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Mining production targets under threat from fuel price hikes

 Namibia’s mining production targets for 2023 are under threat from the continued rise in fuel prices, the Chamber of Mines of Namibia has warned.

This comes as the Ministry of Mines and Energy on Monday announced a N$1.98 price hike in the diesel price to N$24.10 per litre with future increases forecasted.

“Should such inflationary pressures persist, it may cause some mining operations to review and revise their production targets in the following year as increasing fuel prices and the appreciating exchange rate will impact their revenues and overall profitability of operations. Should such cost pressures persist, this may likely erode some of the profit gains in a higher mineral price environment,” Chamber of Mines Economist Lauren Davidson told The Brief.

She added that despite the negative effects of the recent hikes, mining companies were likely to stick to their 2022 production targets.

“The increase of the price of fuel will have a negative impact on the cost of production, and not necessarily on production as yet. As mines have set their production targets for the year, mining companies will still try and achieve these production targets as much as they can to control their costs,” Davidson said.

However, it is not clear what impact the developments will have on the extractive sector growth targets.

The latest fuel price increase comes as players in the mining sectors had already raised alarm bells over local price hikes, mainly diesel, on their production costs.

Local mining companies, AfriTin Mining, Swakop Uranium and Langer Heinrich Uranium, have all cited high fuel prices for having a significant impact on their operational costs.

Langer Heinrich indicated that high fuel prices are driving up its restart costs by an additional 23% to N$1.9 billion.

The sector warning comes as Finance Minister Iipumbu Shiimi has revised downwards the country’s 2022 growth projections from 2.9% to 2.8% citing global factors such as high interest rates and inflation as well as disruptions on supply chains.

The treasury boss also slashed next year’s economic forecast to 3.4% down from the initial projection of 3.7% when he presented his midterm budget review in Parliament last month. 

“The projected growth in 2022 will be anchored by output from primary industries and tertiary industries on the back of a strong recovery in mining activities, supported by buoyant performance in the diamond sub-sector and a return to growth for most of the tertiary industries,” he said.

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