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Kalahari Copper Belt covert search while BCL lies moribund

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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Cresta cuts losses, pins recovery hopes on renewed travel sentiment 

20th October 2021
Cresta

Cresta Marakanelo Holidays Limited, Botswana’s leading hotel group, is battling the catastrophic effects of the Covid-19 pandemic and its far-reaching implications. 

The tourism and travel business was by far one of the most hit economic sectors. The key to containing the COVID-19 pandemic was the significant curtailment of movement of the people to reduce the spread of the virus. On the flip side, this delivered a massive blow to the tourism and hospitality business, which largely relies on accommodating travellers.

This week, Cresta released their unaudited condensed consolidated financial results for the half-year period ended June 2021. The Group, which operates 11 hotels in Botswana, reported a significant reduction in losses owing to stringent cost-containment measures deployed by management to ensure the business doesn’t plunge deeper into the negative figures zone.

The Group’s registered a six-month loss before Taxation of P34.1 million, which was P8.4 million lower than the prior-year first six months period, which reported a loss of P42.5 million. Cresta says the COVID-19 headwinds continue to significantly affect the tourism and hospitality industry, and Cresta Marakanelo Limited was not an exception.

During the six months to June 2021, the Government of Botswana continued to implement a raft of measures imposed in December 2020 to curb the spread of COVID-19. These measures, which include restrictions on inter-zonal travel, a ban on alcohol sales, and a limited number of conference guests, have had a direct effect on reducing the level of activity in hotels.

The resort town hotels, which ordinarily generate at least 50 percent of their business from incoming foreign travellers, were significantly affected by the lockdowns in the source countries and low travel sentiment even after the hard lockdown measures were lifted.  The first-quarter performance was low in line with the seasonality of the business. However, the performance was further slowed down by the pandemic induced low travel sentiment and pandemic mitigation controls in place.

The second quarter saw a rise in the performance of the business when compared to the first quarter, contributing 60% of the revenue generated for the six months ended 30 June 2021. The business enjoyed a steady month-on-month increase in revenues from January to June 2021.

Under the adverse operating conditions for the industry, Cresta Directors boast of the P8.4 million loss cut. This, according to a commentary alongside financials, was mainly driven by the cost reduction measures implemented, some of which will be continued in the long term, even after the pandemic has been contained.

Revenue for the period under review was P96.5 million, 4% (P3.3 million) higher than the same period last year. Earnings before interest, tax, and depreciation and amortization (EBITDA) achieved during the period was P2.2 million, an improvement on the prior year’s loss incurred of P2.5 million.

The reduced market base has seen a surge in price wars in the industry, a variable that further puts pressure on the company’s revenues. Cresta management noted that the Group would continue to focus on cost containment to ensure the business’s survival through this difficult pandemic season.

In a drive to reduce the operating leverage of the business to ensure the company continues to be a going concern, several measures were implemented, including the suspension of all non-critical capital expenditure projects and freeze on all discretionary expenditure. In addition, Cresta negotiated with staff, landlords and other strategic suppliers to reduce contractual obligations. Following these measures, Cresta was able to minimize the reduction in cash balances during the period.

From 31 December 2020, cash balances declined by P29.1 million for the six months to 30 June 2021, compared to a decline of P42.1 million during the same period in 2020 on largely the same level of revenue mirroring successful cash preservation.  In assessing the ability of the Group to continue as a going concern, management performed a sensitivity analysis on a 12-month cash flow forecast which the Board of Directors reviewed to their satisfaction.

A range of possible outcomes related to the COVID-19 pandemic were considered, and it was concluded that Cresta Marakanelo Limited would continue as a going concern. The single most significant assumption was that the business should make a turnaround for the better within 12 months period on the back of vaccination programmes both in the source market countries and locally.

Vaccination enhances travel sentiment for the market, and it is on its strength that most paid guests are opting to postpone their bookings rather than cancel altogether.  The company has also secured an additional working capital facility of P25 million. This will provide extra headroom while the business levels are low.

Based on the review of the Group’s cash flow forecasts, the Directors believe that the Group will have sufficient resources to continue to trade as a going concern for a period of at least 12 months from the date of approval of these financial statements and accordingly, the interim financial statements have been prepared on the going concern basis.

Last month Cresta announced that they had decided not to renew the lease for the Cresta Golfview Hotel in Lusaka, Zambia, which comes to an end on 31 January 2022. The landlord of the property will continue to run the hotel under a different brand, and preparations are currently underway for a smooth handover of the property, with the least possible impact to staff, suppliers and guests.

During the half-year, P11.7 million (2020: P25.8 million) was utilized in operating activities, primarily due to the subdued revenues. Net cash used in investing activities amounted to P2.5 million (2020: P14.4 million).

The reduction in cash outflow on investing activities was because of the capital expenditure freeze. With regards to financing activities, P15.2 million (2020: P4.1 million) was utilized, split between bank loan repayments of P3.7 million (2020: P1.5 million) and leasing hotel properties P11.5 million (2020: P11.6 million).

In the future, Cresta pins its full recovery hopes on the vaccination plan, which is envisioned to cultivate revived travel sentiment significantly. “As seen in other countries whose vaccination programmes were embraced by a significant part of the population, vaccination is expected to see the removal of conferencing restrictions, alcohol sale ban and lifting of travel restrictions,” the company said.

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Botswana possesses unexploited renewable energy 

20th October 2021
renewable-energy

The International Renewable Energy Agency’s (IRENA) latest Renewables Readiness Assessment of Botswana has made it known that the country enjoys considerable renewable energy potential. Notably, solar, wind and bioenergy are more prevalent. However, these remain largely untapped, despite the country’s ambitious plans for integrating renewable energy into its energy system.

According to the report, Botswana’s total primary energy supply (TPES) is fossil-based and largely reliant on oil products and coal, complemented by biomass and waste energy. In the Integrated Resource Plan (IRP) launched in December 2020, it was announced that renewable energy should account for at least 15% of the energy mix by 2030, whilst the country’s Vision 2036 calls for a 50% renewable energy contribution to the energy mix by March 2036. The ambitions are arguably aloof given the insufficient critical actions that could significantly impact the energy transition in Botswana.

Access to electricity stands at 65%, with 81% of urban areas illuminated and 28% of rural regions electrified. As of 2017, the country’s total energy supply of 2.9 million tonnes of oil equivalent consists of oil products (35%), coal (44%), (traditional) biofuels and waste (19%) and imported electricity (2%). The IRENA has established that electricity is mainly produced from coal or petroleum products imported from South Africa.

As is the case in most regions, Botswana’s power system is characterised by an unreliable power supply, lack of investment, poor maintenance, and high service costs. To meet its peak power demand, Botswana imports power from the Southern Africa Power Pool (SAPP) – mainly from South Africa – and when imports are not available, resorts to costly backup diesel power plants.

In 2013, the International Energy Agency’s (IEA) Clean Coal Centre found that Botswana has estimated coal resources of 40 gigatonnes (Gt) or 40 trillion Kg. In 2014, the only two measured coal reserves were Morupule and Mmamabula basins, with a capacity of 7.2 Gt. IRENA believes this abundant resource is underexploited as only a single coal mine, Morupule, is currently operating.

Already established, Botswana relies heavily on fossil fuels for its electricity generation. As shown by the country’s installed generating capacity of 893.3 megawatts (MW), comprising 600 MW from the coal-fired Morupule B, 132 MW from the also coal-burning Morupule A, 90 MW from Orapa power plant, which is a diesel peaking plant, 70 MW from Matshelagabedi power plant (diesel peaking plant) and 1.3 MW from Phakalane solar photovoltaic power plant, according to the then Ministry of Mining, Minerals, Energy and Water Resource (MMERW) in 2017, now under a new name.

IRENA posits that although the installed capacity can cover the country’s peak demand estimated at 610 MW, the Botswana Power Cooperation’s (BPC) interconnected system faces several challenges. According to the power parastatal, in 2017, Morupule A did not produce electricity and was closed down for refurbishment. It produced 25 gigawatt-hours (GWh) in 2018 but had to be shut down again to remedy defects identified during commissioning.

Morupule B has been running under capacity since its commissioning in 2013 due to plant breakdown and system failures. BPC is currently undertaking remediation, which is expected to be completed in 2023/24, with all units running 100% production.

As for the diesel power plants of Orapa, producing 90MW and Matshelagabedi’s 70MW, which are rented to Alstom, they were conceived to support peak load but are being used for regular electricity supply BPC reports. The Corporation’s two diesel power stations were not used during 2018 and remained on standby. The lack of capacity to satisfy electricity demand requires regular imports from surrounding countries.

Botswana relied on electricity imports to cover up to 94% of its demand until the progressive recovery of the Morupule B plant. IRENA noted that the share of electricity imports in total supply decreased to about 17%, or 594 gigawatt-hours (GWh) in 2018 from 1 297 GWh in 2017 due to lower demand from the mining sector.

BPC has been in a precarious financial state for many years due to high import costs, operational difficulties and inoperative assets and has been kept afloat by government subsidies.
Botswana has an exceptionally high rate of solar irradiation, making solar energy a promising renewable energy source in the country.

The semi-arid country has an estimated 3 200 hours of sunshine per year. According to a MMEWR study, the yearly solar resources from global horizontal irradiation (GHI) range from 2 050 to 2 920 kilowatts received in one hour by one square meter of a surface (kWh/m²). For comparison, these irradiation levels are similar to those in California, which is amongst the most competitive solar market today.

Botswana is also endowed with a range of bioenergy resources that could be used for energy production. Wood fuel remains the dominant cooking fuel for rural households, as 42% of the population relies on it. A 2016 World Bank study based on a government study from 2007 to assess biofuel production and use in Botswana revealed the potential for biodiesel production from Jatropha curcas and bioethanol from sweet sorghum and sugarcane crops.

The Central district presents the highest biodiesel potential from Jatropha production, while the North-West district’s bioethanol potential from sweet sorghum is mainly located in the Ngami sub-district. However, another study coordinated by IRENA found that Jatropha is not suitable to cultivate in Botswana, as 100% of the land is restricted due to protected areas, wetlands, existing agricultural lands or urban areas, as well as additional exclusion areas and other restrictions in terms of market access and water availability. Sugarcane crops were only viable if irrigated, and the extent of production could reach 9% of the land.

Furthermore, an analysis conducted by IRENA and United States-based Lawrence Berkeley National Laboratory (LBNL) for the Africa Clean Energy Corridor depicts some suitable zones for wind turbine power deployment, which are mainly located in the southern part of Kgalagadi district near Tsabong and the Southern region, with a technical potential of up to 1.5 GW.

In the foreword of Botswana’s Renewables Readiness Assessment, the Minister for Mineral Resources, Green Technology and Energy Security, Lefoko Moagi, said the release of the report coincides with the recent adoption by Parliament of the Botswana National Energy Policy – a key, strategic instrument for the successful and economic development of the local energy sector.

A prominent objective of the Policy is to achieve a substantive penetration of new and renewable energy sources in the country’s energy mix; the goal is to attain adequate economic energy self-sufficiency and security, as well as to position Botswana to fulfil its vision of becoming a regional net exporter, especially in the electricity sector. Director-General for IRENA Francesco La Camera said Botswana possesses considerable potential for renewable energy development.

In the introduction of the assessment, La Camera stated that the report presents clear and practical steps to maximise the country’s use of renewables in driving sustainable economic growth for Botswana. The extensive document identifies the need to adopt a broader range of renewable energy technologies to diversify Botswana’s power generation away from coal, generate socio-economic value and fulfil the country’s environmental and climate commitments.

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NAMDEB extends life of mine for land operations by up to 20 years

19th October 2021

Joint venture between De Beers and Government of Republic of Namibia announces new plan, supporting economic, commercial, employment and community benefit, following receipt of royalty relief Namdeb Diamond Corporation (Proprietary) Limited (‘Namdeb’), a 50:50 joint venture between De Beers Group and the Government of the Republic of Namibia, today announced the approval of a new long-term business plan that will extend the current life of mine for Namibia’s land-based operations as far as 2042.

Under the previous business plan, the land-based Namdeb operations would have come to the end of their life at the end of 2022 due to unsustainable economics. However, a series of positive engagements between the Namdeb management team and the Government of the Republic of Namibia has enabled the creation of a mutually beneficial new business plan that extends the life of mine by up to 20 years, delivering positive outcomes for the Namibian economy, the Namdeb business, employees, community partners and the wider diamond industry.

As part of the plan, the Government of the Republic of Namibia has offered Namdeb royalty relief from 2021 to 2025, with the royalty rate during this period reducing from 10% to 5%. This royalty relief has in turn underpinned an economically sustainable future for Namdeb via a life of mine extension that, through the additional taxes, dividends and royalties from the extended life of mine, is forecast to generate an additional fiscal contribution for Namibia of approximately N$40 billion. Meanwhile, the life of mine extension will also deliver ongoing employment for Namdeb’s existing employees, the creation of 600 additional jobs, ongoing benefits for community partners and approximately eight million carats of additional high value production.

Bruce Cleaver, CEO, De Beers Group, said: “Namdeb, a shining example of partnership, has a proud and unique place in Namibia’s economic history. This new business plan, forged by Namdeb management and enabled by the willingness of Government to find a solution in the best interest of Namibia, means that Namdeb’s future is now secure and the company is positioned to continue making a significant contribution to the Namibian economy, the socio-economic development of the Oranjemund community and the lives of Namdeb employees.” Hon. Tom Alweendo, Minister of Mines and Energy for the Government of the Republic of Namibia, said: “Mining remains the backbone of our economy and is one of the largest employment sectors within our country.

Government understood the fundamental impact of what the Namdeb mine closure at the end of 2022 would have had on Namibia. Therefore, it was imperative to safeguard this operation for the benefit of sustaining the life of mine for both the national economy as well as preserving employment for our people and the livelihoods of families that depend on it.”

Riaan Burger, CEO, Namdeb Diamond Corporation, said: “After more than a century of production, these operations were approaching the end of their life, but the creation of this new business plan means we can continue to deliver for Namibia for many years into the future. This is great news for the hardworking women and men of Namdeb, as well as for all our community partners who we are proud to have worked with over the years. We now look forward to starting a new chapter in Namdeb’s proud history.”

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