VZCZCXRO1552
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHWD #0209/01 1561201
ZNR UUUUU ZZH
R 051201Z JUN 09
FM AMEMBASSY WINDHOEK
TO RUEHC/SECSTATE WASHDC 0574
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEHC/DEPT OF LABOR WASHDC
RUEHBJ/AMEMBASSY BEIJING 0097
RUEHBY/AMEMBASSY CANBERRA 0037
RUEHLO/AMEMBASSY LONDON 0146
RUEHMO/AMEMBASSY MOSCOW 0093
RUEHNE/AMEMBASSY NEW DELHI 0033
RUEHOT/AMEMBASSY OTTAWA 0048
RUEHFR/AMEMBASSY PARIS 0231
RUEHSG/AMEMBASSY SANTIAGO 0015
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE

UNCLAS SECTION 01 OF 03 WINDHOEK 000209 
 
SIPDIS 
SENSITIVE 
 
STATE PLEASE PASS USAID 
STATE PLEASE PASS USGS 
DEPT FOR AF/S, EEB/ESC AND CBA 
DOE FOR SPERL AND PERSON 
DOC FOR ITA/DIEMOND 
 
E.O.   12958: N/A 
TAGS: EMIN ENRG EPET EINV ETRD KNNP SENV WA
SUBJECT: Namibia's Lone Gold Mine Plans to Double Output 
 
REF: WINDHOEK 201 
 
Not for Distribution on the Internet 
 
¶1. (SBU) Summary.  AngloGold Ashanti's Navachab Gold Mine is 
Namibia's only gold producer.  The open-pit mine is located in a 
region that hosts numerous low-grade and uneconomic deposits, but 
the potential for expansion is favorable.  Navachab is a small 
producer with an output of about one to one-and-a-half percent of 
AngloGold's global gold production.  Although small in production 
terms, the mine has a large socio-economic footprint in a remote 
region where there are few other employment opportunities.  The mine 
recruits labor and staff almost exclusively from local communities, 
which it also supports by providing facilities and services in 
education, training, health, and recreation.  The HIV-prevalence 
rate for mine workers is estimated at eight percent, compared to the 
national average of 15.4 percent.  Navachab is in the process of 
expanding and diversifying its resource base and mining operations 
with the aim of doubling its gold output over the next few years. 
Navachab's gross sales in 2008 represented about 0.7 percent of 
Namibia's GDP, and the company contributed about 1.4 percent of 
government revenues. End Summary. 
 
------------------------------------ 
Visit to Navachab Open-Pit Gold Mine 
------------------------------------ 
 
¶2. (SBU)  Navachab Gold Mine is the only operating gold mine in 
Namibia.  It is a low-grade, high-tonnage, open-pit mine, which is 
wholly-owned by AngloGold Ashanti of South Africa. The mine is 
located near the town of Karibib, 170 kilometers northwest of 
Windhoek.  The current life of the mine is to 2016, but proposed pit 
expansions will increase this by an estimated seven years.  Future 
production from other identified satellite pits could extend its 
life beyond this date.  Navachab mine reached full production in 
1990 with a plant capacity of 120,000 tons per month to produce 
about 2.5 tons of gold per year.  This represents one to 
one-and-a-half percent of AngloGold's total annual gold output. 
Production is by conventional open pit mining, followed by crushing, 
milling, cyanide solution, carbon-in-pulp (CIP) precipitation, and 
gold recovery by electro-winning. 
 
-------------------------------------- 
Geology is Key to Expanding Production 
-------------------------------------- 
 
¶3. (SBU) The Navachab orebody comprises a 35 meter-thick marble unit 
with vein mineralization extending above and below it.  The deposit 
is estimated to contain 10.4 million tons of ore with an average 
grade of 2.3 grams of gold per ton. There is a further 6.5 million 
tons of marginal ore with an average grade of 0.66 grams per ton. 
Reserves and resources are being expanded as drilling proceeds.  A 
number of satellite deposits are currently being evaluated for 
future mining.  Current reserves and indicated reserves contain 3.7 
and 40.6 tons of gold (116,000 and 1.27 million ounces, 
respectively). These amounts could double as other possible 
resources are firmed up.  A reinterpretation of the geology of the 
Navachab deposit resulted in the identification of additional target 
areas.  Drilling has significantly expanded the mine's resource base 
and production strategy, and have added many years to the mine's 
life, which was originally estimated at thirteen years. 
 
--------------------------- 
Recovering Gold at Navachab 
--------------------------- 
 
¶4. (SBU)  The Navachab pit is mined by conventional open-pit methods 
and will, according to mine management, reach a final depth of 164 
meters.  The deposit is open-ended, leaving room for further 
expansion.  The current mining rate is about 7.3 million tons of 
rock per year.  The mine is a single-train operation comprising 
drills, excavator, crusher, and mill.  Thus a failure along any part 
of the line can halt operations.  This poses production risks as the 
operation requires good management and maintenance skills, which are 
 
WINDHOEK 00000209  002 OF 003 
 
 
lacking due to the loss of skills to local and international 
competitors.  Gold production declined by 15 percent to 68,000 
ounces in 2008, as a result of the shortage of skilled maintenance 
personnel.  Capital expenditure of USD $18 million is scheduled for 
2009 and will be spent on implementing a dense media separation 
(DMS) plant as well as for upgrading the mine and plant's capacity 
and performance.  Gold production for 2009 is projected to increase 
to 70,000 ounces at a total cash cost of USD $430-$450 per ounce. 
Navachab told us the mine would remain profitable as long as gold 
stays above USD $500 an ounce.  The DMS plant will have a capacity 
of 200 tons per hour and cost USD $21.5 million to construct.  It 
will increase production and enable the economic processing of the 
mine's below-grade stockpile.  These expansion projects could double 
production in a few years. 
 
------------------------------- 
Looking After the Mine's Assets 
------------------------------- 
 
¶5. (SBU)  Navachab mine employs 360 full-time staff and 100 
contractors.  Mine management appears safety- and health-conscious 
and maintains that the mine has never had a fatal accident.  As of 
April 1, the mine had achieved 507 days without a lost time injury 
(LTI).  On the health front, the last voluntary testing program (in 
2008) indicated an eight percent HIV prevalence.  This level is low 
compared to the estimated 15.4 percent national average, which 
management ascribes to recruitment from stable local communities. 
Navachab's management also believes that recruitment of local 
residents explains the generally good industrial relations it has 
with the labor force and the low number of labor actions over the 
years.  The mine protects the environment through implementation of 
the International Cyanide Management Code and, for the future, 
development of a mine closure plan, which has been approved and 
funded in a registered rehabilitation trust fund. 
 
--------------------------------------------- -- 
Navachab's Contribution to the Namibian Economy 
--------------------------------------------- -- 
 
¶6. (SBU)  Navachab's gross sales in 2008 reached N$492.9 million 
about 0.7 percent of Namibia's gross domestic product.  The company 
paid out N$58 million in taxes and an additional N$ 14.7 in royalty 
fees, contributing to about 1.4 percent of total government 
revenues. 
 
----------------------------------------- 
Navachab Adds Value for Local Communities 
----------------------------------------- 
 
¶7. (SBU)  Namibians comprise at least 97 percent of the permanent 
staff and contractors employed by Navachab mine, of which the vast 
majority are recruited from local communities.  The mine provides 
funds and facilities for education and training through 
scholarships, basic adult education classes, apprenticeships, study 
loans, and management grooming.  There is a skills shortage at the 
mine, particularly at the operator level, but management believes 
the closure of other mines (primarily copper) in Namibia will 
increase availability of both skilled labor and equipment.  Navachab 
is a relatively small mine with a big socio-economic footprint.  The 
mine pumped some USD $26 million into the greater Karibib community 
and the country in 2007 through payment of wages, corporate taxes 
(37.5 percent), capital purchases, and royalties(3 percent).  This 
does not include the mine's support for local schools and sports. 
 
 
--------------------------------------------- - 
Navachab Mine Management Issues and Non-Issues 
--------------------------------------------- - 
 
¶8. (SBU)  Mine management described the following  major challenges 
confronting the mine: 
-- Water scarcity, which ongoing desalination projects (reftel) may 
resolve; 
-- Low ore grades, which require constant cost and management 
 
WINDHOEK 00000209  003 OF 003 
 
 
vigilance; 
-- Aging mine infrastructure and the lack of skills needed to 
maintain operational integrity; 
-- Limited capacity because of the single-train design of the mine 
and plant; 
-- Gold price fluctuations, which inhibit both production and 
financial planning; 
-- Input cost increases, which amounted to nearly 58 percent in 
2007; 
 
----------------------------- 
Other Gold Sources in Namibia 
----------------------------- 
 
¶9. (SBU)  Gold is also recovered in small quantities from base metal 
mines in Namibia, but this source has declined since closure of the 
country's four copper mines.  A new gold mine with a similar geology 
to that of Navachab -- Otjikoto -- is being developed to produce two 
tons of gold annually by 2013.  The project is owned by Teal 
Exploration and Mining, a subsidiary of South Africa's African 
Rainbow Minerals (ARM). 
 
¶10. (SBU)  Comment:  Gold's impact on the Namibian economy is less 
dramatic than commodities like diamonds and uranium. Nevertheless, 
Navachab gold mine is important to both Namibia and AngloGold 
Ashanti because it provides some level of diversification.  Gold 
demand and prices have withstood the global commodity downturn.  End 
comment. 
 
----------------------------- 
Embassy Team Visit to Namibia 
----------------------------- 
 
¶11. (SBU)  In a collaborative effort, officers and specialists from 
both Embassy Pretoria and Embassy Windhoek visited mines, industry, 
and government offices in Namibia March 30-April 3 with a focus on 
assessing Namibia's mining sector.  Embassy Windhoek wishes to thank 
Embassy Pretoria's David Young and Paul White for their assistance 
with the mining sector review. 
 
MATHIEU