Jason Mitchell
Namibia is one of Africa’s most attractive investment destinations for foreign mining companies. The country would like to become more involved in refining its minerals but lacks the infrastructure to do so currently.
According to the IMF IMF, the country has an estimated US$13.6bn economy and income per head of $5,050 a year (one of the highest in sub-Saharan Africa, only surpassed by Botswana and South Africa). It only has 2.7m inhabitants, making it one of the world’s least densely populated nations (only Greenland and Mongolia have a lower population density).
The economy is estimated to expand at 2.8% last year and is forecast to grow by 2.7% this year. Independence from South Africa was achieved in 1990, after which the country transitioned to multiparty democracy. Their shared history means Namibia’s economy is closely linked to South Africa’s.
Mining contributes around 12% to the country’s economy and more than 50% to its export revenues. It is home to minerals, including diamonds, magnesium, zinc, silver, gold, lead, copper, lithium, nickel, cobalt, uranium and rare earth elements (REEs). Many are essential to “green” energy technologies, including wind turbines and electric vehicles. Given the mounting global demand for critical minerals, investment in the Namibian mining sector is poised for solid growth.
The country is also one of the top global producers of uranium and gem-quality diamonds, but its lithium and REE reserves have started to attract the most attention from foreign investors. Miners are optimistic about what lies below the Namibian desert soil and are encouraged by the stable political environment.
In June 2023, the Namibian government banned the export of unprocessed crushed lithium ore and other critical minerals — including cobalt, manganese, graphite and REEs — as it seeks to profit more from the strong global demand for these materials. It wants to promote in-country “beneficiation” and to maximise local profits throughout the critical materials supply chain. “Beneficiation” is the process where ore is reduced in size and gangue (the commercially worthless material) is separated from the ore.
However, some mining companies argue that Namibia lacks the infrastructure necessary to become a major mineral processing hub. Significant investments in water, power and logistics would be needed first.
The mining sector recorded a year of solid growth of 21.6% during 2022 — compared with only 11% during 2021 — on the back of a robust performance by the diamond sector (up 44.2% in 2022), according to the country’s Chamber of Mines. The industry realised a turnover of Namibian dollars 38bn ($2bn) in 2022, up from Namibian dollars 32bn in 2021.
Namibia has lithium pegmatites stretching hundreds of kilometres beneath its arid plains. Pegmatite — plutonic rocks containing lithium — occurrences are present in the Damara Orogen in the country’s north-central region and the Namaqua Metamorphic Complex in the southern part of the country. In the Damara Orogen, four linear pegmatite belts carry significant REEs and semi-precious stones.
It is estimated that Namibia’s lithium reserves total 230,000 metric tonnes; experts see it as among the five African countries poised for a lithium boom (along with the Democratic Republic of the Congo, Mali, Zimbabwe and Ghana).
According to Simonis Storm Securities, a Namibian wealth manager, the country’s lithium industry could be valued at up to $1bn a year. However, experts have classified its lithium deposits as “low grade” at closer to 1% (against the global standard grade of 6%).
Lepidico, an Australian miner, and Andrada, a Guernsey-based technology metals mining company, have two of Namibia’s biggest and most advanced lithium operations.
Simonis Storm analysts said — that although both companies have announced significant discoveries — lithium mining production is only expected to be in full swing from 2025.
Xinfeng Investments, a Chinese mining company, also has operations in the country, but in October 2023, the Namibian authorities ordered the police to stop transporting lithium ore inside the country and from trying to export it. It accused Xinfeng of violating the ban on critical raw mineral exports.
The country possesses significant reserves of REEs, including dysprosium and terbium — needed for permanent magnets in electric cars’ batteries and wind turbines. According to the US Geological Survey, Namibia and South Africa contain the two largest amounts of rare earth-bearing mineral deposits in Africa. Namibia contains 27 rare earth-bearing minerals, while South Africa has 23.
Furthermore, several minerals in Namibia and South Africa bear REEs, which are in great demand for the products defining the “green” economy and defence-related sectors. Namibia and South Africa have comparatively large deposits of monazite and bastnasite, considered among the most common rare earth-bearing minerals. Other important rare earth-bearing minerals in Namibia include parisite, florenite, and ancylite. They should also be economically viable, as they are used in lasers and semiconductors.
Currently, two mining companies are exploring REEs in Namibia, both owned by Namibia Critical Metals (NCM), a Canadian company. The first mine operates the Lofdal mine — the country’s most advanced rare earth project — in the Kunene region in northwest Namibia, where the rare earth-bearing minerals include monazite, bastnasite and parisite. These minerals hold the REEs: cerium, lanthanum, and neodymium. They are used in producing catalysts, lamps, optics, alloys, polishing, colourants, catalysts, lighters, turbine blade coating, lasers, magnets, computers, electric motors and generators. NCM has a joint venture with the state-run Japan Oil, Gas and Metals National Corporation to develop the Lofdal deposit.
The second mine, Okorusu Complex, located in the Otjozondjupa Region in the northeast, contains monazite and xenotime. They promise to yield the REEs yttrium, cerium, and lanthanum, which are used in lasers, TVs, superconductors, LEDs, light bulbs, cancer treatment, catalysts, lighters, lamps, optics, alloys, polishing, colorant and turbine blade coating.
Broadmind Mining, a Namibian mining company, is assessing the economic viability of its Eisenberg deposit, close to Otjiwarongo, a town in the northeast of the country. It has an inferred resource of 570m mt of REEs, including neodymium, praseodymium, yttrium and cerium, and could become one of the world’s biggest rare earth mines. Broadmind expects it to start production in 2026.
In August 2023, Namibia agreed with Japan to jointly explore and develop REEs to ensure a consistent supply of electric vehicle batteries to the Asian country’s automotive sector. Under this agreement, the Japan Organisation for Metals and Energy Security (JOGMEC) will collaborate with Epangelo, a Namibian state-owned mining company, on several exploration projects.
Furthermore, in November 2022, Namibia signed a Memorandum of Understanding with the European Union to sell its rare earth minerals to the bloc, which is seeking to reduce its dependence on China for critical materials. The EU is also interested in developing cobalt and graphite mining in Namibia, though they are mined on a small scale in the country. The EU plans to mobilise funding to develop the soft and hard infrastructure required for projects.
In April 2023, Olaf Scholz, the German Chancellor, also pledged assistance to Namibia — along with other countries boasting extensive lithium reserves — to establish local lithium processing.
Other firms with critical minerals projects in Namibia include the Australia-listed Prospect Resources, Arcadia Minerals and Askari Metals. Celsius Resources, another Australian mining company, is developing a cobalt project.
Namibia is witnessing a surge in mine acquisitions — both of operational mines and those in maintenance. Notable recent acquisitions include Rosh Pinah Zinc by Appian Natural Resources, a fund located in London, and Namib Lead and Zinc by CL Ventures Lux, a company located in Luxembourg.
According to GlobalData, there are 135 mines in Namibia, most at the exploration stage, signalling high interest from mining companies. Some 77 mines are in the exploration phase, 27 are in operation, and 13 are at the feasibility stage. Seven are at pre-feasibility. There are 26 uranium mines, 16 copper, 14 diamond, 10 iron ore, and eight gold by mineral resources.
The Namibian government is eager to become more involved in the “beneficiation” of the country’s mineral ores. Potential investors need to consider the significant political pressure for local “beneficiation. ” Acquisitions planning job cuts could face special scrutiny and challenges. Regulatory bodies, such as the Namibian Competition Commission, are increasingly advocating for investment in local processing as a condition for acquisition approvals.
In the mining sector, investments in exclusive prospecting licences and mining licences are made through share acquisitions, investments or asset purchase agreements. Mining licences often require a minimum of 20% representation of historically disadvantaged Namibians in management, including the board. Additionally, historically disadvantaged Namibians must own 5% of principal voting shares, mining licence holdings, or indirectly.
Investing in the local processing of raw materials could be worthwhile for foreign miners, as more rigorous regulation might be introduced shortly to require even greater local processing of essential mineral resources.
Of the smaller global mining markets, Namibia offers a stable political environment and low-security risks. The 2022 Fraser Institute Survey of Mining Companies showed that the country improved on the overall Investment Attractiveness Index by seven points, from 52 in 2021 to 59 in 2022. On this index, Namibia was ranked 38th out of 62 surveyed jurisdictions, compared to 59th out of 84 in 2021. It ranked sixth out of 16 African jurisdictions surveyed on overall investment attractiveness (Botswana was ranked first, followed by Morocco, Burkina Faso, Ghana and Ivory Coast).
Namibia’s strong regulatory environment, stable economy and rich mineral resources make it an attractive investment destination. Moving the country from reliance on diamond exports and tourism, investments in critical materials could drive significant economic growth by the decade’s end. However, the country will have to invest large sums in infrastructure to become heavily involved in processing its mineral ores. – Business Europe
— Jason Mitchell, a British financial journalist based in Africa, writes about emerging markets, including Africa, the Middle East and Latin America. He specialises in topics related to wealth creation, mining, capital markets, banking and conservation.
