Country Risk, Petro Envy, Land Grab?

Osino Resources’ View On A Namibia Minister’s Disruptive Comments

• Plus: ‘Ignored’ Developments: Val-d’Or Mining; HighGold Mining; Others  

We were discussing ‘country risk’ here among miners in practically every nation on the mining planet.

[See: Country Risk Overblown — Sometimes]

Then, Namibia comes along and sees a regulator shoot from the hip this week.

The mining and energy ministry ‘clarified’ the ‘resource nationalism’ comments by Tom Alweendo, the official. Still, stock market damage was done.

 

Shares in the one I follow and own, Heye Daun‘s gold developer (Twin Hills) Osino Resources, shed 14% or so of value. OSI OSIIF is coming back Thursday, up 6%.

Namibia is about as pro-development and democracy-pitched as any nation in Africa and much of the metals and oil producing jurisdictions of the world.

This blow-up demonstrates what country risk poses, sometimes harrowing, to investors and their invested companies.

Heye Daun’s real-time view — as a probable gold miner in Namibia at Twin Hills — on what he called “the unfortunate comments” this week at a Namibia Uranium Institute workshop arfe telling in themselves. The rogue comments by Tom Alweendo, he says, were being “blown out of proportion.”

TRADING 
Below: Gold Chart Overview
Press Releases Of Merit Today & This Week:
HighGold Mining HIGH HGGOF Onyx Spinoff Approved
Snowline Gold SGD SNWGF Expands Yukon Property 
Val-d'Or Mining VZZ VDOMF Multiple Exploration Pacts With Eldorado Gold *

Those comments, from a national ministry that has to answer to the people, the leader, the banks and the bond credit-rating agencies, “have now been clarified. Means we are back to normal although some damage has been done,” Heye, a geo-engineer, said from Namibia.

The follow-up statement (part of it below) and the comments that sparked the gasps will make a solid class lesson for anyone getting their economic geology degree.

For one, the ministry in a statement that was both apologetic and strident about Namibian rights to land and resources, said “government has no intention to seize any stake from existing mineral or petroleum licence holders and remains committed to uphold the sanctity of contract(s).”

There was  a big however — one we see in any government ministry that must answer to its appointing leaders (electoral politics) and to the people (social politics).

(Peru, Chile, Ecuador are recent examples of the balancing of public comments vs. constitutional law.)

Namibia’s ministry said “the reality remains that Namibians are and remain disadvantaged because they may not have the financial and other means to exercise their rights in relation to natural resources, as such the state as supreme owner of these natural resources may demand a certain minimum stake through public enterprises  … in the future.”

Heye Daun explains that Osino’s mining license calls for 5% shareholding to be sold to local partners. “We are busy with that.”

The follow-up noted “the Namibian people have a legitimate expectation of having a share of ownership in the exploration and mining of our countries‘ natural resources. Cognizant of the fact that many Namibians might not have individual capacity or the requisite resources to realize these rights or expectations in their individual capacities, it would be just that the Government acquire these rights on their behalf. “

Heye tells me, “It is basically an old story which got some fresh tailwinds …  published by a local journalist … and then carried by news services around the world.”

`Let’s let Heye do the context here.

“Generally speaking, the debate around resource nationalism has recently been somewhat elevated again mainly as a result of the recent very large offshore Namibia oil discoveries which have been made by Total and others. These discoveries are large even on a global scale and will definitely have a transformative effect on Namibia within a few years, not necessarily all positive.

“Some fears are probably justified about how the economic rents from these discoveries will be shared and potentially not benefitting Namibians to the degree they should. This is a valid concern, but unfortunately this is washing over into the mining industry and this is now coalescing with an old, and until recently debunked discussion around the need for a free-carried interest in all mining to be given to the state or local enterprises.

“The concept of local/Black/indigenous empowerment is not new and was first proposed many years ago in a flawed legal proposal called NEEEF (Namibia Equitable Economic Empowerment Framework), which called for a blanket 20% to 25% equity free carry for government or designated disadvantaged groups. This was so badly thought out and drafted that the Government withdrew that Proposal and shelved it a few years ago, but the issue keeps coming up from time to time, mostly in parliament or public forums when certain government ministers or officials use it to grandstand or placate populist parliamentarians. The president of Namibia is on record as having said that such moves will not result in true empowerment and thus took this 25% local empowerment proposal off the table as far back as 2018.”

See: https://economist.com.na/34275/headlines/neeef-25-compulsory-equity-stake-off-the-cards-president/

“Unfortunately though, the NEEEF legislative proposal still lingers as the proposed Act was neither fully withdrawn not amended, and thus still causes certain politicians to refer to it, or to use it to grandstand and to demand a free equity slice in the industry. The very competent, active and state-owned Namibia Investment and Promotion Board is actively canvassing to have this Act clarified to eliminate the confusion emanating from it.”

https://namibian.com.na/delayed-neeeb-creates-uncertainty-investment-board/

Thus, “Various international businesses operating in Namibia have thus successfully facilitated direct Namibian ownership in their business via various means. Two  examples amongst many are Standard Bank and B2Gold, who both facilitated a 10% ownership for employees or a local consortium to own a piece of their Namibian businesses.

Standard Bank did this via an ESOP: https://neweralive.na/posts/standard-bank-employees-10-percent-bank.

B2Gold did it via a local partner: https://economist.com.na/12012/headlines/otjikoto-mine-officially-opened/.

Equity shares with local entities that go beyond ‘free carries’ are common in many nations, some far more than the 5% stipulated in Osino’s mining license.

Osino recently received confirmation that an investment by Namibia’s well-funded public employee pension scheme would qualify as ‘previously disadvantaged,’ “and this is what Osino is working towards.”

Still, debate over how the government will ensure that it gets a fair share of the expected oil bonanza will continue to cause populist statements to be made — we can be sure of that. Just look at presidential comments that roiled Chile’s lithium pub-cos a month.

Thank you, Heye Daun. A future professor of mining econ, perhaps?

Gold Chart

Word from Brien Lundin of New Orleans Investment Conference in his monthly Gold Newsletter:

“The Federal Reserve will be forced to end its rate hikes by either a crisis in the system, the upcoming recession or the spiraling costs of servicing the debt. So whether the pause comes at the June 14 decision or not, the end is near. That’s one of the things that gold has been factoring in by its recent assaults on record-high levels. And that’s why we’ve seen those assaults beaten back, for now. As the flow of economic data has continued to show the resiliency of the U.S. economy, and as inflation (core PCE in particular) has remained stubbornly high, the odds of the Fed governing committee FOMC tossing out another quarter-point hike on June 14 have increased.”

Brien in his report, which is (like The Calandra Report/TCR a paid service), tags a half-dozen explorers and royalty companies that I own and-or that we try to track, among them: Vox Royalty VOXR, i-80 Gold IAUX, HighGold Mining HIGH, Aztec Minerals AZT, Avino Silver & Gold Mines ASM and Banyan Gold BYN. Of those, I own VOXR, IAUX, ASM and BYN.

Chart from my (above) chart-watcher in Las Vegas, Al Marden: “As we wait for our leaders, here’s a technical tidbit. When the stochastics have an up slope and the stock has a down slope (blue lines on chart), it’s called a positive divergence and most often indicates a change in direction.” For now, the divergence, amid strong jobs growth in the U.S. Friday, is DOWN.

So I will take that with a gram of gold.

• * I own shares of  SGD. And OSI. And VZZ. — Thom Calandra