Namdeb nets bigger diamond mining profits for 2006

Increased diamond production and sales enabled Namibia's major diamond mining corporation, Namdeb, to increase after-tax profits by 150 percent.

WINDHOEK - 

"It was an impressive year for Namdeb with major milestones scored," said Hilifa Mbako, the company's group manager: external affairs and corporate communication Thursday, as Namibia's leading diamond producer posted a widened profit for the year ended December 31, 2006.

"The year was characterised by increased production and expanded partnerships between management, employees, contractors and joint venture partners," added Mbako.

Namdeb is a 50-50 partnership between the Namibian government and the world's largest diamond mining company, South African Oppenheimer family-controlled De Beers.

During the year, the company realised several milestones. Namdeb's profits before tax increased to N$1.3 billion (US$183.1 million) in the year, up from N$777 million (US$108.4 million) at the same period in 2005 - a 67 percent increase, which the company attributed to improved sales volume, a mixed and favourable exchange rate.

After tax, the company netted profits of N$305 million (US$42.5 million), up from N$122 million the previous year.

Diamond sales during the year amounted to N$5.3 billion  (US$738 million), a 34 percent increase compared to N$3.9 billion in 2005 after the company's diamond production exceeded its target of two million carats to produce nearly 2.2 million carats.

Carats sold increased by 27 percent generating N$3.6 billion (US$502 million) from N$2.7 billion in 2005, due to increased land and marine production, the company said. But it added that the figure was impacted negatively by higher equipment expenses, fuel price increases, increased mining activity, and normal inventory fluctuations.

Land production was at 1.120 million carats, up from 818,000 in 2005, while the company's marine operations accounted for 1.045 million carats from 894,000 in the comparative year.

The cost of sales increased by 33 percent due to increased mining activity, the company said, and it paid taxes amounting to N$989 million to the government, an increase of 51 percent over that of 2005 at N$655 million, while the total taxation represents 76 percent of pre tax profits (2005: 84 percent).

Total dividends declared to the shareholders amounted to N$270 million, which Namdeb said was achieved "against the background of substantial capital expenditure intended to ensure Namdeb's future sustainability".

Namdeb Managing Director, Inge Zaamwani attributed to an increase in land-based production at the mine's No 3 Plant, Pocket Beaches as well as increased marine production, while Mbako said the company's flagship Oranjemund mines should not be ruled out.

Despite concerns raised by Mineweb in September last year of declining carat size per stone, Mbako said this did not have an impact on the company's impressive results.

"The carat size was average [at 0.45 percent]. As far as I am concerned the carats produced show an improvement," said Mbako.

He said in 2006 the company also took measures to counter threats of a declining land based resource base.

"Namdeb continues to invest substantial capital on an annual basis to find new reserves and discover ways of economically mining and treating previously uneconomic reserves, thereby extending the life of the land operations," said Mbako.

He added, "In 2006 alone, cash used in investing in land-based activities reflected an increase from 2005 of 124 percent or N$243 million. This increase is part of a planned investment strategy to increase profitable production from land based resources.

"Prospecting and R&D include a substantial investment in the future especially on the Marine Dredging project. Several strategic projects were progressed during 2006. These projects, which include mining of beach accretion along the sea - something we have not been doing - and further out to sea will, apart from extending the life of land based mining, also secure continued employment for many Namdeb employees."

The company has also initiated a 20-year turn around plan, divided into phases of five years, which will see it increasing its production to profitable levels, at the same time investing more in finding new reserves.

"Our future strategy requires an on-going capital injection," said Mbako.

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