Industry Trend Analysis - Uranium Boom To Sustain Mining Sector Growth - JULY 2017

BMI View: Namibia's mining sector will be bolstered by a significant uptick in uranium production in 2017, as the second-largest uranium project in the world reaches full production capacity. Despite this, future mining sector growth prospects in the country will be hampered by regulatory challenges within the wider industry.

Namibia's mining sector will witness solid growth over the coming years, primarily due to an increase in domestic uranium production as the country's largest uranium project reaches full production capacity in 2017. While miners in the country will benefit from a low-risk political environment relative to the regional average, recent government proposals that will make the regulatory framework more restrictive will negatively affect investor sentiment and hold back growth opportunities. The country's mining sector is a key element of the economy, accounting for over 12.5% of national GDP and is composed by a diverse base of commodities ranging from copper, diamonds, gold, zinc, lead, silver and uranium. In terms of these minerals, production growth over our forecast period from 2017-2021 will be fastest in the uranium sector, averaging 7.2% y-o-y, followed by diamonds (2.6%), gold, copper and lead (2.0%) and Zinc which will witness a decline (-3.0%).

Containing over 5.0% of the world's identified uranium reserves, Namibia will benefit from increasing Chinese investment as the government there makes a concerted effort to increase domestic nuclear power generation. A prime example of this trend is the joint venture between China General Nuclear Power Company and the Namibian government-owned Epangelo Mining Co. to develop the Husab project, under the name of Swakop Uranium. The venture is 90.0% owned by Chinese investors, who are largely responsible for the development of the project's ore pits. Husab is the second-largest uranium project in the world, with an expected output of 6.8 thousand tonnes (kt) per year, which amounts to more than double Namibia's 2016 uranium output of 2.9kt. With full production capacity at the mine estimated to be reached by August of this year, we forecast Namibian uranium production to grow by 70.0% y-o-y in 2017, allowing the country to leapfrog Niger and Australia and become the third-largest uranium producer by 2021, when we expect annual output to reach 8.5kt.

Uranium, From Underperformer To Outperformer
Nambia - Select Commodities Average Production Growth (% y-o-y)
e/f = BMI estimate/forecast. Source: USGS, BMI

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