Namibia missing out on the next potential oil boom
By Martha Nangolo And Lauren Davidson
According to Bannerman Resources CEO, Brandon Munro presentation at the recently held 2017 Mining Expo and Conference, Namibia could benefit from global exploration trends and the nature of exploration companies plays a significant role in how such investment decisions are made.
Anecdotal evidence presented further suggests that investment decisions by foreign investors are stalled due to current policy uncertainty. The current economic climate bodes well for most miners, in an environment where the prices of base metals have recovered and the market fundamentals thereto appear to be promising in the near future, which also translates into a potential up-swing in the subdued exploration trends of recent years.
The mining sector as a whole highlighted valid concerns at the event as to whether Namibia is positioned to maximize on a potential improvement in exploration activities and what could be improved on to harness maximum benefits when such trends reverse.
Junior companies currently account for the largest share of global exploration expenditure, even in Namibia, these firms are significantly smaller than multi-national mining conglomerates and are exposed to a larger degree of risk, Munro said, adding that such companies’ investment decisions are influenced by a range of factors, including the mineral attractiveness of a jurisdiction and the level of policy certainty in the relevant country.
Focusing specifically on how investment into exploration ventures are made, Munro highlighted that investors track global commodity trends scouting for the next “Hot Swing”; a commodity with a favourable price and promising fundamentals.
Munro advocated for active promotion of the mining industry by encouraging junior companies to undertake exploration through efficient license application, processing and issuing procedures as well as the speedy processing of joint ventures.
In as far as the destination is concerned, investors consider political and economic factors of the area they are looking to invest; whether policy and political decisions may soften or worsen potential losses incurred from such investments.
Namibia is well placed to benefit from the next expected upturn in global exploration trends, however, Munro says areas of improvement are glaring. “Industry players have revealed that only a small portion of Namibia’s prospecting areas are covered by active exploration licenses and data from the Ministry of Mines and Energy show that many existing exploration licenses are dormant,” Munro said, adding that Namibians own a large number of these licenses, in the hope of selling to foreign investors through international stock exchanges.
Although Namibia is still a significantly more attractive destination for investment into mining and exploration than most of its African counterparts, the case presented suggests substantial room for improvement to unlock the country’s exploration potential.
Munro cited how current policy changes are keeping investors at bay unlike in 2014 when Namibia was rated the most attractive African jurisdiction for investment into exploration and mining, but has since slid to ninth place in 2016. The report that Munro referenced cited uncertainty surrounding the new Empowerment policy and legislation (NEEEF/B) and Additional Conditions to licences as the main factors leading to a drop in rankings and pronounced negative investor sentiment regarding Namibia’s mining sector.
Munro explained how the unlocking of a country’s potential is crucial in determining investor hospitality, which is determined by a comprehensive geological database, policy certainty and licence application convenience to name a few.
Exploration being the initial stage in the mining lifecycle, underpins the longevity and sustainability of the sector, and should thus not be compromised by uncertainty in investor sentiment, lest the numerous socio-economic benefits of mining be forfeited.
Many exploration companies also rely on credit ratings agencies for a more comprehensive outlook, who consider similar factors in their country analyses. Investors also account for how much support is provided to existing mining players by government in a particular country.
Policy certainty, the timeframe required for mining licence applications to be processed as well as renewals could deter or encourage investment decisions. A clear example of this lies in the results of the 2016 Fraser Institute Survey of Mining companies.