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.
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.
Kgalagadi Breweries Limited (KBL) has suspended its operations indefinitely owing to the tough trading conditions occasioned Government decision to ban the sale of alcohol at the beginning of this month.
The brewer announced the decision today (Wednesday). KBL Corporate Affairs Manager Madisa said from the 25th January 2021 only a minimal number of critical roles will continue to be staffed and all other operational activity will stop.
KBL also acknowledged the impact this will have on the overall supply chain and those whose livelihoods depend on the beer industry and requests their understanding.
The current ban is expected to end on 31st January 2021, KBL said should the ban be extended past this date, suspension of its operations will continue.
KBL explained that its Tuesday meeting with suppliers was to align with them that due to the current situation, the brewer will suspend payments as of 6th February 2021, up for review pending the outcome of the current alcohol ban.
“However, it is regrettable that this latest total ban on alcohol sales has resulted in the suspension of KBL’s operations, which will remain in place for as long as the alcohol ban persists. KBL continues its efforts to engage government on this critical issue, which is having an enormous impact on the industry and its extensive value chain,” said Madisa.
On Tuesday afternoon, KBL conducted an ‘emergency meeting’ with its suppliers addressing some business decisions the company has made amid the current alcohol ban. Botswana has several alcohol bans since the first lockdown of March.
Mostly alcohol has been banned as a measure of curtailing the spread of Covid-19 and government then lived with putting stringiest operating hours for alcohol sales and distribution for a long time. Next week Monday KBL will be shutting down its operations, after a two weeks ban on liquor.
Sources say ever since the 4th of January 2021 when the December curfew regulations were extended, KBL has been brewing stacks of liquor for stockpiling. This is solely the reason why the brewer decided to close shop and stop manufacturing alcohol, because KBL’s depots no longer needed supply. On Tuesday suppliers were told to stop supplying KBL as next week the plant will be closing.
Air of uncertainty was hovering in the KBL plant premises on Tuesday as many workers feared mostly for their jobs. No one knows when alcohol ban will be lifted or if Botswana is going for a hard lockdown following the recent surge of Covid-19 infections. Botswana has 18,630 coronavirus cases, with 88 deaths and 14,624 recoveries.
KBL owner Botswana Stock Exchange (BSE) listed Sechaba Holdings came into contact with response to Covid-19 in March when Botswana recorded its first cases and that was the time when the company was doing well for years since the shedding of alcohol levy.
Sechaba associates, KBL and Coca Cola Beverages Botswana (CCBB), that time according to the holding company in its abridged financial results for the year ended 31 December 2019, continued to forecast growth in 2020 notwithstanding the challenges related to COVID-19.
Sechaba that time saw the business environment has been generally positive including relationship with stakeholders and the associates continue to manage the performance and business continuity risks.
Ten months ago the brewer underestimated the damage that can come with the pandemic and expected Covid-19 disruptions to be “temporary and the business will survive.”
That time Sechaba’s sole associate, KBL operates traditional beer breweries, alcoholic fruit beverages and a clear beer brewery.
In the period that just ended in December 2019, KBL contributed 72 percent to Sechaba’s revenues while CCBB contributed 28 percent. KBL also performed high in contribution to profit after tax with a share of 74 percent while CCBB contributed 26 percent.
Sechaba holds 49.9 percent in the local headline alcohol brewer KBL and 49.9 percent in the non-alcoholic drinks associate, CCBB. Sechaba holds 60 percent of the shares of KBL while SABMiller Botswana B.V. holds 40 percent. SABMiller Plc has management control in the operating company. The Botswana Development Corporation has a 25.6 percent shareholding in Sechaba Breweries Holdings Limited.
The glitter on the glass of KBL or Sechaba, is of December 2019 financial results which was downplayed and turned into a bearish affair in the financial results for the half year ended 30 June 2020. For those results, there was a spill in profit by Sechaba cash cow KBL by 72 percent while CCBB recorded a decline in profit by 15 percent, both and respectively in correspondence with the same period in 2019. All this downfall comes down to a loss of 60 percent of profit by the parent company. That was more than the 60 percent fall expected before the release of results.
In September during the release of the June 2020 results, Sechaba admitted that the intervention put by government since April, to fight the Covid-19 pandemic, negatively impacted its business performance and its associates, KBL and CCBB bore the full brunt. Revenue collected for KBL was lower by 37 percent while for its sister associate; CCBB, the numbers were down by 7.1 percent. This is the time when sale of alcohol was banned and manufacturing of soft drinks was not part of essential services.
Sechaba Chairman, Bafana Molomo last year said even though Covid-19 interventions would have an impact on the associates, this impact is expected to be temporary and the businesses will survive.
“However, it is advised that the situation is changing constantly and that it will be monitored closely. The Group’s associates continue to forecast growth in 2020 notwithstanding the challenges relating to Covid-19. The business environment has been generally positive, and the Group continues to enhance relationships with all stakeholders. The associates continue to manage the performance and business continuity risks,” he said.
Lockdown is back, but now with less stringent measure of curfew restrictions, and will affect the economy whose bounce back was expected to be this year.
Economic projections saw 2021 with glimmer of hope, where all the past Covid-19 ruins will be offset by things going back to normal. An anomaly of curfew has since come to this country’s shores after the discovery of a new Covid-19 variant.
Some Botswana’s trade partners are on complete lockdown ever since the beginning of the festive season when the new variant was reported to be spreading rapidly and uncontrollably.
Measures were since put in place to tame the new high spreading and uncontrollable coronavirus variant called South African 501. V2 which was discovered in Botswana’s neighbor South Africa and the similar variant also known as E484K discovered in the UK.
After South Africa put in a curfew restriction following a response to a second wave of infections driven by a new Covid-19 variant, also called 20C/501Y.V2
President Mokgweetsi Masisi announced on national television Botswana’s first restrictions which was a curfew from 7pm to 4am from 24 December 2020 to 4 January 2021.
This month curfew regulations were extended from 8pm to 4am until end of January and many business operations were either stopped or closed earlier, hence slowing of economic activity in Botswana.
Latest data showing how business operations are being affected is not yet available. But many businesses are already crying foul and showing frustrations.
Lining of economic data with Covid-19 measures shows that at a time when there were lockdowns the economy slumped by 24 percent.
The GDP data of the second quarter of 2020, a time when Botswana got into its first lockdown amid national panic, shows that the real Gross Domestic Product contracted by 24 percent “due to the impact of measures that were put in place to combat the spread of the Covid-19 pandemic.”
But Botswana expected a 7.7 percent rebound and growth in 2021 from the 8.9 percent contraction forecast of last year.
This was pinned on expected improved sentiment in the global diamond industry and overall improved economic activity when the domestic economy goes back to normal.
Bank of Botswana’s Monetary Policy Committee in December last year also projected that inflation will go back to within the objective range in the second quarter of 2021.
Initially, in October last year, the central bank projected that inflation will be within 3-6 percent by the third quarter of 2021.
Two months later Bank of Botswana projections changed with the reversion to the objective range now expected to come earlier than the previous forecast as the domestic and the international economies were opening.
“Overall, risks to the inflation outlook are assessed to be balanced. Upside risks relate to the potential increase in international commodity prices beyond current forecasts, aggressive action by governments and major central banks to bolster demand, as well as possible supply constraints due to travel restrictions and lockdowns, though abating,” said Bank of Botswana last month.
When the meeting of Monetary Policy Committee which was held on 3 December 2020 decided to maintain the Bank Rate at 3.75 percent inflation had increased from 1.8 percent in September to 2.2 percent in October 2020 and remained below the lower bound of the Bank’s objective range of 3 – 6percent.
With the curfew which is place this whole month, spending or economic activity is expected to slow down and inflation will remain below the lower bound of the Bank’s objective range.
According to the last Monetary Policy Statement, the real GDP contracted by 4.2 percent in the 12 months to June 2020 compared to a growth of 3.9 percent in the corresponding period in 2019.
Mining and non-mining sectors registered a steep decline in output and this is blamed on Covid-19 containment measures.
The curfew regulation, despite being of a lesser sting than total lockdown, will have a slight or nominal impact on the domestic economy which is also affected by lockdowns in some of Botswana‘s trading partners.
Uncertainty looms on Botswana as reports continue that the 501. V2 seems to be uncontrollable and is spreading quickly in Botswana population.
While the country is on curfew restrictions, a possible lockdown looms if the disease continue to spread with this much prevalence, according to sources at government enclave.
This means the economic recovery, a rebound or leap in 2021, could remain a big pipeline dream.
The International Monetary Fund (IMF) had forecast the domestic economy to contract by 9.6 percent in 2020 compared to 5.4 percent in the April 2020 World Economic Outlook.
While the domestic eyes projected the economic to rebound to a growth of 7.7 percent, IMF had higher lenses of a growth of 8.6 percent in 2021. But the expected growth is set to be offset by the new elephant in the room, South African 501. V2.
The central bank and other international bodies have not ruled any chances of the pandemic remaining resilient or standing stubborn against countries, meaning possibility of future containment measures remains.
Now in Botswana a stubborn variant of the pandemic has caused panic and curfew regulations.
In December 2020, Monetary Policy Committee said: “Even with recovery in 2021, the contraction in 2020 equates, approximately, to a two-year loss of growth in output. The disparity in forecasts attest to the challenges of making forward projections when there is uncertainty about the duration of constrained economic activity, the resultant adverse impact on productive capacity, as well as the speed of resumption of production and pace of recovery in demand.”
Q3:2020 GDP decrease eases, but still remains in the negatives
The data for Q4: 2020 is yet to be released. Economic data available is the recent Q3:2020 released last month showing that real GDP for the third quarter of 2020 decreased by 6.0 percent compared to a deep contraction of 24.0 percent registered in the previous quarter.
As mentioned by Bank of Botswana in the last Monetary Policy Committee meeting of 2020 which was held in December just few weeks before the release of the Q3:2020 GDP data, the economy was expected to have performed better in the third quarter of 2020 compared to the second quarter given the gradual easing of COVID-19.
In Q3:2020 the economy tried to jump up out of the dark hole, but could move up 18 times and still remain in the fringes of economic hell. Many saw this movement as the one towards the recovery of 2021.
According to Statistics Botswana, the improvement in the third quarter GDP reflected continued efforts to reopen businesses and resume activities that were postponed or restricted due to the COVID-19 pandemic.
The latest report on Sub Sahara Africa (SSA) by rating agency Moody’s was prepared before the global panic of a new coronavirus variant which has already been detected in Botswana following its discovery in South Africa, the country’s major trade partner.
Latest reports are that the new variant, now christened South African 501.V2 or E484K, was detected from the local tourism hub of Maun, and the Covid-19 task team have borrowed credence from the high rate of infections prior to the festive season as vindication of the new virus mutation being in Botswana.
The local task team is not the only one missing on full scientific data of how this new corona virus variant is in Botswana and its carriers or patients — renowned rating agency released a report on Wednesday with absence of any mention of South African 501.V2.
Moody’s made a study on “2021 outlook negative as debt costs intensify amid limited institutional capacity to adjust post pandemic.”
However, the current affairs suggest that “post pandemic” there are mutations or new variants of the virus which should be dealt with, now forcing countries like Botswana, South Africa and some in Southern Africa into coming up with curfew regulations to curb the new form of Covid-19.
The Great Pandemic seems to be here to stay in the midst of humankind if reports coming from next door South Africa about Covid-19 taking new forms to survive vaccine hence spreading uncontrollably is anything to go by.
Optimism has been brought the vaccine which is currently being rolled out, but scientific theories being conducted suggest that the new variant of Covid-19 might prove to be more resistant to vaccination.
Moody’s released a report this week on the outlook of SSA creditworthiness in 2021 which is deemed to be negative. With the new variant sweeping across Botswana and its influential trade partner South Africa, curfew regulations that are currently in place in the two countries could lead to further economic injury.
That Moody’s expectation for the fundamental conditions that will drive sovereign credit over the next 12-18 months to be severe, could be less far-reaching and short sighted given the lack of the new variant factor on the latest report.
“We expect SSA sovereigns to face severe challenges in grappling with the fallout from the coronavirus shock as lower overall economic growth and revenue coupled with higher government expenditure will lead to wider fiscal deficits and higher debt,” said Moody’s on Wednesday.
Higher debt levels, weaker debt affordability (amid both lower revenue and higher interest payments) and low buffers will challenge SSA sovereigns’ institutional capacity to manage economies, public health, budget positions, financing strategies, reserves and social discontent, thus elevating event risk.”
According to Moody’s latest report on SSA, commodity producers and tourism-dependent countries like Botswana were hit particularly hard.
Currently no tourist can come to Botswana lest they want to brave the ‘new Covid-19’, incidentally borders have been closed save for goods transportation.
The change in outlook on Botswana (A2 negative) was driven by a fall in demand for diamonds, its principal export commodity, said Moody’s. This has affected Botswana’s GDP which on the third quarter of 2020 was -6 percent, moving from -24 percent in the second quarter which mirrored all the hallmarks of an economy down spiraled by Covid-19 negative ripple effects.
Moody’s furthered its report by picking on overall growth in the SSA region to be associated with lasting impact of the economic contraction, which the rating agency said it will be greater in 2021.
“The region’s long-term recovery is more precarious given that SSA sovereigns have little fiscal space to counter the pandemic’s negative impact on economic activity and preserve productive capacity, and given that structural factors are generally less conducive to fostering a rebound in SSA than in other Emerging Markets,” said Moody’s.
Moody’s said although favourable base effects will help the recovery, real GDP growth will remain lower than historical averages in most countries. Botswana was at last given a glimmer of hope by the Moody’s report, optimism was that non-energy exporters like this country will remain the most dynamic economies, with growth driven by domestic demand and high public investment rates, and a rebound in demand for non-energy commodities.
“Public investment that addresses infrastructure gaps can raise growth both over the near and longer term. However, the impact of public investment on boosting long-term growth potential is determined in part by investment efficiency, which is generally weak in the region. Public investment efficiency is constrained by weak institutional quality, which affects project selection, appraisal and monitoring, as well as high rates of corruption, which can lead to rent-seeking and cost overruns,” said the rating agency.
Moody’s projected that Botswana will average economic growth of 6.5 percent in 2021 as a global growth recovery drives greater demand for coffee and diamonds. This is despite much uncertainty wearing on this country’s prospect of a big leap, the discovery of the new coronavirus variant believed to be at large in Botswana’s shores.