23 January 2013

Namibia: Mixed Expectations for Mining

POSSIBLE strikes feature high on economists' list of challenges facing the Namibian economy this year.

"A key risk to our view is the continued assertiveness of unions in Southern Africa, particularly in the mining sectors, which could lower our growth expectations," FNB Namibia senior head of research and development, Daniel Motinga, said in his economic forecast for Rand Merchant Bank (RMB). His concerns were echoed in IJG Securities' Economic Outlook 2013, which states: "As always, strikes could pose risks to production, although no looming strikes are seen at this point."

FNB Namibia expects the domestic economy to on average grow by "around 4,3%" in 2013 and 2014, while IJG is forecasting growth of 4% for this year.

After growing an estimated 15% in 2012, IJG expects a contraction of 10,7% in the mining industry this year.

Namdeb's production is forecast to shrink after increasing by an estimated 27% last year. IJG based its growth expectations on the "back of strong production levels since April 2012, with the company averaging production of 147 000 carats a month since". Namdeb's "consistency of production was also comforting", IJG said.

"We foresee production contracting in 2013, whereafter an increase is expected once again. No specific catalysts were identified that could result in the company producing out of line with targets," it said.

Although Namdeb is investing N$280 million to build a new mine at Sendelingsdrift on the Orange River, this won't boost production this year as the mine is only expected to become operational in 2014, IJG said. On the uranium front IJG expects Langer Heinrich to reach its nameplate production of 2 359 tons this year. Rössing's production should be in line with that of 2012, it said.

Motinga said the economy should start benefitting from the construction of the N$21-billion Husab uranium mine, which is scheduled to begin in 2013 and is scheduled for completion in 2015.

"The project will employ between 4 000 and 6 000 people during the construction phase, which augurs well for the retail and trading sectors," he said.

Government's Targeted Intervention Programme for Employment and Economic Growth (Tipeeg) should support "quite a boost" in construction, IJG said.

"All the additional construction is set to fuel demand for cement, and should the infant industry protection indeed hold for Ohorongo cement, local cement production could see a substantial uptick," the company said. IJG also expects increased copper production this year as "production issues at Weatherly are sorted out and production is ramped up".

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