Namibian Minerals Corporation

The first company to mine the seabed at commercial scale

Former company1993 to 2003

Namibian Minerals Corporation, known as Namco, put a purpose-built tracked crawler on the seabed off Luderitz in April 1998 and mined diamonds with it at commercial scale. That was two decades before any of the nodule companies now working towards the same thing. At its peak in 1999 it recovered 273,700 carats in a year.

It was destroyed between 2001 and 2003, and the cause was not the sea. It lost the crawler’s undercarriage in January 2001 at a moment when its balance sheet had no room for the loss, and never recovered from it. Its operating companies were wound up in 2003.

News and articles

Overview

• The shell dates to British Columbia in 1967. It was continued into the Yukon in September 1993 and took the Namco name that October through a reverse takeover, run from an office on Dover Street in London with operations out of Namibia and South Africa.
• It traded as NMR in Vancouver from 1993 and in Toronto from June 1996, dual-listed on the Namibian Stock Exchange in September 1994 as that exchange first listing from outside the common monetary area, and added a Nasdaq line in April 1997. It never had a London listing.
• It worked three Namibian mining licences totalling 857 km² and about 18,500 km² of exploration ground, and bought Ocean Diamond Mining for US$48.9 million in 1999.
• It surveyed from 1993, bulk-sampled through 1995 and 1996, and began mining in April 1998 using a seabed crawler working through a mother ship.
• Production ramped fast: 100,100 carats in the seven months to December 1998, then 273,700 carats in 1999 for revenue of US$42.8 million and net income of US$16.9 million.
• It spent US$50.0 million on new projects during 2000 and ended that year with US$4.4 million of cash against US$69.0 million of long-term liabilities, having missed its production target by nearly half.
• On January 7, 2001, the crawler’s undercarriage was severely damaged in service and production from it stopped completely. Insurers paid about US$2 million of repairs and US$9.3 million of business interruption, which confirms the loss was real and operational.
• Its bankers offered a three-month moratorium but, on the company’s account, would not say what they would do afterwards. A planned equity raise collapsed and nine subsidiaries went into provisional liquidation in February 2001.
• It restarted and in 2002 produced 205,700 carats in nine months, setting a single-vessel daily record that July. It was still losing money: cash cost per carat had gone from US$118 in 2000 to US$324 in 2001 against a realised price near US$150.
• A shareholder and lender standoff on December 5, 2002, ended it. Its largest shareholder would inject US$30 million only if the senior lenders reduced their exposure, the lenders would not, and the board stopped the subsidiaries trading that day.
• Trading was suspended in Toronto in December 2002, the delisting took effect in January 2004, and the United States regulator revoked its registration in July 2008.

Production

The fleet and the mining tools

What actually went wrong

The record is unusually clear about this, and it is worth being precise because the obvious guesses are wrong.

• No vessel sank. There was no maritime casualty at any point. What was lost in January 2001 was a seabed crawler’s undercarriage, and what failed in July 2002 was a ship’s main engines. A newswire headline from June 2003 about the company abandoning ships is a pun about the directors resigning.
• The diamond price was not the killer either. Prices fell through the 1998 Asian crisis but then rose to a peak in 2000 and were still near US$150 a carat in 2001. What moved was cost, from US$118 a carat in 2000 to US$324 in 2001.
• The proximate cause was the loss of the crawler at a moment when the company had spent US$50 million on expansion and had US$4.4 million of cash against US$69 million of long-term liabilities.
• Surviving the first liquidation then made everything harder: skilled people left, spares and services became inaccessible, and supplier relationships deteriorated. The company said so plainly in its own annual filing.
• The ground also behaved differently from the model. One area returned 23% of its modelled grade when mined, after the consultants had explicitly cautioned that the estimate needed verification. By March 2002 the entire measured resource had been reclassified downward to indicated.
• The final trigger was a standoff between the largest shareholder and the senior lenders in December 2002, not an operational event.

Ownership at the end, and where the assets went

There were 99,740,221 shares outstanding at the end of 2001. Directors and officers held ~0.34% of them between them.

The assets were sold by liquidators who, the company complained, neither consulted it nor told it the basis of selection. The plant and equipment from the largest vessel went to De Beers in 2003 as part of an offer reported at about US$20 million. Most of the rest went to the Leviev Group vehicle that was already the largest shareholder. One vessel had been sold to Trans Hex in 2001 to satisfy the lenders. Shareholders and unsecured creditors were told in June 2003 that there was little prospect of any dividend.

The ground did not stay idle. Diamond Fields, which held the adjacent lease, reported that the rebuilt crawler and one of the mother ships were back in production on its ML 111 by June 9, 2004, operated by the Namibian arm of the group that had bought them. That account is Diamond Fields own, and the corporate identity of the operator is not fully reconciled in the public record.

Filing archive

The company reported in Canada until its collapse. Its securities filings are mirrored here. Note that the 2002 audited accounts were never filed, which is what led to the cease trade order of June 2003.