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Namibia potentially loses out on millions in lithium export deal

November 22, 2022

The Namibian government could have potentially lost out on millions of dollars in potential revenues after Chinese firm Xinfeng Investment exported 75,000 tonnes of lithium ore to China under the guise of testing purposes.

Mines and Energy Minister Tom Alweendo told Parliament on Tuesday that the government was only paid N$2 million in royalties for the exports.

According to global data, the price for lithium carbonate—the compound that gets extracted from the ground—has shot up 432% year over year, hitting over N$1.1 million (US$62,000) per metric tonne from an average of N$190,000 (US$11,000) six years ago.

Lithium is a critical component in rechargeable lithium-ion batteries, which are used in most personal electronics and electric vehicles.

The price spike is due to the booming electric vehicle market, which is putting demand pressure on battery producers, which in turn puts demand pressure on the minerals’ suppliers. According to an analysis from S&P Global, lithium demand could outweigh supply.

Alweendo said Xinfeng Investments was granted leave to export 135,000 tonnes of crushed ore by his Ministry for testing purposes.

“The Ministry officials responsible for the administration of export permits, neglected to agree with the company as to the total quantity of ore that was needed to be exported for testing purposes. As a result, the Company applied for export permits as and when they needed to export, and the permits were issued. It goes without saying that the 135,000 tonnes is an unreasonably high quantity for testing purposes. The only fair conclusion one can make is that the company decided to export crushed ore, not only for testing purposes, but also to make an income for its operations,” he said.

The Mines Minister added that the government has agreed with the company that “what still needs to be exported based on the issued permits must be exported by 29 November 2022.”

Alweendo noted that after a physical visit to the company site, he established that Xinfeng had already started mining operations despite having indicated that they will start with the mining operations in 2024 after they have built a processing plant.

“In their application for a mining licence, they indicated that they have a resource estimation of 8 million tons of ore, with an estimated lithium content of about 1%. They have also indicated that they will start with the mining operations in 2024 after they have built a processing plant. Surprisingly though, the Company started its mining operations soon after they received their mining licence,” Alweendo said.

“As part of their mining licence application, the Company has also stated that before they invest in a processing plant that was to be constructed in 2024, they would need to export a certain quantity of crushed ore to their processing plant in China. This was necessary for them to make further analysis of the ore and then decide about what kind of a plant they needed to build. For this they needed an export permit, to be issued by the Mining Commissioner as per S127 of the Mining Act.”

 

The Minister added that the recent allegation of the N$50 million bribe paid to some officials in the Ministry to award an exploration licence to the said company, had inappropriately shed light on a potential weakness in how exploration applications are evaluated and eventually awarded or declined by the Ministry.

“Over the years, a trend has emerged where exploration rights are awarded to applicants that have not proven any serious intention to do exploration. For some applicants, the main reason why they apply for exploration licences is not so much to do exploration, but rather to trade with the licences once awarded. If this practice is continued unaddressed it has a ruinous effect on our long-term mineral resources development. One of the unintended consequences of this practice is that you create a parallel market for trading in exploration licences, where huge amounts of money are exchanged,” Alweendo said.

“This in turn has the potential to create incentives for Ministry officials to be bribed to award licences inappropriately. Another unintended consequence of awarding exploration rights to those that are not able or not intending to do exploration, is the delay in discovering minerals. It results in a situation where applicants are hoarding land.”

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Last modified on Wednesday, 23 November 2022 22:50