Investing in the Namibian Minerals Sector : The Namdeb Experience

Transcription

1 Investing in the Namibian Minerals Sector : The Namdeb Experience by Inge Zaamwani Kamwi CEO: Namdeb Diamond Corporation 4 March 2012 Toronto, Canada

2 Contents Namibia - Where the desert meets the ocean Mining contribution to GDP Our investment environment The Namdeb experience Conclusion 2

3 Namibia the desert meets the ocean Republic. Independence: March 21, 1990 Namibia has a population of approx. 2 million people GDP: $12.2 billion (2010) 3

4 Mining contribution to Namibia s GDP. Namibia s mining sector grew by 24.6% in 2010 compared to a decline of 41.5% in Mining contributes 8.8% to GDP (N$81.5 billion = US$10.8 billion) Mineral-related exports accounted for 54% of total exports (N$16.5 billion including copper and zinc but excluding cut and polished diamonds) Namibia is a world-class producer of rough diamonds, uranium oxide, high-grade zinc and acidgrade fluorspar, as well as a producer of gold bullion, blister copper, lead concentrate, salt and dimension stones 4

5 MINING is and will continue to be the bedrock of Namibia s economy - economist Robin Sherbourne Manufacturing : Includes copper smelting, zinc refining, cement manufacturing, and diamond cutting and polishing

6 contribution to foreign exchange earnings 6 July 2011

7 The current players in the market Company Ultimate Shareholders Operations AngloGold Ashanti 100% AngloGold Ashanti (NYSE) Navachab gold mine ML31 AREVA 100% AREVA Trekkopje uranium mine ML151 Diamond Fields Diamond Fields International (TSX) ML111 and ML32 Langer Heinrich 100% Paladin Energy (ASX) Langer Heinrich uranium mine ML140 Namdeb Namibia Custom Smelters 50% GRN 50% De Beers (45% Anglo American) 100% Dundee Precious Metals (TSX) Tsumeb smelter 7 Atlantic 1 concession for Namdeb Orange River, Bogenfels, Elizabeth Bay, Mining Area 1, Douglas Bay, Atlantic 1, Midwater (NDTC + NamGem) Okorusu Fluorspar 100% Solvay Fluor (EuroNext) Okorusu fluorspar mine ML90 Rosh Pinah Zinc Glencore recent purchase Rosh Pinah zinc and lead mine ML39 Rössing Uranium 69% Rio Tinto 15% (LSE) Government of Iran 10% IDC of South Africa 3% GRN 3% Individuals Sakawe 76% Samicor BV 10% Longlife Mining 8% GRN 2% National Youth Service 4% Employees Rossing uranium mine ML28 ML36 A-J, ML 51, ML 103A (LLD Diamonds) Salt Company 100% Klein Family ML 66 A-J, ML 71 A-C, ML 83 A-C Salt & Chemicals 100% Chlor-Alkali Holdings Walvis Bay salt pan ML 37 Skorpion Zinc 100% Vedanta (LSE) Skorpion zinc mine ML108,Namzinc refinery Weatherly International 24% RAB Capital 17.56% Matterhorn 8.38% Bank Windhoek 6.75% Rod Webster 4.75% Wolf Martinick 3.23% GIPF (LSE-AIM) Otjihase, Matchless, Tsumeb West, Kombat, Tschudi, Elbe, Berg Aukas, Asis Far West, Gross Otavi (NCS)

8 Namibia ranks 5 th in Africa! The Fraser Institute s Survey of Mining Companies 2011/2012 8

9 Has the investment climate changed? Why were we downgraded in the recent Fraser Report? Epangelo Mining holds all mining rights for strategic minerals going forward (existing licence holders mostly not affected) No clarity surrounding mining taxation (in particular profits surcharge or windfall tax) No clarity surrounding BEE (New Equitable Economic Empowerment Framework which is not yet law) 9

10 Our investment environment Namibia s Tax Regime Based on well-accepted measures of comparison, internal rate of return (IRR) and overall effective tax rates (ETR), it was determined that the current Namibian system is internationally competitive, and offers a fair sharing of revenues between the miner and the government. ANY INCREASE IN TAXATION, OTHER THAN A WELL-CRAFTED EXCESS PROFITS TAX, COULD SHIFT THE FISCAL SYSTEM INTO A HIGH TAX JURISDICTION WHICH OVER THE LONGER-RUN, COULD RESULT IN LOWER GOVERNMENT REVENUES AS COMPANIES SEEK TO INVEST THEIR CAPITAL ELSEWHERE. Namibian Mining Sector Fiscal System Analysis prepared by James Otto for Extract Resources, June

11 Our investment environment Tax Regime 2-3% royalty rates (on gross sales) mining companies 10% royalty rates (on gross sales) diamond mining companies 37.5% corporate tax (on profits) mining companies (currently under discussion) 55% corporate tax (on profits) diamond mining companies 10% withholding taxes on dividends (Non Resident Shareholders Tax) 20% for minorities Accelerated depreciation of investment spending over three years 11

12 Our investment environment Highest Royalty Tax Rate 0% 5% 10% 15% 20% 25% Mexico Norway Belgium United Kingdom China Ecuador Finland India Indonesia Kenya PNG Ukraine United States Zambia Poland Argentina Brazil Mali Peru Namibia DRC Venezuela Angola Botswana Ghana Laos Pakistan Philippines Tanzania Bolivia South Africa Vietnam Australia Guinea Mozambique Namibia Singapore Colombia Canada Chile Zimbabwe Russia Thailand Kazakhstan Source: Ernst & Young

13 Our investment environment Generally very good infrastructure but railways and ports need upgrading and new electricity generating capacity required (Kudu gas-to-power or coal-fired power station?) Environmental regulations currently being finalised (Environmental Management Act 2007) and environmental taxes being considered Rule of law due process and independent courts Political regime regular democratic elections and a new Presidential candidate known by end of this year ( 2012) 13

14 The Namdeb journey A railway worker, Zacharias Lewala, stumbles on a shiny treasure near Lüderitz. The sparkling discovery leads to a major diamond rush. Diamond mining regulations are introduced and the Sperrgebiet (or forbidden territory ) is declared An agreement between De Beers and the Government of the Republic of Namibia results in the formation of Namdeb Diamond Corporation (Pty) Limited. All existing CDM mining licences and related rights are replaced by a consolidated and rationalised mineral agreement. Zacharias Lewala 2004 The Government of the Republic of Namibia and De Beers celebrate 10 years of successful partnership when Namdeb turns 10 years old.

15 Namibia Diamond facts Ranked No. 1 in average carat value Ranked 6 th in the world in terms of value (USD) Contributes 6.2% of the world diamond production 15

16 Namdeb s footprint - How big is the task? Namdeb currently holds five mining licences. Mining areas include; MA1 Orange River Bongenfels Elizabeth Bay Douglas Bay

17 The Deal. Our JV Model 50% 50 %

18 Benefits of the JV.. Contribution of Mining to GDP (%) 18% 16% Diamond mining Other mining 14% 12% 10% 8% 6% 4% 2% 0% Source: CBS 18

19 Benefits of the JV.. Distributable amount since 1994 Total N$ 14.5Bn GRN N$ 11.0Bn De Beers N$ 3.5Bn 2,000 1,500 1,000 GRN DB (500) (1,000) 19

20 Pushing the Limits Limits of Nature 20

21 Pushing the Limits Limits of Technology 21

22 N$ million Capital requirements Capital requirements - Long term potential 1,400 Study costs 1,200 1, Sampling and Exploration Inner Shelf Inshore Deflation NC Portfolio 400 FTP 200 Sendelings ITP

23 Pushing the Limits Limits of Technology Specialized Skills shortage 23

24 Namdeb s success formula.. Good regulators MME Good partnership ( GRN & Namdeb) Robust Business Plan Good resource Technical innovation 24

25 Conclusion Notwithstanding some challenges Namibia is a good investment option! Stable political environment Good infrastructure and heavy investment Good market access Accessible regulator 25