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Department of Mines gives Tlou another prospective license

The Department of Mines has given the Australian Securities Exchange, London's AIM market and the Botswana Stock Exchange listed energy company Tlou Energy Limited a  new prospecting license PL011/2019 designated Boomslang is valid for an initial term of three years.

The license covers ~1,000 Km2, bringing the total licence area held by the Company to ~9,300 Km2. According to Tlou Energy, the Boomslang area was considered highly prospective and provided significant potential development flexibility. Boomslang is located on-trend with the Lesedi Coal Bed Methane Project, where independently certified gas reserves are already in place.

According to the company, the initial development operations ongoing at the Lesedi gas field, the award of the adjacent Boomslang area along with the Mamba area provides the Company with further flexibility and optionality. The Lesedi Coal Bed Methane project is one of two projects Tlou has in Botswana and comprises five CBM prospecting licences

"I am very encouraged by the recently completed drilling program and in particular the strong gas indications observed to date. Furthermore, the good initial water flow, which is higher than that previously observed at Selemo, is potentially indicative of good permeability and therefore potentially good gas flows in this geologically high-graded area,” said Tony Gilby, Tlou managing director.

Recently Botswana government approved the 100 MW CMB tender in relation to “request to open Financial Proposal in respect of Tlou Energy Limited and Sekaname (Pty) Ltd who achieved technical scores of 89.8 percent and 86.4 percent respectively in the tender Development of a Maximum of 100MW of Coal Bed Methane Fueled Pilot Power Plants in Botswana.” The tender numbered Tender No: WOR 0/7/11/3-1 which was approved by the Board that time was submitted few weeks ago to PPADB as Tlou proposal received a technical score of 89.8 percent in the tender while Sekaname was scored a little bit low at 86.4 percent.

The Botswana government approval of the tender came after last year the Ministry of Mineral Resources Green Technology and Energy Security (MMGE) issued a Request for Proposal (‘RFP’) and opened a tender for development of a maximum of 100MW CBM fuelled power plants in Botswana by companies; Tlou Energy Limited and Sekaname (Pty) Ltd.  After the two companies submitted their bids, the government then decided to cancel the original RFPs and approved re-tendering through Public Procurement and Assets Disposal Board (PPADB) by Tlou and Sekaname this year February.

“This proposal is for the development of CBM fuelled power plants up to 100MW.  A successful RFP process can assist in the development of a new CBM gas industry in the country and create a new market for Tlou's independently-certified gas reserves of ~41 billion cubic feet (2P), ~427 billion cubic feet (3P) and significant contingent gas resources of ~3 trillion cubic feet (3C),” said Tlou Energy when receiving the tender.
 

Tlou Enrgy had waited for months for this tender with losing patience with its group CEO Martin McIver going to and fro to meet Minister of Mineral Resources, Green Technology and Energy Eric Molale inquiring and negotiating about the tender.  Last year in an interview with renowned financial news platform Proactive Investors’s Andrew Scott, Tlou Energy Executive Director Gabaake Gabaake said he is positive that the tender will be implemented as the company’s directors have been getting positive feedback from government or the ministry recently.  He said this is going to be a major project will open more.

Finally PPADB approved the request from Ministry of Mineral Resources, Green Technology and Energy Security (MMGE) to open the financial proposal in relation to the Tlou Energy's gas to power tender. Recently Tlou Energy Limited, was focused on delivering power in Botswana and Southern Africa through the development of CMB, it has commenced production testing at its Lesedi 3 development pod.  

According to Tlou, the excellent progress was being made on drilling operations at the second development pod, Lesedi 4. The company said the first half of 2019 should see significant advancements towards achieving one or both of these objectives. Lou further said testing procedures will continue over the coming months with initial performance data expected in Q2 2019. In its latest financial report, Tlou said it spend on exploration activities during the period amounted to P30 million and according to the company, this is an increase on the comparative period and relates mainly to the development wells that were commenced during the reporting period.

According to the company, Tlou Energy believes as 100% owner of the most advanced gas project in the country, the Lesedi CBM Project, it will provide investors with access to a compelling opportunity using domestic gas to produce power and displace expensive diesel and imported power. Botswana has a significant energy shortage and generally relies on expensive imported power and diesel generation to fulfill its power requirements.

Experts predict that Botswana’s power demand is to increase by 37 percent to 1,017MW by 2025. The Australian Securities Exchange, London's AIM market and the Botswana Stock Exchange listed company touted itself as coming to save Southern Africa from the chronic shortage in the region.

Tlou is developing projects using coal bed methane ("CBM") natural gas and Botswana has a significant energy shortage and generally relies on expensive imported power and diesel generation to fulfill its power requirements.  As 100 percent owner of Lesedi CBM Project, Tlou Energy provides investors with access to a compelling opportunity using domestic gas to produce power and displace expensive diesel and imported power.

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Diamond industry crises not over yet – De Beers Chief

13th January 2021
De Beers Group Chief Executive Officer: Bruce Cleaver

Following a devastating first half of the year 2020 due to COVID-19, the global diamond industry  started gaining  positive momentum towards the end of the year as key markets entered into  thanks giving and holiday season.

However Bruce Cleaver, Chief Executive Officer of De Beers Group cautioned that the industry is not out of the woods yet, citing prevailing challenges ahead into 2021.

The first half of 2020 was characterized by some of the worst challenges in history of global diamond trade.

The midstream, where rough diamonds are traded in wholesale and bulk to cutters and polishers, was for the most part of second quarter 2020, suffocated by international travel restrictions as countries responded to the contagious Corona Virus.

This halted movement of buyers and shipment of  the rough goods , resulting  in unprecedented decline of sales, in turn  ballooning stockpiles as the upstream  operations produced with little uptake by the midstream.

The situation was exacerbated by muted demand in the downstream where jewelry industries and tail end retailers closed to further curb the spread of COVID-19.

However towards the end of third quarter getting into the last quarter of the year, demand in both midstream and downstream started to steadily pick up as countries relaxed COVID-19 restrictions.

De Beers, the world’s largest diamond producer by value started reporting significant recovery in sales in the sixth and seventh cycle, figures began to reflect an upswing in sentiment as well as increase in uptake of rough goods by midstream.

Sales for the sixth cycle amounted to $116 Million, following a sharp downturn in the previous cycles, significant jump was realized during the seventh cycle, registering $320 million, an over 175 % upswing when gauged against the proceeding cycle.

De Beers noted that diamond markets showed some continued improvement throughout August and into September as Covid-19 restrictions continued to ease in various locations.

“Manufacturers focused on meeting retail demand for polished diamonds, particularly in certain product areas, accordingly, we saw a recovery in rough diamond demand in the seventh sales cycle of the year, reflecting these retail trends, following several months of minimal manufacturing activity and disrupted demand patterns in all major markets,” said De Beers Chief Executive, Bruce Cleaver in September last year.

The diamond mining behemoth continued to register impressive sales in the eighth and ninth cycle signaling the industry could end the year on a positive note.

The momentum was indeed carried into the last cycle of the year. The value of rough diamond sales (Global Sightholder Sales and Auctions) for De Beers’ tenth sales cycle of 2020 amounted to $440 million, a significant increase from the 2019 tenth sales cycle value.

Against what seemed like a positive year end that would split into the New Year Bruce Cleaver, CEO, De Beers Group, however warned the industry not to count eggs before they hatch.

“Positive consumer demand for diamond jewellery resulting from the holiday season is supporting the continuation of retail orders for polished diamonds from the diamond industry’s midstream sector. This in turn supported steady demand for De Beers’s rough diamonds at our final sales cycle of 2020,” Cleaver had said in December.

In caution the De Beers Chief noted that “While the diamond industry ends the year on a positive note, we must recognise the risks that the ongoing Covid-19 pandemic presents to sector recovery both for the rest of this year and as we head into 2021.”

All segments of the supply chain were severely impacted by the global lockdown measures introduced in response to the Covid-19 pandemic in the first half of 2020.

After a strong US holiday season at the end of 2019, the rough diamond industry started 2020 positively as the midstream restocked and sentiment improved.

However, from February 2020, the Covid-19 outbreak began to have a significant impact on diamond jewellery retail sales and supply chain, with many jewelers suspending all polished purchases and/or delaying payments to their suppliers.

Rough diamond sales were materially affected by lockdowns and travel restrictions, delaying the shipping of rough diamonds into cutting and trading centers and preventing buyers from attending sales events.

These resulted in significant decline in total revenue for the business in the first six months of 2020. Total revenue decreased by 54% to $1.2 billion from $2.6 billion registered in the prior half year period ended 30 June 2019.

For the entire first six (6) months of the year 2020 De Beers Rough diamonds sales fell drastically to $1.0 billion from $2.3 billion in the prior H1 period ended 30 June 2019. Sales volumes decreased by 45% to 8.5 million carats compared to 15.5 million carats registered in the prior period.

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Gov’t coffers depleting to record low levels 

13th January 2021
Dr Matsheka

Next month Minister of Finance & Economic Development, Dr Thapelo Matsheka will face the nation to deliver Botswana‘s first budget speech since COVID-19 pandemic put the world on devastating economic trajectory.

The pandemic that broke out in late 2019 in China has put the entire world on unprecedented chaos ,killing over P1 million people across the globe , shattering economies and almost rendering  the year 2020 – a 12 months stretch of complete setback.

The 2021/22 budget speech will come at time when Botswana’s economy is still trying to emerge out of this.

National lockdowns and local travel restrictions have hit small medium enterprises hard, while international travel restrictions halted movement of both good and people, delivering by far some of the heaviest and worst catastrophic blows on the diamond industry and tourism sector, the likes of which this country has never seen before on its largest economic sectors.

As Minister Matsheka faces parliament next month, the reality on the ground is that Botswana’s national current cash resource, the Government Investment Account (GIA) is depleting at lightning speed.

On the other hand the COVID-19 economic mess is  prevailing,  the virus is reported to have taken a new dangerous shape of a deadly variant, spreading like fueled veld fire and causing some of the world’s super powers back to tough restrictions of lockdown.

According official figures released by Bank of Botswana, in October 2020 the GIA was running at P6 billion compared to the P18.3 billion held in the account in October 2019.

However reports indicate that the account could be currently holding just about P3 billion.  The draw down from the GIA has been by exacerbated by declining diamond revenue, the country‘s largest cash cow. The sector was experiencing significant revenue decline even before COVID-19 struck.

 

When the National Development Plan (NDP) 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at a 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.

Taking into account the COVID-19 economic mess in 2020/21 financial year, the budget deficit could add up to P20 billion after revised figures.

Drawing down from government cash balances to finance these budget deficits meant significant withdrawals from the Government Investment Account, hence the near depletion of this buffer.

Meanwhile  should Botswana’s revenue streams completely dry up to zero levels; the country would only have 11 months, before calling out for humanitarian  aids and international donors, because  foreign reserves are also on slow down.

During 2019, the foreign exchange reserves declined by 8.7 percent, from Seventy One Billion, Four Hundred Million Pula (P71.4 billion) in December 2018 to Sixty Five Billion, Three Hundred Million Pula (P65.3 billion) in December 2019.

The reserves declined further in 2020, falling by 2.3 percent to Sixty Three Billion, Seven Hundred Million Pula (P63.7 billion) in July 2020.  This was revealed by President Masisi during State of the Nation Address in November last year.

The decrease was mainly due to foreign exchange outflows associated with Government obligations and economy-wide import requirements.

However latest statistics(October 2020)  from Bank of Botswana reveal that Botswana’s foreign reserves are estimated at P58.4 billion, with  government’s share of these funds significantly low.

Government has since introduced several measures to contain costs and control expenditure with the most recent intervention being the halting of recruitment in government departments and parastatals.

Furthermore, Value Added Tax has been signaled to go up  from 12% to 14% in April this year with more hikes and service fees anticipated as government embarks on unprecedented domestic revenue mobilization.

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Cresta signs lease agreement for Phakalane golf estate hotel. continues with growth agenda despite covid-19 impact

13th January 2021

Botswana Stock Exchange listed hotel group Cresta Marakanelo Limited (“CML” or “the Company”) announced the signing of a lease agreement for Phakalane Golf Estate Hotel & Convention Centre, which will see CML extend its footprint by adding the 4 star Gaborone property to its already impressive portfolio.  The agreement is subject to regulatory approvals therefore the effective date of the transaction is expected to be 1 February 2021.

 

CML brings a wealth of expertise to the lease and despite the difficult year for the tourism and hospitality industry, due to the impact of the COVID-19 pandemic, CML remains confident in the recovery of the sector and the need to invest in expanding the Company’s footprint.

CML Managing Director, Mr Mokwena Morulane commented: “Our continued efforts to improve our offerings, understand the market dynamics and modern day trends in the face of global challenges, means we are ready for the changing face of tourism and international travel, and this addition to the Cresta portfolio signals our confidence in the future.  

 

“Despite the headwinds faced in 2020, Management has continued to focus on projects that enhance CML’s product offering such as the refurbishments at Cresta Mowana Safari Resort & Spa in the tourism capital Kasane and the ongoing refurbishment of Cresta Marang Residency in Francistown. The signing of the lease for the 4 star Phakalane Golf Estate Hotel & Conference Centre is a great addition to the Cresta portfolio and will unlock shareholder value in the future.

 

“We remain vigilant to value-enhancing opportunities including acquisitions or leases, after having reconsidered our pipeline against current and expected market conditions.”  

 

Commenting on the lease agreement, the Chief Executive Officer, Mr S Parthiban, speaking on behalf of Phakalane  noted; “No hotel chain holds as much expertise in the region, understands our local culture and tastes and what hospitality is about better than Cresta Marakanelo Limited. We believe that the renovations done to the property has made Phakalane Hotel and Convention Centre a unique product in Botswana and at par with international facilities.  We believe that this lease will benefit not only us as Phakalane , but the market in general as Cresta has run hotels successfully in Botswana for over 30 years and is therefore expected to bring new offerings that appeal to the local and international markets as well as the residents and visitors to the Golf Estate. We look forward to a long mutually beneficial relationship with Cresta.” 

 

CML like the rest of the tourism and hospitality industry and the entire value chain was hard hit by lockdowns  with the surge of COVID-19. By investing during the low period, the company hopes to realise the future value of spending time in preparing for the new consumer dynamics and behaviour.  Despite business interruptions as a result of a six-month long state of emergency and several lock-down periods declared by the Government of Botswana to limit the spread of COVID-19, the Company is starting to record an increase in occupancies, which bodes well for the recovery of the industry and the Company’s future prospects.

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