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Sandfire Kalahari Copper Belt bulb lights up

An Australian copper miner Sandfire Resources’ dream of harvesting copper from the untapped zone of Kalahari Copper Belt lives on as Botswana’s anti-trust body has given it a go ahead to merge with local explorer MOD Resources which holds licenses for the much sought after area in the western part of this country.

MOD’s exploration projects in Botswana can be traced back as far as 2012 and the explorer secured extensions for key joint venture prospecting licenses covering the T3 copper project surrounding 950km², T3 expansion project in the Kalahari Copper Belt. MOD has garnered 11,700km2 of prospective copper and is currently active at six key projects designed to advance three resource development projects (T3 Pit, T3 Underground and T1 Underground).

The area of interest, the Kalahari Copper Belt, contains tons 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. Sanfire’s takeover of MOD did not come any cheap, the Australian explorer had to pay the Botswana-focused copper dealer more than P1 billion in what was described by reports from Australia as “scrip and cash deal.” 

It is said Sandfire’s initial bid was turned down and the explorer had to up it from 0.38 Australian Dollars (A$) to A$0.45, a move by 18 percent. Initially the bid was said to be P630 million all-share takeover offer, but MOD Australia which is a parent company for the local explorer negotiating on the deal said, the offer from Sandfire was undervaluing the firm and its assets.

Sanfire Resources’ cornerstone asset is the high-grade, low cost DeGrussa Copper-Gold Mine in Australia. The Australian company has an interest in the Black Butte copper project in Montana, USA.  Now Sandfire is aiming for the “highly prospective, dominant landholding on the underexplored Kalahari copper belt in Botswana.” According to information from the Australian bourse, combination of Sandfire and MOD will leverage the strengths of both companies to both optimize and de-risk development.

When owners of the Boseto mine, Discovery Metals Limited, dumped a project it had spent P1.75 billion on, US-based Cupric Canyon Capital found a treasure from the trash and purchased the mine. Boseto failed due to use of over-reliance on the unsustainable diesel generation which contributed to 35 percent of the mine’s operating costs.

An observer who spoke to this publication, has highlighted that unlike the failed Boseto and it use of energy, Sandfire has a very positive track record showing their commitment to the use of renewables and solar hybrid in mining activities like the use of solar hybrid at their de Grussa Copper mine in Western Australia. The Boseto mine, used 17.1 million liters of diesel in generating its electricity, spending P26 million monthly, leading to its mothball.

Sandfire’s descend on the Kalahari desert was made more possible this week by a decision by Competition Authority to let the Australian explorer merge with MOD Resources, the company holding the Botswana licenses. Competition Authority, in its adjudication found that the proposed transaction is not likely to result in the prevention or substantial lessening of competition, nor of endangering the continuity of the services offered in the relevant market.

Furthermore, no public interest concerns have been identified according to the Authority before it unconditionally approved the proposed acquisition of the entire issued share capital of MOD Resources Limited by Sandfire Resources NL. Competition Authority also reminded that its approval does not override or negate any other mandatory statutory approvals or processes that any of the parties to this merger must comply with under the laws of Botswana

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

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.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

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.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

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”

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