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Low demand for diamonds persists

Diamond production is expected to fall further in 2020, negatively impacting government revenue and export earnings.

This comes after the demand for diamonds plummeted amid the Covid-19 pandemic.

The Chamber of Mines of Namibia’s president, Zebra Kasete, says the decline in demand has dampened the flow in the diamond pipeline.

Kasete was speaking at a meeting on the impact of Covid-19 on the mining industry on Friday.

At the beginning of the pandemic, mineral commodity prices plummeted, particularly for base metals, he said.

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“Namib Lead and Zinc Mine was placed under care and maintenance – the price of zinc and lead dropped to below break-even point, and social distancing is not possible in confined underground environments. Job losses were at 129,” he said.

Kasete said the price of gold rose above US$2 000 per ounce – the highest since 1975. He added this may offset some of the revenue losses to the government and export earnings.

“The mining industry has supported the government in the fight against Covid-19 in cash and in kind to the tune of N$77,9 million,” he said.

Kasete said the pandemic has disrupted the supply chain, which in turn impacted stock levels of inputs, consumables and equipment spares.

The industry is unable to import specialised skills in case of a breakdown of sophisticated equipment, because international flights are banned.

“There are opportunities in building specialised skills locally post Covid-19 and the use of technology to repair equipment with the help of experts remotely,” Kasete said.

Industry Contribution

During 2019, the mining industry contributed N$4,8 billion to government revenue, of which 10% was distributable cash.

This amount forms part of the N$33,5 billion the industry contributed to the economy in the review period.

Kasete said 77,1% of the distributable cash stayed within Namibia’s borders.

The industry paid N$3,166 billion in profit tax and royalties, while operating expenditures took the bulk of the contribution of N$7 billion, followed by wages and salaries at N$4,8 billion.

Meanwhile, looking at mining contribution to gross domestic product and real growth, Kasete said: “Real growth fell, posting a contraction of 11,1% in 2019 due to a drop in diamond and uranium production.”

He said the declining expenditure on exploration, which stood at N$323 million in 2019, is mostly as a result of lower mineral commodity prices.

“Fixed investment by mining continued on its downward trend as no new mining projects were developed,” he said.

In 2019, the mining industry provided 16 324 direct jobs, with 9 027 permanent employees (of whom 283 are expatriates).

Temporary jobs stood at 800, while there were 6 515 contractors.

2020 Developments

Kasete said mining operations have been suspended at Tschudi in February 2020 as the oxide ore body was depleted. He added that processing operations are expected to continue till the end of the year, but 66 direct and 367 contractor jobs have been lost.

Mining operations ceased at Skorpion Zinc due to the depletion of the ore body, and the mine had to close early due to safety concerns about multiple slope failures.

“The refinery conversion project is underway. However, 1 500 jobs (532 permanent and 968 on contract) have been lost, but not as a result of Covid-19,” he said.

Other developments include the official revoking of the non-deductibility of royalties for mining entities “as announced in the 2020/21 budget speech”.

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