Namdeb granted royalty payment relief
Government says it considered saving jobs at the legendary diamond company, which is on its knees as onshore reserves dry up.
20 November 2020 | Local News
Government has agreed to grant Namdeb, a joint venture it equally owns with international diamond miner De Beers, a payment holiday on royalties amid dwindling onshore reserves.
Mines minister Tom Alweendo told Namibia Sun yesterday that government has - in principle - agreed with Namdeb’s request to be excused from paying royalties for an unspecified time frame.
This because Namdeb wants to invest in exploiting diamond resources at sea, following the depletion of diamonds on land, as a means to improve production and also sustain and prolong its operations, which are under threat from costly mining activities on land.
Alweendo said government will not exempt Namdeb from royalty payments, but will defer payment to a date when the diamond company is in a position to pay treasury what it owes.
Namdeb currently pays 10% royalty on its sales and 55% corporate tax on its profit. This is in addition to dividends to government as a shareholder.
The company said these high payments make it unprofitable to extend the mine’s lifespan, potentially causing major job losses as mining operations close. Namdeb's land operations production decreased by 37% in the first half of 2019, producing 209.000 carats.
Alweendo yesterday could not say how much would be lost from state coffers as a result of this agreement, but said it would not be a lot of money because the company does not sell huge volumes of diamonds any more.
Good old days
In 2007, Namdeb's turnover stood at N$4.6 billion, translating to about N$460 million in royalties and N$633 million in taxes. The diamond industry's mining royalties to government were recorded at N$1.15 billion during the 2017/18 fiscal year.
“Namdeb’s land operations are essentially over and they want relief so that they can save up for their intended delving into the sea and prolong their lifespan for at least another eight years.
“As a government, we looked at the situation, including saving jobs, and have therefore agreed to the request to put a break on royalty payments,” Alweendo said yesterday.
“What we made clear to them is that payment is only being deferred and not completely scrapped. As soon as they are back on their feet, we would expect them to honour their obligations.”
Namdeb CEO Riaan Burger did not want to disclose the nature of the agreement with government.
He, however, indicated that consultations were being held to extend the lifespan of the company’s operations, and said the support given by government and its shareholders has been positive.
“We are getting good support from our stakeholders. We are going to put the mine on a new trajectory,” Burger said.