Mining Industry Performance 2011

Robin Sherbourne 23 May 2012

Highlights since Last Mining Expo
• GRN-De Beers deal on Namdeb Holdings • Diamond production falls to 1.336 million carats • Debmarine’s “Peace in Africa” – world’s largest marine diamond mining vessel commissioned in October • Diamond sales (N$6.5bn) exceed uranium sales (N$4.9bn) • Langer Heinrich completes Stage 3 and technical work for Stage 4 • Husab granted 25 year mining licence (ML171) + CGNPC takeover • Namibia drops to 5th in world uranium production in 2011 • Glencore announces intention to buy Rosh Pinah (NaCC) • B2Gold buys Auryx for C$160m in cash and shares • Otjihase and Matchless restart production (Tschudi, Berg-Aukas, Kombat) • Walvis Bay Salt Ekango Salt Refinery (EVI and EHI Investments)

Key Events Since Mining Expo 2011
• Ohorongo Angola import ban and application for IIP • MoF tax proposals in July • OPM policy announcement on New Equitable Economic Empowerment Framework (NEEEF) in October • Environmental regulations under Environmental Management Act 2007 passed and Environmental Commissioner appointed • Epangelo deals with NRE, Bannerman and Extract • Joint GRN-CMN Tax and Value Addition Committees

Mining Value Added in Current Prices (N$m)
14,000

12,000

Other mining
10,000

Diamond mining

8,000

6,000

4,000

2,000

0 1990 '91 '92 '93 '94 '95 '96 '97 '98 '99 2000 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10

Source: National accounts, Central Bureau of Statistics

Mining Value Added as Percentage of GDP
20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 1990 '91 '92 '93 '94 '95 '96 '97 '98 '99 2000 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10

Other mining Diamond mining

Source: National accounts, Central Bureau of Statistics

Mining Fixed Investment as Percentage of GDP (includes exploration expenditure)
8% 7% 6% 5%

5.1%

3.1%
4% 3% 2% 1% 0% 1990 '91 '92 '93 '94 '95 '96 '97 '98 '99 2000 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10

Source: National accounts, Central Bureau of Statistics

Fixed Investment (N$m)
5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2000 '01 '02 '03 '04 '05 '06 Mining '07 '08 '09 '10 Government Source: CBS

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Mining Exports (N$m)
20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 '93 '94 '95 '96 '97 '98 '99 2000 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10

SHG zinc Other minerals Blister copper Metal ores (including uranium) Rough diamonds

Source: National accounts, Central Bureau of Statistics

Mining Employment (Chamber Class A, B and C members including NCS and NIMT)
16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1990 '91 '92 '93 '94 '95 '96 '97 '98 '99 2000 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 11

Source: Chamber of Mines Annual Reports

Employment in Mining Sector at end 2011
500 1,000 1,500 2,000 2,500 3,000

AREVA DBMN Namdeb Langer Heinrich Navachab NCS Ohorongo Okorusu Rosh Pinah Rossing Uranium Salt & Chemicals Salt Company Samicor Skorpion Weatherly Mining Auryx Gold Bannerman Craton Gecko Otjozondu Reptile Uranium Rio Tinto Swakop Uranium Valencia NIMT

Total employment more than 14,000 ( as big as fishing and SOEs)

Key Numbers for Mining Sector in 2011
• • • • • • • • • • Turnover > N$15.8bn Profits > N$1.7bn Wages and salaries > N$2.5bn Fixed investment > N$1.3bn Exploration spending by operating mines > N$404m Exploration spending by exploration companies > N$348m (Auryx N$91m, Bannerman N$60m, Reptile N$78m, Extract N$49m) Profits tax paid > N$884m Mineral royalties paid > N$867m 7,034 permanent employees, 590 temporary employees, and 6,190 contractors Rössing Uranium made loss of N$471m in 2011 (royalty 6%)

Uranium Production (tonnes)
6,000

5,000

Langer Heinrich Rossing

4,000

3,000

2,000

1,000

0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Rio Tinto, Paladin Energy

Uranium Producing Countries* (tonnes of contained U mined in 2011)
0 Kazakhstan Canada Australia Niger Namibia Russia Uzbekistan United States
4,351 5,983 9,145

5,000

10,000

15,000

20,000
19,451

25,000

3,258

2,993

2,500

1,537

Source: World Nuclear Association

*only includes countries producing more than 1,000t

2006/07 Policy Potential Namibia South Africa Botswana Mineral Potential Namibia South Africa Botswana Jurisdictions

2007/08

2008/09

2009/10

2010/11

2011/12

n/a 53 38
n/a 57 32 65

33 50 11
12 45 14 68

34 49 18
40 44 17 71

37 61 21
24 45 7 72

30 67 14
29 66 7 79

45 54 17
44 62 1 93

Two quotes relating to Namibia: “From Hero to Zero in one simple step. Here’s how: Take a country up there with Botswana in the “let’s encourage foreign investment” stakes, throw in some ill-considered ministerial comments, a poorly planned state mining company, define many common minerals as “strategic,” moot a change in the laws, and hey—presto! You end up on the same level as Zimbabwe! When will politicians ever learn? Win-win means just that.” —An exploration company, company president. “South Africa will be in the regulatory spotlight again next year owing to the nationalization debate, Zimbabwe over indigenization, and Namibia in relation to its restrictions on the export of strategic minerals.” —Law firm, partner and practice head.

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Conclusions
• Mining sector emerged well from crisis with most main projects intact (uranium delicately poised) • Easily most dynamic sector of economy investing more than any other sector • Attracting full spectrum of international investors • Junior miners and stock exchanges playing critical role • Investors highly sensitive to Namibian policy pronouncements • Mining to face new taxes, environmental regulations, NEEEF, NT Levy, power and water costs

Robin Sherbourne
Namibian Economics robin@namibianeconomics.com PO Box 86058 Windhoek Namibia

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