State-owned Epangelo Mining Company (EMC) could face difficulties in transforming from an administrative institution into an extracting company after Government refused to fund its intended expansion into mining operations.
The Government, as the principle shareholder, indicated through the line ministry that it has no intention of releasing additional funds to the SoE in the interim.
This has led the company to court foreign mining companies to form strategic partnerships to materialise its dreams.
Government, however, seems to be supportive of the idea, which could bring in huge returns for the parastatal.
Currently, there is also no legislation that prohibits the State-owned company to venture into the lucrative mining sector.
Epangelo receives a N$5m budgetary support from Government on a three-year running budget to smoothen its operations. The company says this amount is not enough to see them venture into actual mining operations.
EMC, which recently won about 17 exploration prospecting licenses (EPLs) across the mining sector, enjoys monopoly of all strategic minerals in Namibia after they were granted sweeping control by the Government as a vehicle of increasing public participation in the mining sector.
Minister of Mines and Energy, Isak Katali revealed that Government has not decided to approve additional funding for the company while a plan to that effect is not yet on the agenda.
“We have not discussed any recapitalisation plans for the company. We only play a facilitation role and any plans concerning Epangelo will be better revealed by the company, because it is their duty to inform the public on what their plans and ways are,” said Katali.
Deputy Minister of Finance, Calle Schlettwein says in future, it would be a reasonable thing for Government to consider the position in which Epangelo will be expected to operate.
“We have not made any provisions for the company yet and the prerogative of such decisions will have to be taken by Government.
“However, Epangelo, just like any other Government company, can ask for capitalisation from the Government through their line ministry,” he said.
Asset management company
Schlettwein added that the decision to capitalise Epangelo will also have to be discussed between both the ministries of Finance and Mines and see if the company can start taking its place as a role player in the economy or they would operate as an asset management company, maintaining stake for the Government in the mining sector.
The deputy minister could also not reveal whether the Government has made any provisions for the company in the forthcoming financial year, which commences at the beginning of April this year.
Meanwhile, Epangelo Managing Director, Elifas Hawala confirmed to The Villager that the current budget allocation of the company in the three year running Government budget is not enough to enhance their operations into actual mining activities and there is need for more.
“We did not necessarily need a lot of money when we started, because we played more of an administrative role for the partners with the intention to raise money for the company’s future operations in the mining sector,” said Hawala.
He confirmed that plans are underway by the company to carry their begging bowl in two weeks’ time to Government to ask for a considerable chunk that he could not reveal.
“We will be going to Government officially pretty soon to look for money for exploration on the sites of the EPLs but it`s not advisable, at this time to talk about the figures involved, because it could pre-empt the negotiations,” he said.
Hawala maintained the company will need considerable time frames to capitalise its operations, although their quest to improve public participation in the mining sector has been overshadowed by views of purported nationalisation.
Hawala added that the company has been negotiating with several possible global partners for possible partnership in their operations on the ground but who cannot be named at this stage.
Although Epangelo maintains that the company has a concrete plan of partnering with potential investors in their areas of interest. This would smoothen the operations of the company in the capital intensive mining sector,
“The EPLs we applied for actually cut across the sector, including rare earth minerals, precious stones and semi-precious stones,” Hawala said.
According to him, the company has agreed on a partnership structure that would allow them to have considerable stakes in the mining sector.
However, The Villager is reliably informed that Epangelo is gunning for 50% stake with any partner they engage in the future.
Hawala says the move to partner with Rare Earth Minerals is a solid start for raising the company’s balance sheet as the company will eventually own 20% of the operations of the company after explorations have been completed.
Tax issues re-invigorated
Schlettwein also added that Government has also upped its momentum to push for different taxes in mining through engagement in the sector.
“We have been in locked rooms with the mining sector and they seem to be agreeing with some of the proposed taxes but they are not entirely supporting Government’s idea of more taxes but at some point, we will have to get what is due to us,” he said.
The deputy minister of Finance also rubbished concerns by the mining sector that increased taxes in the sector could plunge the lucrative industry into dire straits.
“We have always strived to remain an investor-friendly nation and that’s why we engage with these people. These calls of destabilisation in the sector come, because the affected parties do not understand why Government has introduced such taxes.
Responding to the minister’s calls, Chamber of Mines Managing Director, Veston Malango confirmed this week that intensified negotiations between Government and the Chamber have started although he came short of disclosing how the Chamber will handle the issue saying, “The Government and the mining chambers consultations on implementation of taxes are still on an ongoing process.”
Before backpedalling, Government had pressed for a windfall of taxes in the extractive industry ranging from 5% to about 25% in a bid to buffer its financial gain from the mining sector last year, causing a huge outcry from the sector.