WINDHOEK (Reuters) - Namibia’s Chamber of Mines, which represents the mining industry in the southern African country, is concerned that power and water supply shortages and royalty tax legislation could hamper investment.
Mike Leech, president of the industry body in one of the world’s top uranium producers, said a royalty tax passed at the end of 2008 would “increase rather than reduce investor risk”.
“(The tax) is likely ... to make it harder for exploration companies to get projects past the credit committees of the banking institutions they will have to raise the money from,” he said in an annual review the chamber published last week.
Uranium miners pay 3 percent of their gross sales in royalty taxes, on top of a 37.5 percent corporate tax, and some analysts expect royalties to rise due to higher demand for uranium.
Rio Tinto’s Rossing mine, managed by Leech, pays 6 percent in royalties, while Areva receives some tax breaks under an economic development scheme.
Leech also voiced concern that looming water and power shortages could hamper planned expansions and the construction of new mines in the uranium-rich Erongo Region.
“Water particularly for uranium mining remains a challenge in the medium term,” he said.
A 20 million-cubic-litre per annum desalination plant was commissioned last month to secure water supply for Areva’s Trekkopje mine, which is expected to start operations in 2011.
“Security of power remains critical to the prosperity of the industry. Adequate own-generation capacity is the only answer to Namibia’s power woes,” Leech said.
Namibia currently imports half of its power from South Africa, and while the country has plans to boost supply, a recent PricewaterhouseCoopers report said this supply was not guaranteed, placing mining companies “under severe pressure”.
Leech also said the regulator should raise electricity prices “gradually as opposed to instantly”.
“This would enable the industry, particularly new mines, to plan effectively,” he said.
The regulator earlier this month granted power utility NamPower an 18 percent hike in power tariffs for 2010/11. The utility had asked for an 35 percent increase.
Namibia is the fourth largest uranium producer in the world after Kazakhstan, Canada and Australia.
Rio Tinto’s Rossing mine and Paladin Energy’s Langer Heinrich produce about 10 percent of global uranium output and the sector contributed 16 percent to the country’s GDP in 2008.
Several new mines are scheduled to start operations in the next five years.