4 December 2018

Namibia: Not Entire Rössing Going to China - Government

RÖSSING Uranium is not entirely being sold to China National Uranium Corporation (CNUC) - only Rio Tinto's majority stake of nearly 69% - mines and energy permanent secretary Simeon Negumbo says.

The government responded to the media in a press release on Friday, a week after Rio Tinto officially announced its sale to the Chinese company, making Rössing the second Chinese majority-owned uranium mine in Namibia.

"The other shareholders will still be part of the owners of the mine," said Negumbo.

Rio Tinto is selling its 69% shares for N$1,5 billion, while the Namibian government has a 3% stake, and the majority (51%) when it comes to voting rights. The Iranian Foreign Investment Company holds a 15% stake that goes back to the early 1970s in the financing of the mine. The Industrial Development Corporation of South Africa owns 10%, while local individual shareholders own a combined 3%.

Negumbo said the ministry has not received the agreement yet, and therefore cannot express their opinion, neither speculate on any conditions that may be imposed on the transaction until it has studied the agreement and subjected it to the relevant laws.

The sale is a private share transaction between the two parties, and is subject to certain government approvals, such as from the mines ministry and the Namibian Competition Commission.

Although the sale is being seen as a lifeline for the mine, and securing more than 900 workers their jobs over a longer period, it should, however, be used as an opportunity by the government to increase its stake in the company, Erongo governor Cleophas Mutjavikua and Mineworkers Union of Namibia assistant secretary general Paulus Shitumba observed.

Shitumba said even if the government does not want to increase its shares, negotiations should include shareholding by the workers of the mine.

"We have worked there for decades, and this is a Namibian mine on Namibian soil, and it is Namibians who opened that pit. Before it goes to China or anyone else, there should be serious deliberation to include shareholding of the workers, and increase Namibia's share in the mine," he told The Namibian last Friday.

He said a similar shareholding of workers exists in the fishing industry, and this should be emulated in the mining industry.

The possibility of a monopoly of uranium mining in Namibia - both major operating mines, Rössing and Husab being side-by-side in Erongo - was a serious concern, and a caveat to safeguard against a monopoly should be built into the transaction, Mutjavikua stated.

"An important option would be that over a period, more shares come to Epangelo. There needs to be an equilibrium in the share structure where the government is involved," he reasoned.

The Epangelo Mining Company has the government as the sole shareholder. It has 10% shares in Swakop Uranium's Husab mine.

Epangelo CEO Eliphas Hawala, however, told this newspaper on Friday that it does not makes sense to buy a "loss-making entity" unless the investor will recover their losses somewhere else, such as by recovering the losses through the generation of nuclear power, after the uranium leaves Namibia.

"It is a choice between having to close the mine in seven years versus keeping it alive, thus keeping people employed and keeping the payments of royalties flowing in," observed Hawala.

According to him, the current low uranium price is not conducive to making a profit in the near to medium term. Without profit, there will be no dividends to the new buyer, and no taxes to the government.

"In such a scenario, the new buyer can only recover their losses through activities other than mining, for example, if they are vertically integrated through the uranium value chain. In such a scenario, how will the potential losses in tax revenue to the state be mitigated?", he asked.

"This potential risk cannot be mitigated without state intervention. One such intervention, aiming at reducing this risk, is to put a condition in place such as through the Competition Commission, or conditions for the transfer of the mining licence."

Hawala believes the government should put several conditions in place, which would allow for beneficial participation by Namibians in the deal, beyond the collection of royalties and salaries.

"This beneficial participation should yield some form of 'trickle dividend' to the participating Namibian entity. In short, the envisaged trickle dividend is to ensure that Namibians still benefit, even though they are vertically integrated across the entire uranium value chain.

"For example, the minister of mines should use his power to compel the vendor to sign a minerals agreement, on the terms set by the minister as per his powers. This has been done before, like in the case of Namdeb," Hawala said.

Rössing Uranium managing director Richard Storrie said work at the mine would continue as usual until the process is finalised mid-2019. The mine will also support its workers until then and during the transition, and no change will be expected with contracts to ensure continuity.

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