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Khoemacau gets an extra $900 million boost

Ongoing development of the Khoemacau Copper & Silver Project by Cupric Canyon Capital has received an additional funding worth $85 million, approximately P900 from Global Natural Resources Investments and Resources Capital Fund, Khoemacau Copper Mine announced on Thursday.

The company which is a subsidiary of Cupric Capital revealed that subsequent to its announcement of 25 February 2019, a US$85m equity component has been added to its Project Funding Package, bringing total available funding to US$650m , approximately P7 billion.
In February 2019, Cupric Canyon Capital, which at that time was the sole owner of Khoemacau Copper Mines announced the signing of a US$565 million project funding package that comprised of a US$275 million senior debt facility from Red Kite Mine Finance and US$212 million to US$265 million silver stream from RGLD Gold AG a wholly owned subsidiary of Royal Gold, Inc. and a US$25 million subordinated debt Facility from RG AG.

In a statement released on Thursday  Khoemacau says within the additional $85 million boost is Global Natural Resource Investments (GNRI) investment of US$15 million further to its current equity investment, while Resource Capital Fund VII has subscribed for US$70 million of ordinary equity in the Khoemacau group of companies, giving it an effective 11.9% interest in Khoemacau.

The company said in the statement that all components of the Package closed simultaneously and first draws are already underway. This funding from RKMF and RG AG, combined with the US$85 million of new equity, provides the Company with total funding of US$650 million around P7 billion.

The Project Funding Package will be used for construction of Khoemacau 3.6 million tonnes per annum Starter Project, processing ore from a 91 million tonne resource,  at a head grade of 2% copper and 21g/t silver. First copper concentrate production is expected in the first half of 2021, with annual production averaging 62,000 tonnes of copper and 1.9 million ounces of silver for over 20 years. The construction cost of the Starter Project is US$397 million over a two-year construction timeline.

The balance of the Project Funding Package covers working capital and corporate general and administrative costs, financing costs during construction, and repayment of the existing US$105m RKMF Bridge Loan. This Bridge Loan has funded all company activities, including exploration, detailed engineering and early construction activities, since late 2016. As well as providing cost overrun support, the Project Funding Package also funds the expansion Project studies, engineering and permitting work, and the exploration program for the next 2 years.

In June this year Khoemacau executed a 5-year, US$560 million, underground mining contract with Barminco, a subsidiary of international mining services group Ausdrill Limited. Following closing of the Project Funding Package, Khoemacau says Barminco is now proceeding with mobilization and readiness to commence execution of the Zone 5 underground mine in December 2019.

Early construction activities have been underway on the Khoemacau Project site since the beginning of 2019. There are now more than 700 people on site carrying out construction work including boxcuts for underground access, roads, a water pipeline and terraces for surface infrastructure. To date some 7.8% of the project capital cost, or US$31 million, has been spent on these activities, while some 57% of the capital costs have now been committed.

On Tuesday Global Engineering & Project Management Group Fluor Corporation announced that I has been awarded Engineering Procurement & Construction Management Contract for the Khoemacau Copper & Silver Project.Fluor’s scope entails upgrading the existing copper concentrator plant and new mine surface infrastructure.

Early July this year the President Mokgweetsi Masisi led the ground breaking and official opening of the Khoemacau Project. In his address President Masisi noted the signiwficant scale of the project and the associated investment, and that it bore testimony to the country’s attractiveness to foreign direct investment. President Masisi further recognized the importance of this project to the local economy and indeed Botswana.

Commenting on the additional funding Chief Executive Officer of Cupric Canyon Capital   Johan Ferreira said the introduction of RCF brings a further industry leading investor into the financing group. “While the increase in the Project Funding Package provides the flexibility necessary to financially de-risk this development and also secures the funding to continue exploration and feasibility work on our exciting expansion options” he said.

Ferreira says  the closing of the Project Funding Package, along with the execution of the underground mining contract with Barminco, allows  Khoemacau now to move forward with all project development activities at full pace, and marks a significant milestone in this company’s development.

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P230 million Phikwe revival project kicks off

19th October 2020
industrial hub

Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status.  The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.

This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago.  In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.

However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced.  Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.

The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.

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IMF projects deeper recession for 2020, slow recovery for 2021

19th October 2020

The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.

On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April.  For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.

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Botswana partly closed economy a further blow of 4.2 fall in revenue

19th October 2020

The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.

Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.

Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).

“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.

Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.

This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.

For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.

Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers.  “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.

‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’

According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.

Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.

“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.

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