Namdeb Diamond Corporation (Namdeb) yesterday confirmed that despite dwindling land-based diamond production, it has extended the lifespan of its mining operations by 20 years, from 2022 to 2042.
The extension forms part of Namdeb’s new approved long-term business plan through which it also sought royalty remission from government to enable it to develop an economically sustainable business plan to lengthen the life of its land-based operations, which were facing closure at the end of 2022. Consequently, government offered Namdeb a reduction in royalties from 10% to 5% from 2021 to 2024.
The new business plan, described as mutually beneficial, is expected to generate N$40 billion in fiscal contributions to government. Speaking at yesterday’s announcement, Namdeb CEO Riaan Burger said: “Without the royalty remission, it would not have been possible for the shareholders to fund the life of mine (LoM) extension. The royalty remission granted will enable capital to be invested in the operations that will support an LoM extension of up to 20 years for Namdeb’s land-based operations, delivering substantial long-term economic benefits for Namibia, continuity of employment and benefits for community partners.”
The long-term business plan is anticipated to result in 7.8 million carats being produced, amounting to revenue of N$159 billion. However, this product target requires approximately N$2 billion in capital investment over the next three years. Burger added that approximately 2 100 people (1 500 Namdeb employees and 600 contractors) will be retained as a result of the life of mine extension, and approximately 600 jobs are being added to enable additional production activities.
This plan positively impacts the socio-economic development of Namibia, with direct benefits to the //Kharas region and in particular the town of Oranjemund.
“The closing of Namdeb meant we were closing one of the biggest contributors to the Namibian fiscus, the loss of at least 2 100 direct jobs and many more in indirect employment, and also the likely economic collapse of the town of Oranjemund. In contrast, this plan now allows us to not only retain those jobs, but to add more employment, to positively contribute to the Namibian economy and fiscus for many more years and to support the economic transformation of the town of Oranjemund,” Burger observed.
Also at yesterday’s announcement, mines minister Tom Alweendo said government understood the fundamental impact Namdeb’s closure would have had on society and its beneficiaries, as well as its contribution to the gross domestic product (GDP).
“To safeguard the Namibian economy, it was imperative for the government to decide and support Namdeb by granting royalty remission. This decision benefits the sustainability of the life of mine, the national economy as well as preserving employment for our people and the livelihoods of families that depend on it. It may not have been an easy decision to make in an economy that already was crippled by the negative impacts of Covid-19,” explained Alweendo.
He emphasised that mining remains the backbone of the Namibian economy as one of the largest employment sectors within the country.
According to Alweendo, the prudent extension of the mining operation will move Namibia closer towards the achievement of national goals and objectives through the retention and creation of jobs as outlined in the National Development Plans and the Harambee Prosperity Plan II.
Furthermore, the minister encouraged businesses considering investing in the economic diversification of Oranjemund to look into the option of having a public-private partnership for the development of a sustainable community.
Meanwhile, De Beers CEO Bruce Cleaver noted that the resource from which Namdeb extracts diamonds has been mined for over a century, and the process to unlock and recover diamonds had become expensive. He said this is due to the Atlantic Ocean increasingly winning the battle to reclaim its full reach.
“Given the age of the operations, maintaining viable and profitable operations was increasingly becoming difficult under the existing fiscal arrangements. However, in a true testament to the Namibian government’s mantra that ‘Namibia is open for business’, government favourably considered Namdeb’s proposal for a different royalty regime that could unlock additional value for all partners in the long-term. Under this new regime, Namdeb will now have the ability to invest its profits to extend its mining operations, without placing any further strain on its balance-sheet,” stated Cleaver.
Local economist Klaus Schade yesterday told New Era that the good news is not only for the diamond mining industry, but for the entire diamond mining value chain, for government revenue and in particular for job retention.
“It comes at a time when other mining operations are still on care and maintenance, such as Skorpion Zinc, Tschudi Copper and Langer Heinrich Uranium. It also amplifies the need for flexibility on the side of government, particularly as in this case the finance ministry temporarily granted relief in the form of lower royalties,” said Schade.