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Fluor wins Khoemacau EPCM

Global engineering group Flour Corporation on Tuesday announced another major mining development contract in Botswana. Canyon Capital a company developing the Khoemacau Copper & Silver projects has awarded the American conceived giant Engineering  Procurement & Construction Management (EPCM)  services for it’s over P5 billion mining undertaking aimed at  unearthing the base metals for the next 21 years.

Fluor booked the undisclosed contract value in the second quarter of 2019.According to the New York Stock Exchange Listed multinational engineering outfit the contract follows a successfully working relationship after they worked with Canyon Capital on the first phase of preliminary and cost determinacy designs.

“We worked closely with Cupric Canyon in the project’s front-end engineering and design phase to establish a capital-efficient design and execution plan for the project,” said Tony Morgan President of Fluor’s Mining & Metals Business in a statement released from Irving Texas United States on Tuesday.

Fluor was also involved in construction management of the early works for the camp upgrade, bush clearing, transport corridor and surface infrastructure terrace preparation. In this next phase of intense mining infrastructure designs and reconfigurations Fluor’s scope entails upgrading the existing copper concentrator plant and new mine surface infrastructure.

The project is expected to produce an annual average of 62,000 metric tons of copper and 1.9 million ounces of silver with a life of mine in excess of 20 years. “We will leverage our local capabilities and extensive copper experience to execute the Khoemacau project with excellence, safely, on time, on budget and with quality,” added Morgan.

Engineering, Procurement, & Construction Management (EPCM) Contracts arrangement are common set ups used in mega industrial projects where a significant number of trade contactors are involved. On an EPCM contract the client employs the necessary trade contractors to construct the works. The EPCM 'contractor' designs the project, and then acts as a construction manager, coordinating the procurement process and then managing the trade contractors.

Effectively they are performing the role of a consultant during the construction phase. An EPCM contractor is not directly involved in the building and construction of the project, but is rather responsible for the detailed design and overall management of the project, on behalf of the owner or principal.

The EPCM contractor is mandated with ensuring that the engineering and design of the project is in compliance with the projects technical and functional specifications. Supervising, management and coordinating construction interface in accordance with a detailed schedule is the key responsibility of the EPCM contractor. When a need arises during the tenure of the project the EPCM contractor takes full responsibility of   establishing contractual arrangements on behalf of the owner with other contractors, vendors, sub-contractors and sub-vendors, through a tender process.

Flour Corporation raking 164 on the Global fortune 500 company’s scale, at an annual revenue of around $20billion established an office in Botswana in 2015 and has managed and delivered one of the country’s major projects. In September 2012 the company completed Jwaneng Mine expansion works, an over P3.5 billion project that delivered Cut 8. The Jwaneng Cut 8 was an over P24 billion mining investment that boosted mine’s lifespan from 2017 to 2024. Debswana has since commenced Cut 9, an over P15 billion project that will take Jwaneng to 2034.

During expansion into Cut 8 Fluor performed engineering, procurement, and construction management services for associated relocation and rebuilding of the mine surface infrastructure and completed the project in September 2012.Cut 8  enabled  the removal of overburden to allow the mine to access 91 million tonnes of ore that will yielding 102 million carats of diamonds until and 2024 .The P24 billion  Cut 8 project was and still remains  the largest ever single capital commitment in Botswana’s private sector.

The Khoemacau Copper & Silver Project is located in the North East of Botswana in the Ngamiland district, the project encompasses Kalahari Copper belt and the Bosetu Resource, the latter was acquired from Australian  Based Discovery Metal after insolvency in 2013.Early this year by Cupric Canyon Capital announced the successful signing of US$565 million (around P 5.9 billion) capital injection, as funding package to commence development of the Khoemacau project to unearth high grade copper and silver concentrate.

The US$565 million of funding comprised  a US$275 million (P2.9 billion) senior debt facility from Red Kite Mine Finance and a US$265 million (P2.8 billion) silver stream from Royal Gold AG a wholly owned subsidiary of Royal Gold, and a US$25 million (P263 million) subordinated debt facility also from Royal Gold.

During funding announcement Chief Executive Officer of Cupric Canyon Capital Johan Ferreira explained that the deal was expected to be closed in the 2nd quarter of 2019 opening giving way for second phase of construction which is expected to run for two years pushing the Starter Project to produce first sellable concentrate beginning in the first half of 2021, with subsequent ramp-up.

Flour‘s EPCM contract is also noted to included overseeing the upgrade of existing Expansion Project pre-feasibility study to a definitive feasibility study.

The Expansion Project includes the construction of a new 5.8 million tonnes per annum processing facility near Zone 5 which will produce approximately 100,000 tonnes of copper per annum. Founded in 1912, Flour Corporation is a global engineering, procurement, fabrication, construction and maintenance company that transforms the world by building prosperity and empowering progress. Fluor serves its clients by designing, building and maintaining safe, well executed, capital-efficient projects around the world. With headquarters in Irving, Texas, Fluor ranks 164 on the Fortune 500 list with revenue of $19.2 billion in 2018 and has more than 53,000 employees worldwide.

Head of Mining Base Metal Business at Flour Torny Morgan says his company has worked in Botswana since the early 2000s and opened an office in Gaborone in 2015. “From Gaborone, we deliver safety, cost-competitive innovations and execution excellence to clients. Fluor conducts business in a socially, economically and environmentally responsible manner, and the Botswana office provides local employment opportunities and supplier and skills development.” He said.

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

21st September 2020
Botswana-on-high-alert-as-AML-joins-Covid-19-to-plague-mankind-

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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