Botswana Stock Exchange (BSE) listed diamond exploration outfit, Botswana Diamond PLC has revealed in their annual results for the year ended June 2019 that talks with an undisclosed major global diamond mining company for further explorations and commercialization work in the Central Kalahari Game Reserve (CKGR) have hit a snag.
In a statement, the Company Chairman, John Teeling said work done by Botswana Diamonds on their 100% owned licenses contract continues to be focused on the Central Kalahari Game Reserve (CKGR). He explained that extensive geophysical and geochemical analysis was conducted in 2017 and 2018 which led to the identification of high priority targets.
FAILED PARTNERSHIP WITH ALROSA
Botswana Diamond which is also listed on the London Stock Exchange Alternative Investment Market (AIM) was until end of 2018 in partnership with Russian Diamond Mining powerhouse Alrosa for explorations in Kalahari and Orapa area through 50-50 Joint venture Sunland Minerals (Pty) Ltd. Sunland which is now under 100 % ownership of BOD presently holds 2 active Prospecting Licences (PLs) in the Orapa area, as well as 6 PLs in the Gope/CKGR (Kalahari) area. BOD became operators of the Sunland in the Kalahari region in early 2018. A number of high-grade geophysical anomalies were discovered by the company in the Kalahari region of Botswana.
Following the identification of these high-grade geophysical anomalies, heavy mineral sampling for kimberlitic indicators was undertaken on eight of the geophysical anomalies. A total of 267 kimberlitic indicator minerals (“KIMs”) were discovered. All 8 anomalies had KIMs. The KIMs included 41 garnets, 13 chromites, 139 ilmenites, 4 chrome diopsides and 70 olivines.
An analysis of the grains by Remote Exploration Services of Cape Town concluded that the sources were likely to be local due to the abundance, size and fresh surface textures of the KIMs. Few months after Alrosa’s exit BOD announced that negotiations were at an advanced stage with a new joint venture partner though these could not be concluded until Alrosa had officially exited the Sunland.
Following Alrosa’s completed exit out of Sunland BOD announced in August this year that prospecting Licences PL232 and PL235, held by now its wholly -owned subsidiary Sunland Minerals (Pty) Limited have been renewed for an additional two years to September 2021. “These key licences, covering just over 500sq kms, are strategically located in the central Kalahari Desert west of the Ghaghoo diamond mine. Botswana Diamonds has already identified prospective drill ready targets.
The intensive work included aeromagnetic surveys, ground magnetic surveys, soil sampling and target selection,” the company said in the statement three months ago. “Analyses of concentrations of Kimberlitic Indicator Minerals on the licences indicate proximity to kimberlite pipes, which regional geology suggests may be attractive in size and grade,” Further revealed the company. In the same statement dated 22nd August 2019, BOD announced that it was in extended discussions with a major international diamond producer to joint venture the next phase of work on these strategic licenses.
However this week Botswana Diamond Chairman John Teeling revealed that the new talks with a potential replacement for Alrosa have also hit a not convincing stage. Teeling further noted that the BOD is scouting in the market to look for other alternatives in a bid to continue with the projects’ “Interest was shown by third parties to participate in the exploration of these targets. Agreement was reached with one large diamond producer but that has not come to fruition. In our view as the board it is unlikely to be finalized. Alternatives are being considered” he said.
GOVERNMENT STILL HOLDING ONTO MAIBWE –BCL SHARES
Still in the Kalahari diamonds fields Botswana Diamonds holds other prospecting license making a total of eight licenses in Botswana with applications lodged for a further six. The company holds a 15% net interest in the Maibwe joint venture in the Southern Kalahari. BOD’s interest is held through Siseko Minerals, a South African company.BOD owns 51 % of the Siseko. Other partners in Maibwe are BCL at 51% and Future Minerals at 20%. BCL is a large state-owned copper nickel company which is in liquidation while future Minerals is a locally owned Botswana company.
Under the Maibwe Diamonds three-way original JV agreement, BCL was the operator and had to complete and fund an agreed work programme, whereas JV partners Future and Siseko have a free carry up to the Bankable Feasibility Study stage. The project came to a halt during 2016, due to BCL being unable to finance the agreed work programme, and subsequently BCL was placed under provisional liquidation.
The liquidator is in the process of completing a prospectus with a view to selling BCL’s 51% interest in the Maibwe project while BOD and the other partners have been developing alternative scenarios to move the project forward including an offer to acquire BCL’s share in the project at the cost of exploration. “With the prospectus being at an advanced stage, a commercial solution is now in sight,” said John Teeling.
To date the Maibwe JV has identified a cluster of four diamond bearing kimberlite pipes on PL186, with surface sizes of 5ha, 6ha, 2ha and 1ha respectively. Significant quantities of microdiamonds have been found in one of these pipes. “Diamonds were discovered on the Maibwe licenses. The operator, BCL, was placed into liquidation prior to them completing the agreed exploration programme. We have made an offer to the liquidator to buy the BCL holding, we are told that the Botswana government wants more work done on the licenses before making a decision,” explained BOD Chairman.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”