10 July 2012

Namibia: Mining Policies Need Re-Look - Geologist

Existing legislation governing mining operations in the country could in the long term hamper the sector, as mines would struggle to bear the brunt of the high taxes and strict regulations.

In a recent research report on the mining industry titled 'Exploration in Namibia - the future of the mining industry', geologist Dr Roy Miller argues that the new withholding tax of 25 per cent on services and the 37,5 per cent of tax to be charged on the disposal of mining and exploration licences could hamper future investments in the sector.

Miller said the fact that licences for all strategic minerals will only be issued to the State-owned Epangelo company could drastically reduce foreign exchange earnings from the mining sector.

He said by 2040, government revenue from mining and jobs in mining will be a fraction of what they are today.

"Policy somersaults destroy a country's positive reputation, create unfathomable uncertainty and drive away investors who take huge financial risks over a long term," Miller stated.

Earlier this year, Glencore chief executive officer Ivan Glasenberg, warned that mining companies could close shop and pack up if the fiscal and mining regime becomes disadvantageous to exploration and mining. Glasenberg was referring to a possible withdrawal of exploration funds from mining companies, which could result in no new mines being established in the country.

According to the report by Miller, only a handful of Namibian mines have enough reserves to last for the next 30 years, which include the yet to be established Namdeb offshore, Namdeb onshore and the Husab mines.

The Trekkopje mine, albeit with low-grade reserves, and the ongoing salt mining along the coast are also tipped to go the distance.

The report lists scarce water resources and power, skills and electricity shortages, and difficulties in obtaining work permits for would-be investors as some of the factors hindering maximum investments in the sector.

"Our mineral potential is not as high as that of some of our neighbours, but we do have some world-class targets. Also, Namibia's overall tax rate for mining is above that of the world average and getting worse," stated Miller. In order to encourage investments in the highly competitive mining industry, Government needed to provide more incentives than competing countries with mineral potential, the report stressed. Mining is one of Namibia's major industries and contributor to the country's Gross Domestic Product (GDP).

Namibia is known globally for its uranium and diamond deposits. It is the world's sixth largest producer of uranium and among the largest gem quality diamond producers in value terms. It is also one of the leading nations when it comes to zinc, copper and lead reserves. 


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