27/06/19

New Investment in Marine Diamonds

In collaboration with Nedbank

It is widely known that the mining industry is an important pillar of the Namibian economy, typically contributing around 10%-13% to GDP. In fact, during 2017 and 2018 when the economy contracted by 0.9% and 0.1%, respectively, the mining and quarrying sector posted impressive growth of 13.3% and 22.0%. This strong growth cushioned the contractions recorded in the secondary and tertiary industries over the same period, thereby mitigating the full extent of the contractions on overall GDP growth. This notable performance in mining growth was driven mostly by increased output in diamonds and uranium.

The GDP figures for the first quarter of 2019 show the economy shrunk by 2.0% in that period, due to continued weakness across the secondary and tertiary sectors as well as a 1.1% contraction in mining and quarrying. The contraction in the mining sector is the result of lower output across most major minerals, except for uranium. Diamond production was down 6.5% compared to Q1 2018 as offshore production remained flat but one of the land-based operations, Elizabeth Bay, transitioned into care and maintenance. The poorer mining output anticipated for this year, especially after the Q1 2019 results, means that growth in mining will no longer soften the contractions in other sectors.

Namdeb has announced its plans to gradually bring to an end its land-based operations over the next few years, beginning with the Elizabeth Bay mine. While many are more aware of these operations, the offshore operations (falling under Debmarine Namibia) have grown significantly since operations began in 2002 to now account for over 70% of total carats produced. Offshore production overtook land-based production as early as 2005, with a total of 922,000 carats from marine resources that year.

Marine diamonds have grown to form an integral part of the Namibia’s mining sector, and with the gradual closure of Namdeb’s land-based operations there will be an increasingly important role for the marine operations. Just a few years ago, Debmarine Namibia acquired the SS Nujoma – a custom-built exploration and sampling vessel – at a total project cost of N$2.3 billion.

Debmarine Namibia recently announced its intention to add to its fleet, this time a custom-built mining vessel. Additional Mining Vessel 3 will be the seventh in Debmarine Namibia’s fleet and is set to come into operation in 2022. The total project cost is N$7.0 billion (US$468 million), with Debmarine contributing N$1.4 billion directly with five banks supplying the finance for the remaining N$5.6 billion. Nedbank Namibia will act as facility agent and hedging bank, as well as provide 40% of the required financing. This new vessel not only represents the single largest investment in the marine diamond industry but also the world’s first ever custom-built diamond recovery vessel, ensuring that Debmarine Namibia remains a global pioneer in marine diamond mining.

The new vessel is expected to create 160 new jobs once operational and add 500,000 carats in annual diamond production. This significant increase in diamond output, while still a few years away, will contribute significantly to growth in the mining sector, and thereby the economy, once it materializes.