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Friday, 19 April 2024

Kalahari Copper Belt covert search while BCL lies moribund

Business

International explorers with high appetite for copper mining have descended on Botswana ground to explore the untapped area of Kalahari Copper Belt whose underground soil is proven to have hid the treasurous red metal.

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. This is despite government of Botswana shutting down a copper operation, BCL, citing failure of copper in the markets and the mine’s inability to be financially sustainably. BCL has been left flat on the ground and currently going through a controversial process of liquidation which is now on its third year; politicians and commentators alike are pointing a sharp finger at government as copper is now the new thing with the advent of Asia’s electric vehicles boom.

Recently international exploration companies have come out with their machinery and have eventually found a new home in the Kalahari Copper Belt. There are two mines on the offing at the Kalahari Copper Belt – the T3 (Motheo) project of Tshukudu Metals Botswana and the Zone 5 project of Khoemacau Copper Mining. These projects are expected to take off by 2020.

The most recent company showing desire for Botswana copper is the Australian copper producer Sandfire Resources which has even taken a bold step of engulfing a fellow Australian copper explorer MOD Resources, an entity with copper rights in this country. Sandfire will take over MOD together with its Botswana businesses or subsidiaries. 

MOD Resources, listed on the ASX and LSE, owns the T3 copper project in Botswana where a prefeasibility study estimated that the project would require a capital investment of P1.5 billion for development of an open pit operation and a plant with a 2.5-million-tonne-a-year throughput capacity, producing 23 000 t/y copper and 690 000 oz/y of silver in concentrate.

Sanfire Resources’ cornerstone asset is the high-grade, low cost DeGrussa Copper-Gold Mine in Australia. According to the company, it also has an interest in the Black Butte copper project in Montana, USA.  Before having an eye on African or Botswana, Sandfire is strategically focused on exploring for and bringing on new production that can in the short run augment its current production and in the long run, replace production as DeGrussa production diminishes and ultimately ceases.

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 leverages the strengths of both companies to both optimise and de-risk development.

According to information seen by this publication, the T3 Project in Botswana meets Sandfire's investment criteria, including returns, cost profile, scale, life and upside potential.  This also represents an attractive premium for MOD shareholders, whilst providing a funding solution for the development of T3 and retaining exposure to MOD’s significant exploration potential, according to information received.

Competition Authority has recently received a merger notification for the proposed acquisition of the entire issued share capital of MOD Resources by Sandfire Resources. The local antitrust body is interested in this acquisition due to MOD’s control on Botswana listed entities which will be involved in this transaction as subsidiaries or shareholders.  MOD controls MOD Resource Botswana which owns Tshukudu Metals Botswana.

Tshukudu Metals Botswana is a company incorporated in accordance with the Laws of the Republic of Botswana. Tshukudu Metal does not directly or indirectly control any firm in Botswana. According to Competition Authority, Tshukudu Metals is a mineral exploration company and currently does not provide any service or sell any products into or from Botswana. Its shareholders do not own shares in any other Botswana company.

The Directors of Tshukudu Metals are: Leutlwetse Tumelo; Gabaikangwe Chinyepi (both Batswana); Julian Phillip Hanna; and Mark Andre Clements (both Australians). MOD also controls Tshukudu Exploration Botswana whose directors are the same as those of Tshukudu Metals. Even though Tshukudu is a company registered in this country it does not directly or indirectly control any firm in Botswana. Though Tshukudu Explorations has not commenced trading, it is a mineral exploration company. Its shareholders also do not own shares in any other company incorporated in Botswana.

One of MOD’s local directors did Leutlwetse Tumelo want to divulge the details of the Sandfire takeover to BusinessPost. He only said, “the acquisition of MOD Resources by Sandfire is still going through some key regulatory approval processes. Until these processes are completed we cannot disclose more details around the transaction.”

Khoemacau bets billions on Kalahari Copper Belt

At last year’s Botswana Resource Sector Conference (BRSC) it was discussed that the Kalahari Copper Belt has a huge potential of becoming the copper hub of Botswana. But it will continue to be dwarfed by the gigantic production of the Central African Copperbelt of Zambia and the DRC. Those who speak for diversification from another mineral, to move from diamonds, hope for copper to take over-but it is still too far according to experts. Copper stands in a pole position at this time of the revolution of Asian markets demanding the red metal for electric vehicles manufacturing.

The Kalahari Copper Belt is referred as a ‘corridor’ of sediment-hosted copper/silver mineralization extending south-west from Maun in Botswana through to the Namibian border and beyond. The copper belt however has its mishaps. In 2015 February, 422 workers who went out to mine for a better life in the Kalahari had their hopes abruptly cut down when Boseto mine was closed. 

Owners of the Boseto mine, Discovery Metals Limited, had spent P1.75 billion on the project had to endure the slump of copper demand and prices in those years, but the mine is said to have been put on a deathbed by over-reliance on the unsustainable diesel generation which contributed to 35 percent of the mine’s operating costs. The Boseto mine used 17.1 million litres of diesel in generating its electricity, spending P26 million monthly, leading to its mothball.

The US-based Cupric Canyon Capital with its subsidiary Khoemacau Copper Mining purchased Boseto mine in 2015 including a new 3 Mt/a concentrator which was commissioned in 2012 by Australia’s Discovery Metals, and a Tailings Storage Facility (TSF). Cupric Canyon Capital has already spent almost P7.3 billion on the Kalahari Copper Belt for the Khoemacau mine. It is recently projected that Khoemacau copper production will increase to 62.000 metric tonnes while that of silver to 1.9 million ounces silver annually.

President Mokgweetsi Masisi evidently ushered the closure of the BCL copper mine in 2016 while still a vice president. But when ushering the opening of Khoemacau recently, Masisi is a man who now speaks with a renewed heart showing a lot of hope in the future of copper as an economic factor in the case of the newly reopened copper mine.

At a time when copper markets were raising most skepticism, government decided to put BCL on a sick bed and (government) claimed that it could not afford to fund the mine. That time Masisi stood firm and defended government’s decision to put the mine on liquidation as the most prudent. But his words and decisions have come back to haunt him and his presidency as copper is now in demand.

“The future looks bright for copper mining as the global forecasts indicated that copper demand globally was expected to exceed supply by mid-2020s because there was a surging growth from the power and utilities sector especially in China, India and other Asian nations,” said Masisi during the r recent opening of Khoemacau Mine.

When addressing attendees during the opening of Khoemacau Masisi said more than P4 billion was dedicated to be spent between 2018 and 2021 for developing the necessary infrastructure required to operate. He further touted Khoemacau to come with revenue of P10 billion over its 22 year operational life from 2021-2042, a tax revenue of P700 million and the creation of about 1200 jobs during the first phase including 1663 jobs on average per year as well as 883 direct jobs.

Copper prices

While appetite on copper mining and production is growing rapidly, latest figures show that there has been an unsettling trend of falling copper prices in recent months.  From a huge fall in price in the end of last year December, copper prices rose from $2.62/lb to $2.96/lb after February this year. This year the month of August shows it is a month of lows in the copper market.

Expects say this is due to US President Donald Trump last week statement that he would impose more tariffs on Chinese import and the Oriental giant retaliating that it will fight back, ending a month-long trade truce between the world’s two biggest economies. The failure of truce also further fuels the two nations’ long standing trade war.

China and its Asian brothers supply the world, including America, with electric vehicles and a lot of goods that uses copper. Hence a spike in tariffs by US means less production of copper using goods in Asia which also results in less demand for copper, subsequently red metal prices go down. The copper prices have been sharply plummeting since the end of July. At the wake of last week Trump announcement on tariffs prices went to the lows at $2.57/lb on 4 August. However there is a positive trend this week, much to the interest of copper producers, on Wednesday this week the prices even reached a high of $2.61/lb.

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Business

LLR transforms from Company to Group reporting

9th April 2024

Botswana Stock Exchange listed diversified real estate company, Letlole La Rona Limited (“LLR” or “the Company” or “the Group”), posted its first set of group financial statements which comprise the Company and Group consolidated accounts, which show strong financial performance for the six months ended 31 December 2023, with improvements across all key metrics.

The Company commenced the financial year with the appointment of a Deputy Chairperson, Mr Mooketsi Maphane, in order to bolster its governance and enhance leadership continuity through the development of a Board and Executive Management Succession Plan.

At operational level, LLR increased its shareholding in Railpark Mall from 32.79% to 57.79% and proudly took over the management of this prime asset.

The CEO of LLR, Ms Kamogelo Mowaneng commented “During the period under review, our portfolio continued to perform strongly, with improvements across all key metrics as a result of our ongoing focus on portfolio growth and optimisation.

“We are pleased to report a successful first half of the 2024 financial year, where we managed to not only grow the portfolio through strategic acquisitions and value accretive refurbishments but also recycled capital through the disposal of Moedi House as well as the ongoing sale of section titles at Red Square Apartments. The acquisition of an additional 25% stake in JTTM Properties significantly uplifted the value of our investment portfolio to P2.0 billion at a Group level. Our investment portfolio was further differentiated by the quality of our tenant base, as demonstrated by above market occupancy levels of 99.15% and strong collections of above 100% for the period”.

The growth in contractual revenue of 9% from the prior year’s P48.0 million to the current year P52.2 million, increased income from Railpark Mall, coupled with high collection rates, has enabled the company to declare a distribution of 9.11 thebe per linked unit, which is in line with the prior year.

 

In line with its strategic pillars of ‘Streamlined and Expanded Botswana Portfolio’ as well as ‘Quality African Assets’, the Group continuously monitors the performance of its investments to ensure that they meet the targeted returns.

“The Group continues to explore yield accretive opportunities for balance sheet growth and funding options that can be deployed to finance that growth” further commented the CEO of LLR Ms Kamogelo Mowaneng.

Ms Mowaneng further thanked the Group’s stakeholders for their continued support and stated that they look forward to unlocking further value in the Group.

 

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Business

Botswana’s Electricity Generation Dips 26.4%

9th April 2024

The Botswana Power Corporation (BPC) has reported a significant decrease in electricity generation for the fourth quarter of 2023, with output plummeting by 26.4%. This decline is primarily attributed to operational difficulties at the Morupule B power plant, as per the latest Botswana Index of Electricity Generation (IEG) released recently.

Local electricity production saw a drastic reduction, falling from 889,535 MWH in the third quarter of 2023 to 654,312 MWH in the period under review. This substantial decrease is largely due to the operational challenges at the Morupule B power plant. Consequently, the need for imported electricity surged by 35.6% (136,243 MWH) from 382,426 MWH in the third quarter to 518,669 MWH in the fourth quarter. This increase was necessitated by the need to compensate for the shortfall in locally generated electricity.

Zambia Electricity Supply Corporation Limited (ZESCO) was the principal supplier of imported electricity, accounting for 43.1% of total electricity imports during the fourth quarter of 2023. Eskom followed with 21.8%, while the remaining 12.1, 10.3, 8.6, and 4.2% were sourced from Electricidade de Mozambique (EDM), Southern African Power Pool (SAPP), Nampower, and Cross-border electricity markets, respectively. Cross-border electricity markets involve the supply of electricity to towns and villages along the border from neighboring countries such as Namibia and Zambia.

Distributed electricity exhibited a decrease of 7.8% (98,980 MWH), dropping from 1,271,961 MWH in the third quarter of 2023 to 1,172,981 MWH in the review quarter.

Electricity generated locally contributed 55.8% to the electricity distributed during the fourth quarter of 2023, a decrease from the 74.5% contribution in the same quarter of the previous year. This signifies a decrease of 18.7 percentage points. The quarter-on-quarter comparison shows that the contribution of locally generated electricity to the distributed electricity fell by 14.2 percentage points, from 69.9% in the third quarter of 2023 to 55.8% in the fourth quarter. The Morupule A and B power stations accounted for 90.4% of the electricity generated during the fourth quarter of 2023, while Matshelagabedi and Orapa emergency power plants contributed the remaining 5.9 and 3.7% respectively.

The year-on-year analysis reveals some improvement in local electricity generation. The year-on-year perspective shows that the amount of distributed electricity increased by 8.2% (88,781 MWH), from 1,084,200 MWH in the fourth quarter of 2022 to 1,172,981 MWH in the current quarter. The trend of the Index of Electricity Generation from the first quarter of 2013 to the fourth quarter of 2023 indicates an improvement in local electricity generation, despite fluctuations.

The year-on-year analysis also reveals a downward trend in the physical volume of imported electricity. The trend in the physical volume of imported electricity from the first quarter of 2013 to the fourth quarter of 2023 shows a downward trend, indicating the country’s continued effort to generate adequate electricity to meet domestic demand, has led to the decreased reliance on electricity imports.

In response to the need to increase local generation and reduce power imports, the government has initiated a new National Energy Policy. This policy is aimed at guiding the management and development of Botswana’s energy sector and encouraging investment in new and renewable energy. In the policy document, Minister of Mineral Resources, Green Technology and Energy Security Lefoko Moagi stated that the policy aims to transform Botswana from being a net energy importer to a self-sufficient nation with surplus energy for export into the region. Moagi expressed confidence that Botswana has the potential to achieve self-sufficiency in electric power supply, given the country’s readily available energy resources such as coal and renewable sources.

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Business

MMG acquires Khoemacau in a transaction valued at P23Bn

9th April 2024

MMG Limited, the Hong Kong-based mining company specializing in base metals, has successfully concluded the acquisition of Khoemacau Copper Mine, a state-of-the-art, world-class copper asset nestled in the northwest of Botswana.

On Monday, MMG announced that the acquisition of Khoemacau Mine in Botswana was finalized on 22nd March 2024. “This acquisition enriches the company’s portfolio with a top-tier, transformative growth project and signifies a monumental milestone in the Company’s journey,” MMG communicated in an official statement published on the Hong Kong Stock Exchange.

Upon completion of the acquisition, MMG remitted to the Sellers an Aggregate Consideration of approximately US$1,734,657,000 (over P23 billion), a sum subject to potential adjustments post-Completion.

In addition to the Aggregate Consideration, MMG, in accordance with the Agreement, advanced an aggregate amount of approximately US$348,580,000 (over P4.5 billion) as the Aggregate Debt Settlement Amount, to settle certain debt balances of the Target Group (Cuprous Capital/Khoemacau).

On November 21, 2023, Khoemacau announced that the shareholders of its parent company [Cuprous Capital] had agreed to sell 100% of their interests to MMG Limited.

MMG is a global resources company that mines, explores, and develops copper and other base metals projects on four continents. The company is headquartered in Melbourne, Australia, and has a significant shareholder, China Minmetals Corporation, which is China’s largest metals and minerals group owned by the Government of the People’s Republic of China.

On December 22, 2023, Khoemacau Copper Mining (Pty) Ltd received the approval from the Minister of Minerals and Energy of Botswana regarding the transfer of a controlling interest in the Project Licenses and Prospecting Licenses associated with the Khoemacau Copper Mine, a result of the Acquisition.

 

The Botswana Competition & Consumer Authority (CCA) on January 29, 2024, notified the market that it had given its approval for the takeover of Khoemacau Copper Mining by MMG Limited.

On January 29, 2024, the CCA issued a merger decision to the market, stating that after conducting all necessary assessments, it was ready to proceed.

The Competition Authority affirmed that the structure of the relevant market would not significantly change upon implementation of the proposed merger as the proposed transaction is not likely to result in a substantial lessening of competition, nor endanger the continuity of service in the market of mining of copper and silver ores and the production, and sale or supply of copper concentrate in Botswana.

Furthermore, the CCA stated that the proposed merger would not have any negative impact on public interest matters in Botswana as per the provisions of section 52(2) of the Competition Act 2018.

Earlier this month, Minister of Minerals & Energy, Lefoko Maxwell Moagi, informed parliament that his Ministry was endorsing the Khoemacau acquisition by MMG Limited. He noted that not only was the company acquiring the existing operation but also committing to an expansion program that would cost over $700 million to double production, create more jobs for Batswana, and increase taxes and royalties paid to the Government.

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