tonnes of tin. Old residents of the small town explained that South Africa needed SELF-STANDING the mine because when sanctions set in, there was no trade with Otjiwarongo is moving on from being dependent on B2Gold, about global markets, so Uis became one of the contributors of tin for that 70 kilometres away, and Whale Rock Cement, as it has already devel- country’s very dynamic steel industry. oped a self-sustaining economy, Otjiwarongo public relations officer However, when the sanctions were lifted in 1990, much cheaper tin Adelheid Shilongo said. was again available on the global market, and so Iscor “just pulled “The municipality is not directly dependent on the mines, although out”. the economy benefits from the spin-offs of having the mines in close This had a negative impact on the settlement as many workers left, proximity, including increased buying power, more property rentals and took their buying power with them. and purchases,” she noted. Afritin owns 100% of Namibian-registered Dawnmin Investments Mines have not only brought benefits. Otjiwarongo has seen an in- Limited, who are in a joint venture with the small miners of Uis, a flux of people to the town, putting the municipality under pressure non-profit organisation established by the Ministry of Mines and to increase and expand basic services, as well as the expansion of Energy. informal settlements due to an influx of job seekers. According to Viljoen, the Uis mine used to be the largest open-cast “We survived before the mines were established –– B2Gold in 2014, tin mine in the world, and Afritin aims to achieve that objective and Whale Rock Cement in early 2018. The mining sector only again. makes up 20% of Otjiwarongo’s economy; the rest is from agricul- “We believe the increase in economic activities, as well as the associ- ture, service providers and tourism,” said Shilongo. ated infrastructure, will have a big impact on the lives of the people According to B2Gold’s public relations superintendent, Namasiku in the area. Not least, of course, is the creation of jobs,” observed Nalis, the company is the biggest employer in the Otjozondjupa re- Viljoen. gion, and the spin-offs are not only income to individuals and their families, but the mining operations also stimulate economic activi- EVOLUTION ties at Otavi and Otjiwarongo. Due to minerals being finite resources, many mining companies Its corporate social initiatives focus on education, health, livelihoods have established programmes to ensure proper mine closure proce- and the environment. dures which include the full rehabilitation of the environment, and the economic integration of the communities they operate in, into REVIVAL? autonomous economic systems. While other towns remain dependent on mines or evolving into So, the great legacy of a mine is not how long it is able to extract, pro- self-sustainable economies, Uis in Erongo has ‘been there and done cess and produce raw material, but also whether it was able to close that’, and is now looking at a revival in its economy. graciously, and leave behind a community which enjoys socio-eco- Work is being started at the old tin mine by Afritin. The project is nomic development and the means to be able to continue to exist worth about N$300 million, according to company chief executive independently and sustainably within the national economy. n

mining journal a publication of the namibian uranium industry

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Bannerman ResourcesNamibia’s Limited’s CEO, Brandon Munro uranium industry is keeping head above water

The Namibian (TN) spoke to Bannerman Resources Limited’s CEO Brandon Munro (BM), who is also a quantitative economist with 20 years of experience as a corporate lawyer and resources executive. Munro has remained closely involved with the Namibian uranium sector over the last 10 years. He lived in Namibia between 2009 and ADAM HARTMAN 2015, initially as general manager of Bannerman, and also serving as governance adviser to the Namibian Uranium Association. NAMIBIA is globally renowned for three things: Munro was appointed as co-chair of the World Nuclear Association wildlife conservation, quality diamonds, and be- (WNA)’s demand working group, a body which forecasts global ing a top-five producer of uranium. nuclear fuel demand scenarios to a 20-year horizon. The working While Namibia has a proud history of producing group’s findings are published every two years in the WNA nuclear uranium, a great reputation cannot defy econom- fuel report, which is distributed widely. ics. He is recognised as an authority in the uranium sector, and his Namibia experienced a ‘uranium rush’ about 15 insights into the nuclear sector have seen him deliver a number of presentations worldwide, including peak industry conferences years ago when multinationals scrambled for the such as the World Nuclear Association’s symposium and the World mineral in the Erongo region, dubbed the ‘ura- Nuclear Fuel Cycle. nium province’, so much so that the government TN: What is the current global condition for uranium mining announced a moratorium on new applications and processing? for exploration licences on nuclear fuel minerals BM: There is no doubt about the depressed uranium market we around 2007. The moratorium was lifted in 2017. are witnessing around the globe. Some of the lowest cost mines in New projects such as Langer Heinrich and Areva’s the world, such as the McArthur River Mine in Canada, have been placed on care and maintenance. Another very marked example is Trekkopje mines promised a prosperous future. that of Kazatomprom, an industry giant which only managed a net That was until a tsunami disaster in Japan’s Fuku- profit of US$150 million, despite contributing about 20% to the shima destroyed a key reactor, causing the global global uranium market, and having the lowest cost mines in the uranium industry and related economy to reel. world. Namibia felt the ripple-effects, and the uranium With such underwhelming success in the sector by the big players, landscape has changed over the past decade, with it’s not surprising that a great number of miners are not making any Chinese companies dominating the sector cur- money. Namibia’s own example of this struggle is Langer Heinrich, whose parent company went bankrupt, and after recapitalising the rently, and many upcoming and existing projects company, was forced to put its mine into care and maintenance. being pushed onto the back-burner. So, what does the future hold for Namibia’s urani- TN: How did we get to this slump from the ‘rush’ about a um industry? Is it still a key player in production? decade ago? BM: We’ve been in a downturn ever since Fukushima, which oc- curred eight years ago. The real problem was created by the sector Ø

mining journal a publication of the namibian 35

uranium industry not falling fast enough because uranium prices were being buff- energy needs, rather than trying to make a profit on every pound of ered by long-term contracts, which not only prolonged the deterio- uranium. ration of the sector at the time, but also its recovery. After Fukushima, we very quickly lost about 10% of demand for nu- TN: What challenges do you think Namibia has with maintain- clear power globally, mainly from Germany and Japan. We, howev- ing and developing the uranium mining sector? er, did not lose much supply because most of the uranium producers BM: Namibia needs to be cautious about its government policy and were still supplying into long-term contracts at attractive prices writ- operating environment impacting on an already difficult interna- 37 ten during the last boom. tional commodity cycle. The unusual challenge facing the Namibian It would’ve been more beneficial in the long-term if production had uranium sector is that its ore bodies have the lowest uranium grade immediately dropped 10% to match demand. But worse, mines con- mined anywhere in the world. Rössing has a grade of about 350 tinued to supply long-term contracts, and Kazakhstan increased its parts per million (ppm) of uranium oxide, whilst new ore bodies be- own supply from low-cost mines. It’s only in the last year that we’ve ing discovered in Canada are up to 100 000 ppm of uranium oxide seen the conclusion of some of these long-term contracts, exposing – that is 300 times richer than we mine in Namibia. The fact that we the producers to the economics of the spot market. The result of this have the lowest grade (and therefore higher cost) uranium mines in oversupply was a decade of surpluses which have now built up inven- the world makes us far more susceptible to the commodity cycle than tories, suppressing the uranium spot price and investor expectations. many other uranium jurisdictions. The government, therefore, needs to be careful its policies do not worsen the current negative commod- TN: What is the future for uranium globally, and for Namibia ity cycle, and should seek ways to lure foreign investment into the specifically? sector as a job creation strategy. BM: The sheer growth of nuclear power in China, India, Russia and the Middle East drives an optimistic outlook for uranium. Namibia TN: What loopholes/pitfalls are there when it comes to explora- is in a very special situation because we are fortunate to be on good tion and/or mining, and what needs to be done to ensure the geo-political terms with these powerhouses. The same can’t be said investment environment is streamlined? of the other major uranium producers, which either tend to fall on BM: Policymakers need to understand that the uranium sector is one side or the other of the Cold War 2,0 situation –– an unfortunate truly global. The funding required to explore for, determine the fea- dynamic we have in the world right now. sibility of, and ultimately build a uranium mine is not coming from Namibia – it’s coming internationally. This money has many, many TN: In Namibia, we have some projects put on ice. On the other other choices. The money is not sentimental as to where it is invested, hand, we have big interest and optimism from China in the lo- and if faced with an unattractive policy environment, it will simply cal uranium industry through Husab, Rössing and Langer Hein- be redirected to Canada or Australia. Namibia competes with Canada rich. Why the contrast? Why is China so optimistic, and the rest and Australia where the uranium grades are higher and the policy seemingly not? environment is lower risk. BM: The Chinese are master strategists, and take a long-term view of their energy needs. Hence, China is able to implement this vision TN: What success or experience has Namibia gained so far in over a 50- or 100-year time frame. China understands its own require- this specific sector? ments for nuclear power, which are enormous. Unfortunately, this de- BM: Namibia’s successful 40-year uranium export from Rössing has mand isn’t fully understood globally, and those who do recognise it demonstrated to the world that we are capable of providing consist- are not positioned to take action ahead of things that China might be ent and secure uranium, plus we have the regulatory environment to doing in 10, 20 or 50 years. This places China in a unique position to oversee uranium production effectively, while maintaining a proud secure its future energy needs, whereas many uranium producers are environmental record. Our social record is outstanding, proving subject to the month-to-month whims of the current market. Husab that Namibia’s point of difference is generating far greater positive would be uneconomic if the mine was producing uranium to be fully societal benefits than seen in, for instance, First World uranium-pro- sold into the commercial market at a profit. Fortunately for Namibia, ducing countries. The Namibian Uranium Association has been in- the uranium coming from Husab is directly feeding Chinese nuclear strumental in promoting these benefits to the outside world, and has power plants since their owners’ focus is on producing fuel for their ensured our mines are subject to full industry stewardship. n

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38 50 years of Excellence

LAUREN DAVIDSON

FROM ITS modest beginnings in May 1969, the of private institutions, in which the Chamber of Mines was Chamber of Mines of Namibia marks a milestone rated as the top-performing organisation. This esteemed this year as it celebrates 50 years of dedicated ser- reputation of the chamber has indeed been upheld in re- vice to Namibia’s mining industry. cent years with membership, which is entirely voluntary, The celebration is symbolic of the industry’s dynam- doubling in the last 15 years. This is testament to the or- ic history, longevity, and the role it plays in Namib- ganisation’s continued commitment to excellence in ser- ia’s socio-economic development. The Chamber of vice delivery. Mines, as the industry’s representative body, has Through established committees within the Chamber of Mines’ structures, the organisation also addresses important contributed significantly to shaping the path of this issues such as health and safety, environment, power, explo- history through its passionate work towards pro- ration matters, human resources and labour. Through each gressing growth in Namibia’s mining sector. of these committees, quarterly meetings are held to discuss cross-cutting topics affecting the entire industry; how these can The organisation was inaugurated as the Association for be addressed through shared experiences and expertise, while Mining Companies of South West Africa at the Grand Ho- striving towards industry best practices in each of these areas. tel in Windhoek on 9 May 1969. At this meeting, six rep- The Chamber of Mines of Namibia has grown into a respect- resentatives were elected to serve on the council of the ed and reputable representative body for mining in Africa, association, and a main outcome was the formulation of one that is often consulted on how best to bridge the divide a constitution and rules of the association, which were for- between the mining sector and the government.The activities mally adopted. The constitution was revised 10 years later of the chamber, and thereby its members, are gov- and the name changed to the Chamber of Mines of erned by a robust constitution, code of conduct South West Africa. At independence in 1990, and ethics, which empower the council to the organisation was renamed the Cham- expel members from the chamber if a ber of Mines of Namibia. case of contravention is established. The chamber has indeed evolved with This self-governing mechanism has the industry over the years, but it con- afforded the chamber a respected sta- tinues to subscribe to the main prin- tus with the government, with which ciples on which it was formed. These it has developed a mutually beneficial are to promote, encourage, protect and relationship that is embedded in trust. foster the growth of the mining sector in It is through this reinforcing relation- Namibia.To shape such an environment, ship that the industry has evolved and one of the primary functions of the chamber continues to expand, while contributing to is to continuously engage the government, and the sustainable development of Namibia. advise it on policies and legislative matters affecting the The Chamber of Mines will strive to grow and evolve with industry. industry developments and best practices, all the while In 2011, the chamber celebrated a notable milestone in maintaining its core principles. Currently, the sector is faced this regard, with the reversal of potentially devastating with challenges, but the chamber is committed to overcom- tax proposals that would have crippled the industry. The ing these, and to ensuring the sustained growth of Namib- government’s withdrawal of the proposals was a direct out- ia’s mining industry. come of successful policy engagement and intervention by Through collaborative partnerships, a vibrant and commit- the chamber. ted industry, the Chamber of Mines looks forward to serv- In 2009, Old Mutual Namibia and the Namibian Stock Ex- ing the sector for the next 50 years and beyond. change conducted an executive opinion survey to get and n analyse the views of Namibia’s top executives on a wide range of issues critical to the country’s economic prosperity. •Lauren Davidson is an economist with the Chamber of One of the areas covered in the survey was the performance Mines..

mining journal a publication of the namibian INCLUSION

BEGINS WITH Exceptional things happen when women participate in a workforce to the best of their abilities. In their respective US TODAY, roles, they do more than just contribute to the growth of the company, they inspire and lead by example. This is because skill, passion and leadership are not gender AS WE CREATE bound qualities. Therefore at Namdeb you’ll find some of the challenging positions occupied by women who’ve A BALANCE proven that they can inspire today, for a better tomorrow. GOOD TODAY. FOR A BETTER BETTER TOMORROW. TOMORROW

mining journal a publication of the namibian advertorial

REPUBLIC OF NAMIBIA Deputy Minister Kornelia Shilunga 40 Ministry Of Mines And Energy

Honourable Kornelia Shilunga is the first female to be apointed as Deputy Minister of Mines of Mines and Energy. Hon. Shilunga is also the patron of the Women in Mining Association Namibia (WiMAN), which was established in 2017 by a group of exceptional women aiming to create equal opportu- nities for women in the mining sector. During the compilation of the 2019 Mining journal, The Namibian newspaper had the opportunity to catch up with Hon. Shilunga whereby she answered a few questions regarding women and the sector.

In 2018, the Chamber of Mines mentioned that the mining sector employs currently in the industry, is one way of encouraging women to enter mining. about 9 000 people, of which 97% are Namibians. During the same period, During the month of March, the Women in Mining Association of Namibia N$3,2 billion was spent on labour. (WiMAN) ran a social media campaign doing just that. I was amazed and very proud to see what the women in the industry have done in this short Although times have changed, the employment number of women time that they have been in the industry. What is now required is a call in the mining sector is still minimal. Can you please provide us with for action. This can be done by consulting WiMAN in any policy change figures in terms of how many women are employed in the mining decisions. Currently the private sector is preparing to review the Mining sector? Charter of Namibia – I would like to see WiMAN being involved in that According to statistics obtained from the Chamber of Mines for the year process. 2018, there are 1 529 women employed in the mining industry, which constitutes 17% of the workforce, and the majority are below senior Do you think that such a representation is fair? And what do you think management level. should be done to improve such representation? There are a number of barriers to women participation at higher levels in Women bring a different perspective into the mining industry as they pos- the industry. Some of the tangible barriers are: lack of female role models, sess a number of inherent traits that greatly benefit the industry. It is also lack of mentorships and networking opportunities, as well as societal pres- important to attract the future generations into the industry by “catching sures. Intangible barriers include a perceived lack of skills and experience them while they are still young”. Career fairs and girl–child initiatives can be as well as gender stereotyping. utilised to generate interest in the mining industry. In Namibia, although we have been making inroads in women empower- ment, society has been slow in taking up parity–a woman is still considered On 11 April 2017, at the Annual Leadership Development confer- the primary caregiver, meaning she stays at home to take care of children, ence for women in mining, you mentioned that culture and negative and if she does return to work, she is still the person that takes off work gender stereotypes are some of these challenges. Do you agree that hours to take kids to the hospital, attend to extra–curricular activities at these challenges continue to exist ,or has the scenario changed? school, etc. This negatively affects her career progression. Negative cultural influences and gender stereotypes cannot be changed over- The biggest barriers, however, are societal and cultural norms, which still night. We need to work today to be assured of the change tomorrow. see women in traditional roles. Culture and society have created a belief that women are less able and not suitable for leadership roles but the reality is that women can and do thrive Why is it that the sector is still male–dominated? Are women not both in technical and leadership roles. interested or is the sector yet to become inclusive? We need to start changing the narrative. Changing the language we use In the quest to promote the various mining fields to young girls is a start. Terms such as “male–dominated” should be removed from our from an early age, what agenda/plan has the government and terminology. While the industry has done well (in terms of diversity), cultural non-governmental organisations embarked on for 2019/2020 influences, gender stereoyping, lack of functional diversity and inclusive moving forward? policies hinder the industry from becoming inclusive. Through the Women in Mining Association of Namibia (WiMAN) in which The industry should support women by offering growth opportunities that the government is represented, there are many plans for 2019/2020 and are in line with their complex roles in society in order to allow them to reach beyond. The association plans to reach out to all the women in mining to their true potential. bring them on board; collaborate with like-minded organisations to attract more females into the mining sector; create an empowering network that What type of initiatives does the ministry have to encourage more will inspire, support, and develop women in mining by providing access women to enter the sector? to education, skills development, mentorship and representation; as well as Celebrating the various careers as well as achievements by women providing mentoring and coaching programmes. n

national geographic

PAUL COOPER

Brightly coloured wallpaper peeling off the walls, dilapidated houses now inundated in rolling banks of sand … this is Kolmanskop, a ghost town in southern Africa’s Namib Desert, in 42 the middle of a region known as “the forbidden zone.” And the story of how it got here is about as strange as the sight of the town today. (See nine of the world’s best ghost towns.)

A STRANGE, PAINFUL HISTORY One evening in 1908, a Namibian rail- way worker named Zacherias Lewala was shovelling railroad tracks clear of creeping sand dunes when he saw some stones shining in the low light. Lewala’s German employer identified them for what they were: diamonds. Lewala was not paid or rewarded for his find. Soon, hordes of prospectors descended on the area. By 1912, a town had sprung up, producing a million carats a year, or 11,7% of the world’s total diamond production. Wealthy Kolmanskop became a well of luxury in the barren desert. There was a butcher, a baker, a post office, and an ice factory; fresh water was brought by rail. European opera groups even came to per- form. A sort of mad eccentricity reigned. A Namibian One family kept a pet ostrich that terror- ised other townspeople and was made to pull a sleigh at Christmas. But Kolmanskop—part of the struggling colony of German South West Africa— ghost town was also built on a legacy of colonial violence. Only four years before the discovery of diamonds at Kolmanskop, the Namibian Herero people rebelled At Kolmanskop, the sand-filled buildings of a for- against the German colonisers, who re- mer diamond mining town attract tourists by the taliated with genocidal ferocity by kill- ing over 60 000 Herero. thousands. national geographic

the sand-covered ruins. Today, as many as 35 000 tourists visit the site every year, bringing money to the nearby coastal town of Lüderitz. “Ruin gazing” is nothing new—for millen- nia, people have been drawn to broken cities and toppled monuments, places 43 of quiet contemplation that remind us of our own hubris and of the power of time. Thóra Pétursdóttir and Bjørnar Olsen, ed- itors of the book ‘Ruin Memories: Materi- alities, Aesthetics and the Archaeology of the Recent Past,’ describe our fascination with ruins. “Masked objects are unveiled, inside is turned out,” they write. “Collapsed walls, broken windows and open drawers ex- pose intimacy and privacy, recalling to light the previously hidden, forgotten or unknown.” Pétursdóttir and Olsen argue that the crumbling walls and sand-filled rooms of young ruins—their age measured in decades, not millennia—challenge our as- BOOM AND BUST found on the beach terraces to the south. sumptions about the order and progress Kolmanskop’s prospectors were becom- The townspeople left in droves, abandon- of the modern world. ing rich overnight simply picking dia- ing homes and possessions. But even these reminders that nothing monds off the desert floor, but German By 1956, Kolmanskop was completely lasts forever won’t last forever. Despite authorities wanted greater control over abandoned. The dunes that once rolled ongoing conservation efforts and a year- the incredible riches. over Lewala’s railway tracks now burst ly limit on the number of tourists, stud- They cracked down, declaring a vast area through the ghost town’s doors and ies undertaken around 2010 showed “a of Namibia a Sperrgebiet, or restricted porches, filling its rooms with smooth marked deterioration” of several struc- zone, forbidding entry to ordinary peo- banks of sand. tures at Kolmanskop. ple and reserving prospecting rights for During its brief heyday, about a thousand Before long, the town might vanish into a single, Berlin-based company. Tribes- people—German colonists and their fam- the desert. Until then, the surreal ruins re- people displaced from their land by the ilies as well as local tribespeople who mind us of our societies’ power to build— zone’s construction were often employed worked the mines—lived at Kolmanskop. but also of the material waste and human as workers in the diamond mines, forced suffering we’re capable of wreaking. to live on cramped, barracks-like com- A SECOND LIFE (AND DEATH) Today’s tourists visit a testament to the pounds for months at a time. In 2002, a local private company called evils of the colonial system, a melan- But it wasn’t to last. Intensive mining Ghost Town Tours was awarded the con- choly monument to a world disappearing depleted the area by the 1930s, and in cession to manage Kolmanskop as a tour- once and for all beneath history’s shifting 1928, the town’s fate was sealed when the ist attraction, bussing visitors into the for- sands. n richest diamond fields ever known were bidden zone to explore and photograph *National Geographic advertorial Continuing

44 NAMDEB’s positive legacy

diamond mining town on a transformation journey

As a member of the Chamber of Mines (CoM), Namdeb will commemorate the CoM’s 50–year jubilee, through celebrating operational successes and showcasing how the Namdeb business continues creating a positive legacy.

Diamond mining continues to play a critical role in developing As such, Namdeb has been working hand in hand with the Oranje- Namibia, and Namdeb has been at the forefront of ensuring that mund Town Council and other key stakeholders, such as the NCCI, the focus is on doing the right things today to ensure a better to ensure the smooth transformation of Oranjemund transitioning tomorrow. into a normalised town. Oranjemund was established in 1936 for the sole purpose of sup- In this regard, a memorandum of understanding was signed in porting diamond mining operations. The town was run by Namdeb 2013 between Namdeb and the NCCI branch at Oranjemund to (formerly Consolidated Diamond Mines) and access to, and settle- promote harmonious relationships, and cooperation for informa- ment at Oranjemund was restricted. The town was proclaimed in tion sharing on investment opportunities, infrastructure and new 2011 and officially opened to the general public in October 2017. projects. At the same time collaboration with the Oranjemund During the time that the town was closed, Namdeb was the sole Town Council (OTC) has resulted in the spearheading of various economic driver. With the opening of the town a new era was born. initiatives. Namdeb now has a three–year robust business plan where mining One of these initiatives is the OMD 2030 Hub, which is a com- activities are envisaged to cease in 2021. Namdeb will, however, munity organisation. Its mission is to assist stakeholders with continue to do rehabilitation work in all of the areas mined until transforming Oranjemund from being economically dependent on 2030. The three year business plan generates sufficient cash, one industry to an economically diverse and culturally rich town. which allows the business to honour all its liabilities. Furthermore Furthermore, it serves as the foundation where citizens participate it ensures funding towards a responsible mine closure plan until in building their own community and take pride in their collabora- 2030 with a strong focus on social closure encompassing Oranje- tive as well as individual successes. Namdeb continues to support mund’s transformation. OMD 2030 through various means such as making office space Namdeb believes in continuing to create a positive legacy and this available and providing financial support. Approximately N$800 is why efforts have been invested in investigating various options 000 was recently sponsored to the OMD 2030 Hub. OMD 2030 that will contribute to ensuring a self-funding and sustainable has a significant role to play in the transformation of Oranjemund town which is successful as a result of diversified economies. It is from education and support of the citizenry as well as promoting a three-legged approach which comprises Transfer of municipal the town and more specifically tourism as an important part of eco- services; transition and integration of the town into the regional nomic diversification, transformation and normalisation of the town. and national frameworks as well as the actual transformation and It is imperative for Oranjemund town to achieve economic diver- diversification of Oranjemund’s local economy. sification, so that it is sustainable beyond diamond mining and as Namdeb is fully committed to repurposing Oranjemund because such the success of the town’s transformation process requires the efforts being invested in for the sustainability of the town are all stakeholders to work together towards realising a normalised aligned to Namibia’s Harambee Prosperity Plan objectives. town. n

mining journal a publication of the namibian VIVO ENERGY NAMIBIA, FUELING AFRICA S FUTURE

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46

Contributions of Mining to the Namibian economy

The mining industry is one of the four pillars of Namibia’s economy, the others being fishing, agriculture and tourism. Namibia currently has 184 active mining licences and the industry’s con- tribution is mostly from a limited few mining companies relating to dia- monds, uranium, gold, zinc and copper.

None of the mining companies are listed on the Namibian Stock there were more than 1 400 Exploration and Prospecting Licenc- Exchange and, therefore, information is not publicly available. es active and in the 2017 financial year N$ 562 million were Some of the important contributions mining made to the Namib- spent on exploration activities. ian economy for the 2017 financial year, obtained from the 2017 Given the above statistics, it is clear how important the mining annual report of the Chamber of Mines, are as follows: sector is to the economy of Namibia without even considering • 12,8% growth compared to a 5,4% contraction the previous the multiplier effect of all the mining peripheral services and pur- year, chases from the local communities. • 12,2% direct contribution to GDP of Namibia, • 50% on average of Namibia’s export revenue is from min- Burdens on the mining industry in Namibia ing, • 10 500 temporary and permanent employees with a total Effect of changes in tax legislation wage bill of N$5,1 billion; In the recent budget speech the minister of finance proposed 12 • N$7,4 billion, excluding Swakop Uranium, contributed in amendments to the current Tax Act of Namibia. Of these the fol- terms of taxes, royalties and levies to the government. lowing will have a direct effect on the mining industry: These figures relate to the 2017 calendar year and we have in all • Repealing the export processing zone and introducing spe- likelihood progressed further en route to achieving goals set out cial economic zones, with a sunset clause for current opera- as part of NDP5 i.e. reaching 15,2% of Namibia’s GDP by 2022. tors with the EPZ status; Exploration is an important part of the future of mining opera- • Abolish the current practice of a conduit (flow through) prin- tions and to ensure sustainable growth. As at 8 December 2018 ciple in the taxation of trusts; Ø

mining journal a publication of the namibian

pwc - contributions of mining

Andre Burger Etienne Louw PwC | Senior Manager PwC | Senior Manager Office: +264 64 217 743 | Office: +264 64 217 700 Mobile: +264 81 239 1609 Mobile: +264 81 150 9965 Email: [email protected] Email:[email protected]

48 49

• Introduce a 10% dividend tax for dividends paid to resi- The standard dents, • Disallow deductibility of fees and interest paid to non-resi- Classification and measurement dents for calculating taxable income until payment of with- IFRS 9 has three classification categories for debt instruments: am- holding tax paid is proven; and ortised cost, fair value through other comprehensive income (‘FVO- • Disallow deductibility of royalties for non-diamond mining CI’) and fair value through profit or loss (‘FVPL’). Classification under entities. IFRS 9 for debt instruments is driven by the entity’s business model Disallowing the deductibility of royalties will have the most sig- for managing the financial assets and whether the contractual cash nificant impact as it is expected to have a detrimental effect on flows represent solely payments of principal and interest (‘SPPI’). An the viability of existing and proposed operations of the mining entity’s business model is how an entity manages its financial assets industry in Namibia. The industry is already under pressure as in order to generate cash flows and create value for the entity. That is, a result of low commodity prices and the financial models are an entity’s business model determines whether the cash flows will cost-sensitive. Imposing additional taxes in the form of disallow- result from collecting contractual cash flows, selling financial assets ing the deductibility of royalty payments could result in unwant- or both. ed consequences for the economy in the form of job losses and If a debt instrument is held to collect contractual cash flows, it is clas- the withdrawal of investments from the country. sified as amortised cost if it also meets the SPPI requirement. Debt In addition to the effect on the above proposals, PWC performed instruments that meet the SPPI requirement that are held both to a Paying Taxes study in conjunction with the World Bank Group collect assets’ contractual cash flows and to sell the assets are clas- indicating that in Namibia it takes an annual average of 302 sified as FVOCI. Under the new model, FVPL is the residual catego- hours and 27 tax payments to be tax compliant in Namibia. That ry–financial assets should therefore be classified as FVPL if they do placed Namibia 81st out of 190 economies surveyed on the ease not meet the criteria of FVOCI or amortised cost. Regardless of the of paying taxes. Not only does this place a significant adminis- business model assessment, an entity can elect to classify a financial trative burden on the companies but also makes Namibia a less asset at FVPL if doing so eliminates or significantly reduces a meas- attractive option to invest in. urement or recognition inconsistency (‘accounting mismatch’).

New accounting standards Expected credit losses In the accounting world there has been a wave of change and for IFRS 9 introduces a new model for the recognition of impairment the current year there are two accounting standards contributing losses–the expected credit losses (ECL) model. The ECL model to the cost of compliance for mining entities being IFRS 9 and constitutes a change from the guidance in lAS 39 and seeks to IFRS 15. Let us look at the two standards at a high level to try to address the criticisms of the incurred loss model which arose dur- comprehend the impact the wave of change brings about. ing the economic crisis. In practice, the new rules mean that enti- 1) New IFRS 9 Financial Instruments ties will have to record a day 1 loss equal to the 12-month ECL on pwc - contributions of mining

initial recognition of financial assets that are not credit impaired to depict the transfer of promised goods or services to customers (or lifetime ECL for trade receivables). IFRS 9 contains a ‘three in an amount that reflects the consideration to which the entity stage’ approach which is based on the change in credit quality of expects to be entitled in exchange for those goods or services. An financial assets since initial recognition. Assets move through the entity recognises revenue in accordance with that core principle three stages as credit quality changes and the stages dictate how by applying the following steps: an entity measures impairment losses and applies the effective Step 1: Identify the contract(s) with a customer 49 interest rate method. Where there has been a significant increase Step 2: Identify the performance obligations in the contract 49 in credit risk, impairment is measured using lifetime ECL rather Step 3: Determine the transaction price than 12-month ECL. The model includes operational simplifica- Step 4: Allocate the transaction price to the performance obliga- tions for lease and trade receivables. tions in the contract Step 5: Recognise revenue when (or as) the entity satisfies a per- Disclosures formance obligation Extensive disclosures are required, including reconciliations This model will be applied in two versions, depending on how per- from opening to closing amounts of the ECL provision, assump- formance obligation is satisfied: tions and inputs and a reconciliation on transition of the original (1) over a period of time, or (2) at a point in time (in a given moment) classification categories under lAS 39 to the new classification Due to the use of the five-step model, the moment of revenue categories in IFRS 9. recognition may shift: Revenue, which is currently recognised over a period of time New IFRS 15 Revenue from Contracts with Customers throughout the entire duration of the contract, e.g. in accordance Entities in the mining industry regularly enter into complex with the percentage of completion method, may in the future be contractual arrangements relating to the sale of products. The recognised once, at the end of the contract and vice versa. complexities around pricing and delivery are likely to be affect- ed to some extent by the new standard, including requirements The moment of revenue recognition to identify separate performance obligations and determine the The basic principle of IFRS 15 is recognising revenue when the extent to which transaction prices are subject to the risk of signif- control over a product / service is being transferred to the client. icant reversal. The new requirements could affect the timing and Control is a broader term than the previously used criterion of measurement of revenue recognised. There is also a significant risk and rewards, which determined when the revenue will be increase in the disclosure required. recognised according to IAS 18.

Overview The growing importance of estimates Revenue recognition in the mining industry might appear to A real challenge in the implementation and use of the new stand- be simple. Revenue is generated through the supply of com- ard is increase in the importance of estimates without which recog- modities in exchange for consideration. Complexities can arise, nition of an even relatively simple transaction may be impossible. however, from certain types of contractual arrangements that are common to the industry, including partnerships with other enti- Final thoughts ties and arrangements for which the consideration is based on In the face of all the change and challenges experienced, the future production. Agency arrangements, transportation servic- mining industry is of paramount importance to Namibia’s eco- es, provisionally priced commodity sales contracts and long-term nomic growth and sustainability but also to Namibia’s social take-or-pay arrangements might also be impacted by the new political well–being. Companies should continue to evaluate revenue standard. The complexities in these areas can make the how the new standards and tax proposals might change cur- decision of when to recognise revenue under the new standard rent business activities and deal with these challenges on a pro and how to measure it more challenging. active basis. n

The standard The core principle of IFRS 15 is that an entity recognises revenue

advertorial Training institutions should up standards

Many vocational training centres are not meeting what the The employment level in the mining sector is threatened by robotic/ mining sectors require in terms of well - trained personnel, technological inventions. 51 says African Personnel Services general manager Robert de De Villiers said technology is a worldwide threat to employment but Villiers. there is little that can be done to reverse it. He indicated that the advantage Namibia has, which it needs to “You find a boiler-maker who comes to work but he does not know capitalise on, is the fact that technological inventions are pricey anything about boiler-making,” De Villiers said. to invest in. The lack of skills in the mining sector is experienced all over SADC So the country needs to have flexible labour laws that do not act (Southern African Development Community) and is not only a as barrier so the mines could stick to human labour compared Namibian problem. to mechanised labour.On the willingness of mines to employ “A lot of companies use Zimbabweans because they are well- women, he said: “The mindset has changed completely. People trained,” De Villiers said. now look at competency. Women are now operating those big Commenting on retrenchments in the mining sector, De Villiers said trucks. Out of our total labour force women make up 51%.” the companies are trying to keep and maintain their workers but at The company maintains its recruits well, having its own in-house the same time they need to make profit. safety department and on-site safety officers where their employ- He added that mines have come to appreciate contract mining ees are stationed on a regular basis. work, thus able to accommodate retrenched workers as short-term De Villiers made reference to some investors who come with their contractors. own employees. However, he said APS cannot dictate who the “Even though mining is capital-intensive and the sector is depend- investors employ and would rather let the government do its job ent on external factors; nobody can really influence all operations in ensuring that Namibians are employed and laws are followed. internally. As a recruiting agency of the mining sector, we make sure “However, the quality of education in the country makes it we recruit and place Namibians for any of the available vacancies in difficult for the government to enforce the standards and rules the sector,” De Villiers pointed out. of work permits,” he said. n Think Staff Think

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@APSNamibia mining industry De Beers and the Rush to Gem 52 Quality Synthetics

ROMAN GRYNBERG

FOR years, De Beers has maintained a policy that its on its real diamonds, and acquired some of the most expensive expertise in the production of synthetic diamonds real estate on the planet for its De Beers retail outlets. If you are through its subsidiary Element 6 would only ever young enough to believe the De Beers accounts, then the move to retail, previously almost unheard of for a mining company, be used to produce industrial diamonds. After all, as was a financial disaster, and they lost hundreds of millions of one De Beers chief executive after another said, De dollars. In May last year, the retail end of the market got the bet- Beers would not want to commit financial suicide ter of a century of De Beers’ common sense and hard-headed by collapsing its massive and very profitable invest- business strategy. Since the arrival of the millennial generation, ment in its mines in Botswana, Namibia, South Afri- bling has only been one of the potential luxuries that this group ca and Canada which produced quality diamonds in could compete with. A diamond with any real market value is order to produce synthetics. Only one hell-bent on normally at least one carat in size. Nature is unkind, and most self-destruction could possibly think that producing of what it spews from the earth is much smaller than a carat. Moreover, given the scarcity of good one carat diamonds, their low-cost synthetic diamonds which cannot be dis- price now ranges from US$8 000 to US$10 000. tinguished from mined diamonds by a diamantaire This price range made diamonds uncompetitive with Louis Vuit- with the naked eye, let alone the consumer, was go- ton handbags or even week-long holidays, so the marketing ing to be good for De Beers, Africa, and its owners, people at De Beers had to develop a valuable ‘diamond’ that Anglo American and the government of Botswana. could compete in the US1 000 range. If nature would not pro- These are the men and women who now run De duce the valuable commodities the market required, then there Beers. was nothing stopping man from producing such a product. And so, last year, De Beers decided to reverse its decades-old policy, The once mighty diamond cartel that had ruled over the market and in May started an operation by its US subsidiary Lightbox, with an iron fist has gone fundamentally soft.In 2002, De Beers which now markets its synthetic gem-quality diamonds. Light- stopped being a cartel, and moved over to a new market strategy box began by marketing a one carat diamond for US$800. The which involved them selling diamonds on retail, and has moved response was a massive outcry from the synthetic diamond into the segment of the diamonds market previously held by re- manufacturers. Chatham, a famous US producer of synthetics, tailers. It went into a now dissolved partnership with LVMH, the was the first in line to cry foul, and has reportedly filed a com- great marketer of luxury products. It engraved the ‘forevermark’ plaint against De Beers for ‘predatory pricing’, an offence under

mining journal a publication of the namibian mining industry

the Rush to Gem US anti-monopoly laws. Chatham can only ing demand must be met somewhere, hence market its one-carat diamonds for US$4 000, the power of synthetics to fill the gap. 53 and the De Beers price would drive them out So, the move to gem quality synthetics by De of business. This, Chatham has argued, was Beers is an attempt to control the synthetic Quality Synthetics the entire intention, to temporarily sell these market, with scant consideration that the synthetics below cost, and drive the competi- entry will one day, no doubt, be seen as an tors out of business. important milestone in the demise of dia- The question is whether De Beers’s synthetic monds as the ‘king of gems’. In an attempt to arm, Element 6, and its marketing arm, Light- defend its short-term position in synthetics, box, are losing money at US$800 per carat, or De Beers has been sucked into a commer- whether after 60 years of producing industrial cial vortex from which it will not emerge in synthetics, it is now just very good and very anything like its current form. The diamond cost-effective. managers will reply–what else could De Beers Economists believe religiously in their theo- have done? The answer lay in strengthening ries, and they argued that in the long run, all the market position of mined diamonds as a monopolies and cartels like De Beers would rare and exceptional product. It would appear disappear because either the participants that De Beers has given up.The market vortex would cheat on each other, e.g. Opec, or there of synthetics will suck in all of the major Af- would be new inventions like mobile phones rican-mined diamond producers, including which would undermine existing firms like Angola, Botswana, Namibia and South Africa. the telecoms monopolies. But after 90 years, There will be a massive decline in revenue De Beers has continued to monopolise the from diamond mining in these countries. market. It was the proverbial ‘black swan’. It will not have much effect on a relatively In the case of diamonds, De Beers ruled the large scale, but for quasi-criminal diamond market by punishing those who objected to producers in Zimbabwe and eastern DRC their control of the diamond market, as well who, if one believes the public data, produce as their secret prices. It maintained its mo- large volumes, but reputedly low-quality nopoly, even when suppliers such as Australia diamonds. What is the evidence that such or Russia came on stream. Its buyers, called a decline in diamond prices will eventually ‘sight holders’, were disciplined if they en- occur? In the 1960s when General Electric gaged in marketing that would harm the first entered the wide-scale production of cartel.De Beers has slid massively from con- synthetic industrial diamonds, followed a trolling 90% of the global diamond market decade later by De Beers and then Sumito- in 1990 to about 40% now. Its venture into mo, the industrial diamond market crashed, marketing diamonds at the retail level has brought a new kind and prices tumbled to a tenth of their 1980s peak. At the turn of of functionary into the business – people who know diamonds, the century, 95% of all industrial diamonds were synthetic, and but have not mined diamonds, and certainly not owned diamond when the Chinese finally entered in a big way, prices have totally mines.These people see what is happening with the increased collapsed. This is the market vortex which De Beers, along with penetration of new diamond producers such as Al Rosa, Rio Tinto the African ‘daimacrats’ (those bureaucrats who run the diamond and Dominion Diamonds, and they see the declining position industry) has brought upon us. No one should expect a different of De Beers’ mining interests. Yet, while De Beers is no longer a market outcome to that which was experienced with industrial cartel, it still controls the diamond market as part of what econ- diamonds. And so diamonds, once the ‘king of gems’, appear to omists call a dominant oligopoly. Its rivals accept its price lead- be on their deathbed, and no efforts by De Beers to revive its for- ership, and supply is controlled because De Beers still controls tunes will now succeed.Indeed, the kingmaker has now turned Botswana’s diamond production, and that country has become assassin, helped along by its silent retinue of self-interested Afri- the shock absorber in the diamond market.These managers all can ‘diamacrats’, who have done nothing while Africa loses such a see that while diamonds are not rare (diamond production glob- valuable industry.Fortunately for Namibia, which produces some ally rose from one million carats in 1900 to 175 million carats in of the world’s most valuable diamonds, it will be one of the last to 2005), diamond mines are very rare, and few new ones are being succumb to the effects of the market vortex which will ultimately introduced. And so the rising demand for diamonds, caused in devastate the diamond industry. De Beers will not save us now. no small part by the recent success of De Beers in convincing the Chinese and Indian urban middle classes that diamonds are an *These are the views of Roman Grynberg, and not necessarily essential part of the marriage ritual, has meant that the increas- those of Unam, where he is employed. n

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