namibian sovereign risk

Proposed BEE legislation poses risk to Namibian mining sector - Paladin:


Manager for Africa for Paladin Energy, which owns the Langer Heinrich uranium mine there, says that proposed BEE legislation may damage overseas investment in the highly prospective Namibian mining sector

Author: Agnieszka Flak
Posted: Thursday , 26 Nov 2009

SWAKOPMUND, Namibia (Reuters) -

Namibia's proposed law to force mining companies to yield 25 percent of their shareholding to black investors poses a risk to the industry and may deter future investment, an industry manager said.

Werner Duvenhage, Manager for Africa at Paladin Energy, which owns the Langer Heinrich uranium mine in Namibia, said there was not enough cash among blacks in the country of 2.2 million people to fund such investments.

Duvenhage suggested the government should instead pursue its policy of collecting taxes and royalties from the mines.

"The legislation on royalties is good, rates are reasonable, tax rates are high, but that's the way it is ... but (the state) should stay away from enforcing shareholding," he said, but added that the industry was in support of the other parts of the legislation including local employment.

Namibia is also home to the Rio Tinto-operated Rossing mine, which together with Langer Heinrich account for about 10 percent of world uranium production.

Several other mines are expected to come on stream in the next five years.

Uranium companies currently pay 3 percent of their turnover in royalties and their tax rate is 37.5 percent, Duvenhage said.

"That's a no-risk business for them and they can leave it to the private companies to sort out the funding and run the businesses," he told Reuters in an interview on Wednesday.

Duvenhage said the government would test run the policy for three years before turning it into law.

He said apart from concerns over the proposed empowerment law, the regulatoray framework in Namibia had been favourable and a positive demand picture justified future investments in uranium production.

"There are huge quantities of uranium that will go out of the market in 3-4 years ... and mines will go out of business or produce less. That's what we are positioning ourselves for."

The Langer Heinrich mine is on track to expand annual production capacity this year to 3.7 million pounds from 2.6 million and to further expand to 5.2 million pounds by end-2010.

Duvenhage said the company was eyeing potential joint ventures with possible uranium oftakers.

"We will investigate options of going into joint ventures ... the China/India side, there's a huge market and we need to keep our options open," he said.

The company's Malawi uranium operation is ramping up to an annual production capacity of 3.3 million pounds with a potential to further expand to 3.8 million pounds.

Duvenhage said that while spot prices have been volatile, the term price has been keeping up quite well and should stabilize around $60-70 a pound.

"That's the sort of price we can see new mines coming on to production and existing mines remaining profitable," he said.

Spot uranium on Thursday stood at $43 per pound, down from a record around $136 in June 2007.

© Thomson Reuters 2009. All rights reserved.




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