Barclays profits rise to P588 million
Business
Barclays Bank Botswana continues to wave through tough trading environment and sluggish economic trends to deliver impressive measurable performance.
On Thursday the bank announced their financial results for the year ended December 2018. Delivered by the outgoing Managing Director Reneit van de Merwe the Bank raked in statutory profit before tax of P588 million, mirroring 5 percent growth year-on-year when compared to the previous year ended 2017 December 31st.
According to Barclays Executives the performance was influenced by growth in income, contained costs and favourable expected losses. Removing the effect of separation costs the Bank’s normalised profit before tax registered a strong growth of 14 percent year-on-year.
"Once again our business showed resilience and tenacity and to this end we realized a Profit before tax (PBT) of P638 million for the year ending 31st December 2018.
This represents a year-on-year growth in profitability of 14 percent in comparison to the previous year on a normalized reporting basis. Our performance has been largely driven by Revenue growth, reduction in impairments and contained underlying cost growth. I am also pleased to note that all our business segments have remained profitable and continue to grow in line with our strategic drive,” said Mumba Kalifungwa Barclays, Finance Director.
On a gross basis, Interest income went up by 6 percent year-on-year, despite the interest rate cut of 50bps in the last quarter of 2017. However, an increase in the interest cost of funding driven by market trends diluted the net interest income growth resulting in the bank’s net interest income increasing marginally by 2 percent year on year. Net fee and commission income increased by 6 percent year- on –year. Kalifungwa further explained that this is on the back of the bank’s focus on driving innovation through investment and enhancement of digital channels.
Net trading income increased by 24 percent year-on-year. “This resulted from an increase in forex sales volumes and our continued focus on client acquisition and penetration; operating costs were well contained with the business achieving a cost to income ratio of 52 percent on removing the effect of Barclays plc separation costs. The ratio remains within our strategic target of the lower 50’s. Year-on-Year costs grew 5 percent removing the effect of Barclays plc separation costs.” Explained Kalifungwa
Effective 1 January 2018 a new accounting standard IFRS 9 replaced IAS 39 Financial Instruments: Recognition and measurement. To this end IFRS 9 introduced a revised impairment model which requires entities to recognise expected credit losses based on unbiased forward–looking information. This replaces the existing IAS 39 incurred loss model which only recognizes impairment if there is objective evidence that a loss was already incurred and measures the loss on the most probable outcome. According to Barclays the day 1 impact of this change that was charged to Retained earnings amounted to an after tax amount of P149 million.
However, despite the more stringent accounting for credit losses, the bank’s expected credit losses/ impairments decreased by 35 percent in comparison to the prior year. “The performance is attributable to our enhanced collections capability and conservative credit extension to high risk sectors mainly in the Retail segment” added Barclays Finance Director
Outgoing Managing Director Reinette van der Merwe said Barclays delivered results that underscore resilience as a business and reaffirms confidence that the bank will continue to capture growth opportunities in the market. “Despite the headwinds, we made progress and remain optimistic to reclaim our number one position as the leading financial services provider in our market focusing on exceptional customer service and bringing possibilities to life, our journey to build a scalable digitally-led business is one key pillar of our Absa Group strategy and we are ready to become a truly transformative bank that is modern, fast- thinking and relevant for future,” she said
Barclays registered a solid balance sheet of 12 percent growth in comparison to the previous year ended 31 December 2017. The Bank Exco further explained that the Balance sheet growth was influenced by customer’s loans which increased by 10 percent year- on-years to P11.8 billion. “This growth was fairly distributed across the segments in line with our strategy and continues to be focused around prudent lending in our chosen business segments, Customer deposits increased 8% year-on-year driven by continued customer focus and penetration across all the segments. Our focus in the short and medium term is to optimize our balance sheet, whilst focusing on revenue generating opportunities,” further shared Merwe.
Reinette Van der Merwe also confirmed that she will be leaving Barclays end of this month with the new MD Keabetswe Pheko-Moshagane taking over officially on April 1, 2019.“In the past five years we have grown the revenue contribution from the Corporate and Business Banking portfolio from 19 percent in 2014 to 29 percent in 2018. We have made significant progress in Business Banking as we delivered the customer value propositions whilst creating strategic partnerships to provide credit guarantees to the underserved small businesses. Testimony to this is our Enterprise & Supply Chain Development offering that was launched in 2017. We continue to innovate ensuring that our Digital solutions are inclusive to our Business Banking customers,” she said.
Barclays Chairman of the Board of Directors Oduetse Motshidisi officially unveiled Pheko-Moshagane as the incoming MD, succeeding Van de Merwe, who has been at the bank for five years. Motshidisi said Pheko-Moshagane has held different positions within the bank. Mogashagane shared that going forward creating a thriving organization, growing corporate and business banking portfolios in our chosen sectors as well as investing in technology and strategic partnerships in pursuit of building a customer centric digitally-led bank will remain key pivotal priorities to Barclay’s strategy going into the future.
Business
New Khoemacau owners commit to mine’s multibillion Pula expansion
The future of Botswana’s largest copper and silver operation, Khoemacau Copper Mining, looks promising as the new owners, MMG Group, commit to the mine’s expansion plans. MMG, an Australian headquartered company owned by China, has expressed its dedication to doubling Khoemacau’s production and transforming it into one of the most significant high-grade copper operations in Africa.
Nan Wang, the Executive General Manager for Australia and Africa at MMG, stated that while the immediate focus is on maintaining a consistent production level of 60ktpa, there are solid plans to increase Khoemacau’s production capacity. The company aims to double its production from 3.65Mtpa to 8.15Mtpa, resulting in an increase in payable copper from approximately 60ktpa to around 130ktpa.
To achieve this expansion, Khoemacau has completed a pre-feasibility study on the project and a solar power initiative. The next step is to conduct a feasibility study, which will pave the way for increased production capacity. Additionally, Khoemacau has identified extensive exploration opportunities across its license area, positioning the company for an exciting new phase of development.
The current Khoemacau operation reached full production and nameplate capacity in December 2022, following over a decade of investment totaling over P10 billion. This significant investment allowed for an intense exploration program, resulting in the development of the most automated underground mining operation in Botswana. The first concentrate was produced in June 2021, and the product entered the export market in July of the same year. Throughout 2022, the company has been working on the pre-feasibility study for the expansion project, with the feasibility study scheduled for the following year.
The expansion plans will involve the construction of a new world-class process plant in Zone 5, where the current mining of ore takes place. This new plant will be larger than the existing one in Boseto, which currently receives ore from Zone 5. The expansion will also involve the development of new underground mines, including Mango, Zone 5 North, and Zeta North East. These additional mines will bring the total number of underground shafts at Khoemacau to six. The ramp-up of production from the expansion is expected to occur in 2026.
Khoemacau, which acquired assets in the Kalahari Copper Belt after the liquidation of Discovery Metals in 2015, currently employs over 1500 people, with the majority being Batswana. The Khoemacau Mine is located in north-west Botswana, in the emerging Kalahari Copperbelt. It boasts the 10th largest African Copper Mineral Resource by total contained copper metal and is one of the largest copper sedimentary systems in the world outside of the Central African Copperbelt.
The mine utilizes underground long hole stoping as its mining method and conventional sulphide flotation for processing. Resource drilling results have shown the existing resources to have continuity at depth, and there are several exploration targets within the tenement package that have the potential to extend the mine’s life or increase productivity.
The Zone 5 mine has already ramped up production, and further expansion in the next five years will be supported by the deposits in the Zone 5 Group. The estimated mine life is a minimum of 20 years, with the potential to extend beyond 30 years by tapping into other deposits within the tenement package.
In conclusion, the commitment of MMG Group to Khoemacau’s expansion plans signifies a bright future for Botswana’s largest copper and silver operation. With the completion of pre-feasibility and feasibility studies, as well as significant investments, Khoemacau is poised to become one of Africa’s most important high-grade copper operations. The expansion project will not only increase production capacity but also create new job opportunities and contribute to the economic growth of Botswana.
Business
Khoemacau Copper Mining to be acquired by MMG Limited
Khoemacau Copper Mining, a leading copper mining company, has recently announced its acquisition by MMG Limited, a global resources company based in Australia. This acquisition marks a significant milestone for both companies and demonstrates their commitment to continued investment, growth, and sustainability in the mining industry.
MMG Limited is a renowned mining company that operates copper and other base metals projects across four continents. With its headquarters in Melbourne, Australia, MMG has a strong track record in mining and exploration. The company currently operates several successful mines, including the Dugald River zinc mine and the Rosebery polymetallic mine in Australia, the Kinsevere copper mine in the Democratic Republic of Congo, and the Las Bambas Mine in Peru. MMG’s extensive experience and expertise in mining operations make it an ideal partner for Khoemacau.
MMG’s commitment to sustainability aligns perfectly with Khoemacau’s values and priorities. Khoemacau has always placed a strong emphasis on safety, health, community, and the environment. MMG shares this commitment and applies the principles of good corporate governance as set out in the Corporate Governance Code of the Hong Kong Listing Rules. As a member of the International Council on Mining and Metals (ICMM), MMG adheres to sustainable mining principles, ensuring responsible and ethical practices in all its operations.
Over the past 12 years, Khoemacau’s current shareholders have made significant investments in the development of the company. With approximately US$1 billion deployed in the project, Khoemacau has successfully transformed from an exploration and discovery phase to a fully-fledged operating copper mine. The completion of the ramp-up of the Zone 5/Boseto operations has set the stage for the next phase of expansion.
With the acquisition by MMG, Khoemacau is poised for an exciting new chapter in its development. The completion of a pre-feasibility study on the Khoemacau expansion and a solar power project has paved the way for increased production capacity. The feasibility study will be the next step in doubling the production capacity from 3.65 million tonnes per annum (Mtpa) to 8.15 Mtpa, resulting in a significant increase in payable copper from approximately 60,000 tonnes per annum (ktpa) to 130,000 ktpa. Additionally, Khoemacau has extensive exploration opportunities across its license area, further enhancing its growth potential.
The CEO of Khoemacau, Johan Ferreira, expressed his gratitude to the current owners for their stewardship of the company and their successful transformation of Khoemacau into a fully operational copper mine. He also highlighted the company’s focus on the expansion study and its vision for the future with MMG. Ferreira emphasized that the partnership with MMG will ensure Khoemacau’s long-term success, delivering employment, community benefits, and economic development in Botswana.
MMG Chairman, Jiqing Xu, echoed Ferreira’s sentiments, stating that the acquisition of Khoemacau aligns with MMG’s growth strategy and vision. Xu emphasized MMG’s commitment to creating opportunities for all stakeholders, including shareholders, employees, and communities. He expressed confidence in Khoemacau’s expansion potential and the company’s ability to realize its full potential with the support of MMG.
The sale of Khoemacau to MMG is subject to certain conditions precedent and approvals, with the expected closing date in the first half of 2024. This acquisition represents a significant step forward for both companies and reinforces their commitment to sustainable mining practices, responsible resource development, and long-term growth in the mining industry.
In conclusion, the acquisition of Khoemacau Copper Mining by MMG Limited signifies a new era of investment, growth, and sustainability in the mining industry. With MMG’s extensive experience and commitment to responsible mining practices, Khoemacau is well-positioned for future success. The partnership between the two companies will not only drive economic development but also ensure the safety and well-being of employees, benefit local communities, and contribute to the overall growth of Botswana’s mining sector.
Business
BPC Signs PPA with Sekaname Energy
The Botswana Power Corporation (BPC) has taken a significant step towards diversifying its energy mix by signing a power purchase agreement with Sekaname Energy for the production of power from coal bed methane in Mmashoro village. This agreement marks a major milestone for the energy sector in Botswana as the country transitions from a coal-fired power generation system to a new energy mix comprising coal, gas, solar, and wind.
The CEO of BPC, David Kgoboko, explained that the Power Purchase Agreement is for a 6MW coal bed methane proof of concept project to be developed around Mmashoro village. This project aligns with BPC’s strategic initiatives to increase the proportion of low-carbon power generation sources and renewable energy in the energy mix. The use of coal bed methane for power generation is an exciting development as it provides a hybrid solution with non-dispatchable sources of generation like solar PV. Without flexible base-load generation, the deployment of non-dispatchable solar PV generation would be limited.
Kgoboko emphasized that BPC is committed to enabling the development of a gas supply industry in Botswana. Sekaname Energy, along with other players in the coal bed methane exploration business, is a key and strategic partner for BPC. The successful development of a gas supply industry will enable the realization of a secure and sustainable energy mix for the country.
The Minister of Minerals & Energy, Lefoko Moagi, expressed his support for the initiative by the private sector to develop a gas industry in Botswana. The country has abundant coal reserves, and the government fully supports the commercial extraction of coal bed methane gas for power generation. The government guarantees that BPC will purchase the generated electricity at reasonable tariffs, providing cash flow to the developers and enabling them to raise equity and debt funding for gas extraction development.
Moagi highlighted the benefits of developing a gas supply industry, including diversified primary energy sources, economic diversification, import substitution, and employment creation. He commended Sekaname Energy for undertaking a pilot project to prove the commercial viability of extracting coal bed methane for power generation. If successful, this initiative would unlock the potential of a gas production industry in Botswana.
Sekaname Energy CEO, Peter Mmusi, emphasized the multiple uses of natural gas and its potential to uplift Botswana’s economy. In addition to power generation, natural gas can be used for gas-to-liquids, compressed natural gas, and fertilizer production. Mmusi revealed that Sekaname has already invested $57 million in exploration and infrastructure throughout its resource area. The company plans to spend another $10-15 million for the initial 6MW project and aims to invest over $500 million in the future for a 90MW power plant. Sekaname’s goal is to assist BPC in becoming a net exporter of power within the region and to contribute to Botswana’s transition to cleaner energy production.
In conclusion, the power purchase agreement between BPC and Sekaname Energy for the production of power from coal bed methane in Mmashoro village is a significant step towards diversifying Botswana’s energy mix. This project aligns with BPC’s strategic initiatives to increase the proportion of low-carbon power generation sources and renewable energy. The government’s support for the development of a gas supply industry and the commercial extraction of coal bed methane will bring numerous benefits to the country, including economic diversification, import substitution, and employment creation. With the potential to become a net exporter of power and a cleaner energy producer, Botswana is poised to make significant strides in its energy sector.