Husab Mine buoyant despite legislation

By Fabian Simvula
June 2011
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Extract Resources Namibia remains confident that its Husab Project will emerge the world’s third largest uranium mine even as the Government proposes to give all mining rights to state owned Epangelo Mining Company.

The US$1.7 billion Husab Mine is situated east of Swakopmund about seven kilometres from Rossing mine and 30km from the Langer Heihrich project.

The Minister of Mines and Energy, Isak Katali, recently told parliament that Cabinet had approved proposals to declare uranium, copper, gold, zinc, coal, diamonds and other rare earth metals as strategic minerals and that the State now has exclusive exploration and mining rights over those minerals.

This in the wake of President Hifikepunye Pohamba’s State of the Nation address where the Head of State said that the law was meant to ensure that strategic minerals are exploited with the participation of the public sector.

“It is for this reason that Epangelo Mining Company was established as a vehicle for public ownership in the mining sector. I appeal to parliament to speedily pass the envisaged legislation once it is tabled later this year,” Pohamba said.

Namibia, the world’s fourth largest uranium and biggest offshore diamonds producer, is considering legislative changes to ensure its citizens receive more benefits from the country’s mineral wealth.

Katali has since advised the Chamber of Mines that this does not affect existing exclusive prospecting, mining and mineral deposit retention licences.

Epangelo Chief Executive, Eliphas Hawala, also weighed in saying the state-owned company plans to enter into joint ventures with interested parties in exploration and mining.

“Namibia has deposits of uranium and foreign firms are exploring for gold, lead, zinc and iron ore. It is one of the world’s largest producers of diamonds,” added Hawala.

China is also seeking access to a uranium venture that Extract Resources expects will become the largest producing asset.

“Extract, together with the board of Kalahari, continues to have regular and positive consultations with the Government of Namibia. We have kept an open and active dialogue with the appropriate ministers and officials throughout our five years of operation in the country,” says Steve Galloway, chairman of Extract Resources Namibia.

“The boards of Kalahari and Extract understand the importance of progressing development of Husab for the benefit of all stakeholders and in turn, the Government has maintained its support of this process, demonstrated most recently by the extension of EPL 3138, which covers the Husab project area for a further two year period to 30 April 2013.

“I remain confident that our strong relationship with the Government and our investment in Namibia will continue to bear fruit as we work together to ensure all parties benefit from the development of Husab,” he adds.

Extract Resources fell 20% in two days after reports that uranium, copper, gold and coal would face Namibian legislation giving the State exclusive exploration and mining rights.

Extract Resources said the proposed changes to Namibia’s minerals policy wouldn’t adversely affect its exploration licences or the Husab mining licence application lodged on 10 December 2010.

Adds Galloway, “We have no idea how long it will take before we get the licence. But the Government has been supportive of the project and we are confident that it will not be a problem.

“The mining licence is a crucial step before stakeholders make a final decision on the project in June this year. Husab, currently the world’s fifth largest uranium deposit, is expected to produce 15 million pounds of uranium oxide a year beginning in April 2014. In comparison Rio Tinto’s adjacent Rossing Uranium Mine produces about 9 million pounds of ore a year. Rossing is a big elephant but Husab will be an even bigger elephant.”

Stakeholders have to raise an initial capital of N$12 billion required to bring the mine on stream. The rest of the capital will be raised from debt and equity.

Construction of the project will start within 33 months after stakeholders’ approval of the project.

NamPower and NamWater have both given the assurance that they will both be able to supply electricity and water respectively to the mine.

Extract Resources is also holding talks with NamWater and other uranium mines to build a second desalination plant in the Erongo region.

Namibia’s uranium mines are located in the Namib Desert, which has limited water supplies.

Areva Resources last year opened a desalination plant that extracts water from the Atlantic Ocean for use at its operations.

Extract Resources forecasts a uranium price of US$65 a pound by 2014 when it starts production.

The company’s key value drivers are its holding of approximately 40% in Australian Stock Exchange (ASX), Toronto Stock Exchange (TSX) and Namibia Stock Exchange (NSX) listed Extract Resources and its circa 45% interest in AIM listed North River Resources. PF