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.
This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.
“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.
Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.
A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.
Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.
A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.
Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.
In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.
The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.
In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.
Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.
The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”
In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.
Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.
The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.