Increasing mineral commodity prices around the world are good for the growth of Namibia’s mining industry and are expected to also increase government revenue from the extractive sector. Global commodity prices have surged higher in recent weeks as world economies have embarked on economic recovery following the devastating impact of Covid-19.
“It is good for the mining industry, firstly from an exploration point of view, as we are witnessing increased investment into exploration expenditure by mining and exploration companies. Increased exploration by existing mines will help to extend their lifespan, as has been the case with the Trevali Rosh Pinah mine and increased exploration on new projects will improve the likelihood of discovering new mines,” said CEO of the Namibia Chamber of Mines, Veston Malango.
Malango noted that for advanced mining projects, such as the Reptile Uranium’s Tumas project and Bannerman Resources’ Etango project, an improving uranium price will spur these projects into mine development.
“For existing mines, rising mineral commodity prices will generally result in higher revenues and profits, provided there are no negative offsets, such as escalating input costs or exchange rate fluctuations. Increased revenue from mining operations will result in higher export earnings for the country and improve the overall trade balance, and more revenue to government through larger amounts of royalties and export levies received,” Malango explained.
He added that government will also receive more income through corporate income taxes paid by the sector, should mining operations derive higher profits as a result of increasing mineral commodity prices.
Global commodity prices have been steadily increasing since the beginning of January this year. Brent crude, for example, the international oil benchmark, has risen almost 40% while copper, iron ore, palladium and timber have all hit record highs this year. However, despite these gains, investors must now decide if the rising prices are part of a temporary recovery from profound market shock or if commodity markets commenced a new “supercycle”, where prices remain sustained at elevated levels for years.
Many global economists feel global commodity prices are expected to stay high in the short-term. These elevated prices have largely been attributed to three main factors. Firstly, global economic recovery, secondly constrained commodity supply lines and, thirdly, quantitative easing and fiscal stimulus measures in major economies are anticipated to keep prices elevated.
Meanwhile, Malango added that the mining industry’s contribution to Namibia’s GDP would greatly be increased by investments in the entire mining value chain.
“There is a need to deepen the upstream linkages by establishing industries that would produce mining inputs and consumables. The mining sector is committed to supporting local suppliers of goods and services as demonstrated by the average yearly spend of 40% of total revenue. In 2020, the mining sector spent N$12.3 billion on goods and services procured locally,” Malango stated.
The mining chamber CEO continued that there is a need for government to attract other investors to set up manufacturing and fabrication plants to further add value to Namibian minerals into semi and finished products.
“There are opportunities for copper fabrication plants, galvanising industry or manufacturing of batteries for the booming electric vehicle industry. The pure metals we produce would form the feedstock into these industries. This would be the ultimate mineral-based industrialisation that Namibia seeks to achieve in Vision 2030 and is also aligned to the African Mining Vision (AMV),” said Malango.