By: Nghiinomenwa Erastus
They say there is no free lunch in a free market economy; hence De Beers and the government have agreed to a temporal reduction of royalty payment as a necessary injection to revive the mine.
The two shareholders De-Beers and the government, announced Thursday at a press conference in Windhoek.
The announcement is part of the new long-term business plan for Namdeb, which involves extending the lifespan of the mine at Orangemund by 20 more years.
This is also meant to unlock a contribution of additional future taxes, royalties and dividends estimated to be more than N$40 billion and 8 000 additional carats of diamonds.
According to the two shareholders, “without the royalty remission, it would not have been possible for the shareholders to fund the Life of Mine (LoM) extension”.
Royalties on rough diamonds are charged at 10%.
The temporal royalty change is a 50% reduction of the normal total royalty for 2021 to 2025.
According to the plan, the reduction now enables the business’s re-capitalisation over the next few years.
De Beer’s chief executive officer, Bruce Cleaver, said they were delighted to share the news with all Namibians.
Moreover, with the international diamond community, “that Namdeb, one of the leading players in the international diamond trade, will extend the life of its operations to 2042,” he revealed.
Namdeb land-based operation was set to close completely this year before the government agreed to Namdeb proposal.
Cleaver explained that the process to unlock and recover diamonds had become expensive.
“Given the age of the operations, maintaining viable and profitable operations was increasingly becoming difficult under the existing fiscal arrangements,” said Cleaver.
Namdeb then proposed to the government a different royalty regime that could unlock additional value for all partners in the long- term.
Under this new regime, Namdeb will now have the ability to invest its profits in extending its mining operations without further strain on its Balance Sheet.
As a result, 2100 jobs will be maintained, and 600 new jobs will be created.
The town of Oranjemund will have an extended period in which it can continue to explore commercial opportunities to become truly viable and self-sustaining beyond mining activities.
Namdeb chief executive officer Riaan Burger explained that the closing of one of the biggest contributors to the Namibian fiscus, the loss of at least 2100 direct jobs and many more would be quite significant to the Namibian economy.
Also, the likely economic collapse of the town of Oranjemund.
In contrast, their plan now allows the mining giant to retain jobs and add more employment, contribute to fiscus for many more years, and support the economic transformation of the town of Oranjemund.
Burger said the new long-term plan had been subjected to thorough technical and commercial reviews.
It balances managing risk by using existing methods and incorporating new technology for improved safety and operational efficiencies.
He said the land operation also plans to increase production over the next two and a half years to approximately 160% of the current capacity.
However, it requires a capital investment of approximately N$1,8 billion and, similarly, a significant increase in operational cost. Email: erastus@thevillager.com.na
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