Epangelo Mining Co. has reached a deal to buy a 7, 5 percent stake in QKR Corp’s Navachab gold mine in the country, its first foray into the gold mining sector. QKR, which entered into Namibia’s mining sector this year, has agreed to “vendor finance” Epangelo’s purchase of the minority stake and the state owned mining company plans to use some of its dividends to pay off the loan. This is Epangelo’s second most tentative step into owning equity in an operating mine, after it secured a 10 percent stake in Husab uranium project, which is coming on stream in 2017.
“The deal has been finalised, we are officially one of the shareholders of Navachab. We have secured a 7.5 percent stake. The deal is done and sealed,” Eliphas Hawala, the company managing director said in an interview. Different ‘aspects of the deal were executed over the past few months’.
“The deal is done, everything is agreed,” Hawala said. QKR, a mining investor founded by former JPMorgan Chase & Co. banker Lloyd Penguilly bought Navachab, its maiden deal, from AngloGold Ashanti Ltd for $110 million this year. AngloGold completely divested from the Namibian operation to focus on much larger projects elsewhere on the continent.
Navachab, an open pit mine northwest of the capital, Windhoek, produced 74,000 ounces of gold in 2012 and output fell slightly to 63,000 ounces last year. Epangelo would use “part of our dividends to pay for the stake”, and the company, established in 2008 to warehouse government shareholding in mining projects, would also gain board representation under the agreement, which has already been sanctioned by the parent Ministry of Mines and Energy, Hawala said.
“According to AngloGold it was a small operation but for us it’s a big project,” Hawala said. There is scope ‘to expand production at Navachab by paying more attention to further exploration’.
“There is a lot of life in that mine,” Hawala, a mining engineer, who having worked for government as well Namdeb Diamond Corp, represents a new breed of emerging Namibian mining executives. Epangelo owns a 10 percent stake in China General Nuclear Holding Corp’s Husab uranium project, the Asian economy’s largest investment yet in Namibia. The sprawling Husab mine, situated in the Namib desert, will become the country’s largest and world second largest uranium mine when it attains full production of 15 million pounds of uranium oxide in 2017.
As with the Navachab deal, China General Nuclear agreed to Epangelo paying for its 10 percent Husab stake using dividends once the mine becomes operational and attains a profit. Epangelo has also teamed up with London listed Vedanta Resources to search for base metals at licence areas it owns. The state owned company is currently conducting joint exploration with Vedanta’s Sesa Sterlite for copper, zinc and lead at four exclusive prospecting licenses in northern Namibia, under a memorandum of understanding in which both companies agreed to embark on greenfield projects.
The joint venture has taken over license areas abandoned by Anglo American in Otjozondjupa region and areas surrounding Tsumeb which are believed to hold immense deposits of base metals, Hawala said. Anglo relinquished the license areas when it sold its entire stake in Skorpion Zinc Mine and Refinery to Vedanta Resources two years ago.
Skorpion zinc mine and refinery produces around 150,000 tonnes of special high grade zinc, situated in southern parts of the country. “They are very good prospects, based on work that has been done by Anglo, highly prospective for copper and zinc,” Hawala said.
“We agreed with Vedanta to work on new projects and an action plant. This is a natural progression in the exploration programme,” Hawala said.