Trusted think tank Moody’s paints a gloomy picture on Sub-Sahara Africa potential to rise to the occasion and position itself on the coming huge advent of electric vehicles which will arouse a massive demand for its metals subsequently feeding the sovereigns GDPs.
For Botswana, a big state owned copper and nickel mine has been closed causing a backlash on government’s inability to catch the wave of metal-demanding EV revolution. International explorers, especially will the eye for copper like the ones from Austrialia, might save face for Botswana as they are currently descending on the unexplored and untapped area of Kalahari Copper Belt. The Kalahari Copper Belt is said to contain millions of tonnes of copper and silver resources inside the 1,000-kilometre belt running south west to north east and foreign companies are already pouring billions of Pula in investment. Copper is said to be highly needed for production of EVs.
But there is a lot do for the Sub-Saharan Africa sovereigns to join and enjoy the EV fiesta, according to Moody’s who were currently analyzing the shift to electric vehicles raising battery metal revenue. The US based think tank also looks at the topic of sovereigns readiness to metal demand with relation to issues of governance, infrastructure to shape realization of potential.
“Potential is much smaller for the other sovereigns that produce the metals used in EV batteries in relation to the size of their economies, exports and government revenue.” This recent statement by Moody’s strikes home, as most of Sub-Saharan Africa nations have smaller economies, exports and government-their potential is lower despite these sovereigns producing most metals used in EV batteries.
According to Moody’s latest report, the EV transformation is driving higher demand for the raw materials used in their batteries, in particular lithium, nickel, cobalt and copper. “We expect demand for these metals to grow rapidly into the late 2020s and beyond. In this report, we identify the sovereigns that could see credit benefits from this trend, and explain some of the hurdles that will likely arise,” said Moody’s.
While the US based think tank sees Botswana and its Sub Saharan Africa counterparts to be meandering towards the posterity that comes with EV revolution, it has realized the huge potential of Democratic Republic of the Congo (DRC). Moody’s noted that if DRC’s potential is fully realized, cobalt production would total nearly 16 percent of DRC's 2018 GDP, more than half of its goods exports, and 133 percent of its government revenue by 2030.
However the think tank has seen investment challenges which might constrain credit-positive impact for DRC. According to Moody’s, very weak governance, poor infrastructure and persistent pockets of social instability in the DRC remain key challenges in ramping up metals production. “We find that while Democratic Republic of the Congo (DRC) has extremely large potential, governance and infrastructure limitations will significantly constrain the credit benefits,” said Moodys this week.
Botswana’s northern neighbor Zambia is said to be home to about 77 percent of Africa’s copper supply and is far and away the leading producer in Africa. In Sub Saharan Africa, Zambia is complimented by DRC in huge copper supply, boasting 13 percent of copper which is in the African soil. Botswana has a smaller copper-belt in Kalahari, but it is dwarfed by the gigantic production of the Central African Copperbelt of Zambia and the DRC.
Of the three metals considered for manufacturing EV batteries, DRC produces 5.8 percent of the global copper and 66 percent of cobalt. The country is not that renowned in production of nickel and lithium. The notorious in terms of poor governance DRC has 2.4 percent of copper reserves and 49.5 percent of cobalt.
Overlooking production of Sub-Saharan African countries, Chile is the world's top producer of copper and has the largest according to a 2018 Moody’s report. The same report said Indonesia and Philippines are the world's top producers of nickel, Australia has sizeable reserves. All the top African nickel and copper producers were lagging in both productions and reserves, which were less than 5 percent.
For cobalt DRC continues to be the world’s leading source of mined cobalt supplying more than 60% of global production, according to Moody’s. Its reserves, according to Moody’s, are also significant, accounting for almost half of the global total. “We expect global cobalt supply to increase more slowly than consumption and to remain limited in the near term. The rise in consumption is mainly driven by strong growth in the rechargeable battery and aerospace industries,” said Moody’s.
DRC is also on the top of estimated output value of battery-related metals by the world's top producers in 2030. Moody’s however is skeptical of DRC’s ability to improve its governance. “While its mineral resources provide significant potential for mining investment and flow on effects for the economy, the DRC's track record of very weak governance and recurrent conflict implies a material probability that much of the country's natural wealth potential will remain untapped.
Increasing global focus on the environmental and social aspects of mining provides another risk for the DRC's exploitation of its resources. The London Metals Exchange's announcement of responsible sourcing guidelines for companies mining in high risk or conflict zones illustrates that the country-specific elements of mining investment decisions will play an increasing role in driving the allocation of such investment across jurisdictions,” said Moody’s.
Also, Moody’s further states that sovereigns capable of producing more metal types for batteries have greater diversification and are subsequently less susceptible to shocks in individual markets. Moody’s mentioned Australia, China and Russia as one of those sovereigns and says they produce at least three of the four metals, and have sizeable reserve pools.
The debate of EVs surfaced this year when President Mokgweetsi Masisi promised to allow Batswana to tap into the EV revolution as a way of bringing meaningful jobs. The EV talk also reached the political debate table last month when a ruling party parliament aspirant put the strength of his argument on Botswana producing many engineers. But the opposition has always called this wishful thinking given lack or failure of investment on manufacturing let alone infrastructure and new technology development.
The Bulb World Chief Executive Officer (CEO) and entrepreneur, Ketshephaone Jacob has been selected as a 2021 Top 50 Africa’s Business Hero.
Jacob was chosen from a pool of 12,000 applicants – many of whom are highly-skilled and accomplished entrepreneurs.
Africa’s Business Hero, sponsored by technology entrepreneur, Jack Ma, aims to identify, support and inspire the next generation of African entrepreneurs who are making a difference in their local communities, working to solve the most pressing problems, and building a more sustainable and inclusive economy for the future.
The initiative is as inclusive as possible and applications were open in English and French to entrepreneurs from all African countries, all sectors, and all ages who operate businesses formally registered and headquartered in an African country, and that have a 3 year-track record.
Every year, finalists are selected to compete in the ABH finale pitch competition and participate in a TV Show that will be broadcast online and across the continent.
The finalists will compete for a share of US $1.5 million in grant money.
The Bulb World, is home grown LED light manufacturing company, which was partly funded by Citizen Entrepreneurial Development Agency (CEDA) at the tune of P4 million, to manufacture LED lighting bulbs for both commercial and residential use in 2017.
The Bulb World operate from the Special Economic Zone of Selibe Phikwe. Early this year, The BulB World announced its expansion to South Africa, setting in motion its ambitious Africa expansion plan.
During the first quarter of 2021, production in Botswana’s economic nucleus- the mining sector contracted by 12 percent. This is according to Mining Production Index released by Statistics Botswana this week.
The country’s central data body revealed that Index of Mining production stood at 74.4 during the first quarter of 2021, showing a negative year on-year growth of 12.0 percent, from 84.6 registered during the first quarter of 2020.
The main contributor to the decline in mining production came from the Diamonds sector, which contributed negative 11.7 percentage points. Soda Ash was the only positive contributor in the mining production, contributing 0.1 of a percentage point. However Soda Ash’s contribution was insignificant to offset the negative contribution made by Diamonds.
The quarter-on-quarter analysis by Statistics Botswana experts shows an increase of 16.3 percent from the index of 64.0 during the fourth quarter of 2020 to 74.4 observed during the period under review.
Diamond production decreased by 12.1 percent during the first quarter of 2021 compared to the same quarter of the previous year. The decrease was as a result of planned strategy to align production with weaker trading conditions mostly linked to Covid-19 protocols restrictions.
Botswana’s diamond sector is underpinned by Debswana, the country’s flagship rough producer- a 50-50 joint venture between government and global mining giant De Beers Group. The other producer is Canadian based Lucara Diamond Corp through its wholly owned Karowe Mine which is a relatively small but significant production that has made a name for itself worldwide with rare diamond recoveries of unprecedented carat size.
On the other hand, quarter-on quarter analysis shows that production has improved, registering a positive growth of 17.5 percent during the first quarter of 2021 compared to the preceding quarter – 2020 Q4.
Though production was significantly lower in the first quarter, the two producers ended Q2 with rare diamond recoveries. Debswana early last month found the world’s third largest gem diamond – weighing 1098 carat at Jwaneng Mine, its flagship gem quality diamonds producer, also regarded the world’s richest diamond mine.
A week later Lucara announced its second biggest recovery, the 1174 carat clivage near-gem dug from its Karowe Mine. The diamond is the world third in carat size after the plus-3000 carat Cullinan found in South Africa back in 1905 and the 1758 carat Sewelo unearthed at its Karowe mine in 2019. Debswana and Lucara are investing billions of pulas in underground mining projects to extend the life of its mines, Jwaneng & Karowe respectively.
In terms of Gold which is produced at Mupani mine near Botswana’s second city of Francistown output decreased by 17.9 percent during the first quarter of 2021 compared to the same quarter of the previous year.
Similarly, quarter-on-quarter analysis reflects that production decreased by 21.4 percent during the first quarter of 2021, compared to the preceding quarter. The decrease was as a result of the deteriorating lifespan of the mine as well as the impact of COVID-19 which slowed down the mining activities.
Soda Ash production increased by 11.1 percent during the first quarter of 2021 compared to the same quarter of the previous year. In terms of quarter-on-quarter Soda Ash production also showed an increase, picking up by 2.1 percent during the period under review. The increase in production is attributable to the effectiveness of the plant following refurbishment which occurred in the third quarter of 2020.
Salt production decreased by 34.0 percent during the first quarter of 2021, compared to the same quarter of the previous year. Similarly, the quarter-on-quarter analysis shows that salt production registered a decrease of 32.9 percent during the period under review. Both salt and Sodash are produced by partly government owned Botswana Ash (BotsAsh) operating from Sowa town near Makgadikgadi pans.
Coal production decreased by 11.2 percent during the first quarter of 2021, compared to the corresponding quarter of the previous year. The decrease was attributed to the reduced demand from Morupule B Power Station following the remedial works being undertaken, as one boiler was in operation during the period under review.
Although production fell, Statistics Botswana says there was no shortfall in supply of coal due to stockpiling. On the other hand, the quarter-on-quarter comparison shows that coal production increased by 20.4 percent compared to the preceding quarter.
Botswana’s flagship coal producer is Morupule Coal Mine; a wholly state owned mining company located in Palapye producing primarily for Botswana Power Corporation (BPC)’s power generation plants Morupule A & B.
The other coal producer is Botswana Stock Exchange listed Minergy which operates a 390 MT Coal Resource mine in Masama near Media in the southwestern edge of the Mmamabula Coalfields.
Department of Mines in the Ministry of Mineral Resources, Green Technology & Energy Security has awarded mining licence to Tshukudu Metals-a subsidiary of Aussie firm Sandfire Resources ,giving the company a green light to start piecing the ground at its Motheo Copper Project near Gantsi.
Lefoko Moagi, minister in charge of mineral resources in Botswana confirmed to weekendpost on Tuesday. Minister Moagi revealed that “the licence has been approved , but Sandfire Resources as a listed company will report to its shareholders and investors then make an official public statement” he said.
Based on a forecast copper price of US$3.16/lb (reflecting current long-term consensus pricing) the Base Case 3.2Mtpa – Ghantsi copper project is forecast to generate US$664 million (over P7 billion) in pre-tax free cash-flow and US$987 million (over P10 billion) in EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation), at a forecast all-in sustaining cost of US$1.76/lb over its first 10 years of operations.
In December 2020, the Board of Sandfire Resources approved the commercial development of the Motheo Copper Mine located in the Kalahari Copper Belt in Botswana, marking a key step in its transformation into a global, diversified, and sustainable mining company.
Tshukudu Metals Botswana (Pty) Limited (Tshukudu) a 100% owned subsidiary will be the owner and operator of the Motheo Copper Mine which is scheduled to produce up to 30,000 tonnes per annum of copper in concentrate over a 12 year mine life.TMB is targeting development of its Motheo Copper Mine in 2021 and 2022, with its first production in 2023.
GOVERNMENT NOT TAKING UP 15 % STAKE ON OFFER
Beginning of this year presentations were made to the Department of Mines as part of the Mining Licence approval process and to the Ghanzi Regional Council, additional information was requested by Department of Mines in April and was duly supplied by the company.
As part of the Mining Licence approval process, the Government of Botswana has a right to acquire up to a 15% fully contributing interest in all mining projects locally. Quizzed on whether government through Mineral Development Corporation Botswana (MDCB) would be taking up stake in the project Minister Moagi said, “No consideration is being made on that regard”.
“Government is not considering taking up a stake in the Ghantsi Copper Mine project, every opportunity is assessed on all risks, but Government makes money all the while from leases, taxes and royalties, remember if you take stake you are liable for liabilities of the project as well,” Moagi said.
Last month Sandfire announced that it has awarded over P5 billion worth mining contract to African Mining Services (AMS), a subsidiary of Perenti, to deliver the open cast operation.
The contract, which has an estimated value of US$496 million (over 5 billion), is the largest single operational contract for the new Motheo Project covering a period of 7 years and 3 months, with provision for a one-year extension.
The contract according to Sandfire Resources was awarded following a competitive 3-stage tender process which saw a number of key factors taken into consideration when selecting the preferred contractor.
These included Citizen Economic Empowerment, safety culture, equipment suitability and availability, commercial terms and identified improvement opportunities. Under the terms of the contract, AMS has agreed to form a 70:30 Joint Venture with a suitable local Botswana partner or partners.
The JV is expected to be finalized ahead of commencement of mining in early 2022. African Mining Services has been operating in Africa for over 30 years. AMS’ parent company, ASX listed diversified mining services group Perenti, already has a presence in Botswana through Barminco, their underground mining division, at the large-scale Khoemacau Copper Mine located 200km north-east of Motheo.
Last month Sandfire executives said the award of the open pit mining contract represents another key milestone in advancing the Motheo Project towards production, with all components of the contract in line with the key parameters outlined in the December 2020 Definitive Feasibility Study (DFS).
The company said full-scale construction of the US$279 million (over P 3 billion ) mine development is expected to commence immediately upon receipt of the Mining Licence, with mining scheduled to commence in early 2022 ahead of first production in early 2023. This week Sandfire Resources advertised over 10 positions in calling on applications from geologists, mining engineers and geotechnical engineers.
The Motheo mine has an initial mine life of 12.5 years based on production from the T3 pit. The initial development is expected to generate approximately 1,000 jobs during the construction phase and 600 direct full-time jobs during operations, with at least 95% of the total mine workforce expected to be made of up of Botswana citizens.
Later in the week Sandfire Resources announced in the company website that it has received the licence. Sandfire’s Managing Director and CEO, Mr Karl Simich, said the award of the Mining Licence represented a major milestone that would see a significant increase in construction and development activities on site.
“We are absolutely delighted to now be in a position to move to full-scale construction at Motheo, with our construction crews expected to mobilise to site over the next few days. I would like to thank the Government of Botswana for their support throughout the approvals process, which will see Motheo come on-stream in 2023 as one of very few new copper mines commencing production globally.”
Simich said the project is expected to generate approximately 1,000 jobs during construction and 600 full-time jobs during operations, and represents the foundation for Sandfire’s long-term growth plans in Botswana.
“Our vision is that Motheo will form the centre of a new, long-life copper production hub in in the central portion of the world-class Kalahari Copper Belt, where we hold an extensive ground-holding spanning Botswana and Namibia,” he said.