Improving commodity prices to propel mining sector in 2017
Windhoek-The Chamber of Mines of Namibia has concurred with local economic analysts who are of the opinion that the mining sector will be one of the main drivers of the domestic economy in 2017.
“Based on gradually rising commodity prices and local mining production figures, compounded by the exchange rate, we expect favourable figures coming from the mining sector this year,” said Veston Malango, Chief Executive Officer of the Chamber of Mines. He noted that while uranium prices are not doing well, Namibia is still the only country on the continent to commission a new uranium mine this year, with the Husab Mine in the Erongo Region set to reach full production this year. Once in full operation, Husab will be the largest open-pit uranium mine in the world.
Malango noted that B2Gold’s Otjikoto Mine tripled its production in 2015 and its operating expenditure last year made it the lowest cost gold mine in the world. “These are some of the factors that make Namibia a unique mining destination. It is these factors that will enable mining to be one of the main drivers of the local economy in 2017,” said Malango. According to the World Bank, metal prices rose by four percent in the third quarter of 2016, making it a second consecutive quarterly gain. “Prices continued to rebound from first-quarter lows on supply constraints, rising demand, and falling stocks. Iron ore, nickel, tin, and zinc have risen by more than 20 percent over the past two quarters on various supply shortfalls, while the two largest consumed metals—aluminium and copper—have seen more modest gains following ample supply. Zinc prices have recorded the strongest gains this year (2016), up 50 percent from January to September, due to ongoing supply tightness from mine closures and voluntary production cuts, amid strong steel demand,” reads a Commodity Markets Outlook by the World Bank (WB). The report noted that China’s policy efforts to boost the commodity-intensive infrastructure and construction sectors had been a key driver of demand in 2016. Its share of world metal consumption rose above 50 percent in 2015, and the country accounted for the majority of global growth over the past 15 years. However, the transition to a consumption-led economy, along with industrial sector reform and environmental concerns, is expected to slow demand for raw materials.
The WB further reported that zinc prices soared 17 percent due to tightening in the zinc concentrate market. Behind the tightening are large mine closures in recent years due to exhaustion (Australia, Canada, Ireland) and price-driven production cuts by Glencore (Australia, Peru, Kazakhstan). “Demand for zinc to galvanise steel has increased, which has helped drive the zinc market into deficit while nickel prices surged 16 percent on strong stainless steel demand and potential loss of Philippines ore output due to environmental mine audits,” reads the report.
Most commodity prices continued to rise in the third quarter of 2016 from their lows earlier in the year. Metals prices are projected to rise more sharply in 2017 than forecast last year as a result of faster-than-expected mine closures.