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Thursday, 18 April 2024

Cut 9 sets Botswana apart for the next decade and a half

Business

Recently Debswana Diamond Company just unleashed the much anticipated Cut 9 project at the world‘s richest mine by value, Jwaneng mine, amid much expectation and glittering hope. Cut 9 breathes more life or a lifespan going up to 2035 into Botswana’s diamond industry-this will bring more sparkle to the mineral dependant local economy.

Cut 9 comes against the slight threat of synthetic diamond revolution and any unexpected or unprecedented drop in diamond sales, but economists and experts believe natural diamonds will remain dominant for coming years. Debswana chairman Bruce Cleaver has said the Cut 9 project places Botswana as one of the leading diamond producing nation by volume and value.

“The extension of Jwaneng Mine secures Botswana’s rightful place as a leading diamond producing nation for years to come. With global consumer demand for diamonds reaching record levels in 2018, the extension will enable us to continue to meet the needs of our consumers all over the world. We are deeply proud of the central role Jwaneng Mine has played in Botswana’s remarkable development story and of the role this investment will play in its future,” said Cleaver.

Recently, Debswana has decided to extend the life of Jwaneng Mine to 2035 and the mine is expected to yield an estimated 53 million carats of rough diamonds from 44 million tons of treated material. Debswana shareholders have approved the budget for 2019 and have revealed that the company will invest approximately P20 billion over the life of the project. Debswana is a 50/50 joint venture between the Government of the Republic of Botswana and De Beers Group

The Cut 9 project was given to a local contractor Majwe Mining for P15.7 and will offer more than 1000 jobs predominantly to Batswana. Majwe Mining which will provide diamond mining services is billion a joint venture between Bothakga Burrow Botswana and Thiess Botswana. Majwe mining was also involved in Jwaneng’s Cut 8 Phase 2. The P30 billion which began in 2010 Cut 8 contract services included mine scheduling, drilling and blasting, waste removal and limited ore mining.

Local economist Keith Jefferies is confident that increasing the life’s mine will ensure government has more mineral revenue. He hopes the 1000 jobs will increase, with more indirect and direct employment being added into the mining sector. Mining giant Debswana is a significant contributor to Botswana’s economy and Jwaneng Mine contributes approximately 70 percent of Debswana’s total revenue.

Citizen economic empowerment

Debswana managing director Albert Milton has suggested that Cut 8 does not only come with jobs and revenue to Botswana economy but also brings citizen economic empowerment (CEEP).  “As we have throughout the history of Jwaneng Mine we remain steadfast in ensuring that all projects are delivered safely and to the benefit of the people of Botswana. We are also committed to delivering on the citizen economic empowerment (CEEP) goals and will focus on training our people, developing their skills and harnessing technology to create further safety and efficiency improvements,” said Milton.

According to Milton, the high-level Social Investment CEEP key performance indicators for the Cut-9 project include the establishment of an Apprentice and Artisan Training Centre, a Component Rebuild Centre which is expected to mature into a self-sustaining business within three years from the launch of the project and additional local business development initiatives.

The future of synthetics as Botswana expands naturally

With the recently unveiled Debswana’s Cut 9 project at the world‘s richest mine by value, Jwaneng mine, extending production of natural diamonds to 16 years economists and experts in the diamond industry believes natural diamond production will remain towering against the production of synthetic diamonds. This is despite fears that natural diamond production will give way for lab manufactured diamonds-but in Botswana natural diamond production remains a mainstay in the mineral industry. However local economist Jefferies believes synthetic diamonds do not pose much of a threat.

International diamond expert Edahn Golan has waged the extent at which the synthetics may threaten naturally produced diamonds. In his latest research, Golan found out that for lab made diamonds not all that glitters is gold as the synthetics continue to take a back-foot in the market when compared to prices of natural diamonds.  

“On average, 1-carat lab-grown goods were priced 64% lower than natural diamonds at the end of December, while third-carats were 75% cheaper. If you are wondering why the price gap in retail prices is so much smaller, the answer is simple: retailers are keeping a wider margin,” said Golan. Golan gave an advice to producers like Debswana, saying the natural diamond producing industry should fight hard because it retailers have better margins on synthetics, giving them an incentive to keep promoting them to consumers.

Golan said a quick comparison of retail prices show a price difference of 20-40 percent, depending on the specific goods and the retailers’ branding, market positioning. Wholesale prices behave very differently. In the wholesale market diamonds are priced as a commodity, said Golan. The diamond expert said that makes for a much more accurate way of measuring price changes over time. According to Golan, polished wholesale prices of lab-grown goods are 50-85 percent lower than those of natural diamonds and the depth of the price gap has two general characteristics: first, the smaller the goods, the larger the price difference.

“If diamond companies want to preserve the market they are operating in, they need to wake up now and get going. Otherwise, the demise may be just around the corner. The economics of it are simple: most diamond mines produce a range of goods, from very small low-quality stones to large stunning beauties. But because miners need to sell the entire range to make their operations worthwhile economically, they won’t mine at all if they cannot sell low and mid-range goods. Without the basic goods, hardly anything else will be mined or offered,” advised diamond expert.

Golan is an analyst advising financial institutions, global diamond firms, diamond industry organizations and governmental agencies on topics ranging from provenance of fancy color diamonds to the diamond’s contribution to local economies. Among his clients are diamond firms, miners and the world’s second largest retail metrics firm. He says, “I’m more than happy to make the case for natural diamonds and ethics anytime.”

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Business

LLR transforms from Company to Group reporting

9th April 2024

Botswana Stock Exchange listed diversified real estate company, Letlole La Rona Limited (“LLR” or “the Company” or “the Group”), posted its first set of group financial statements which comprise the Company and Group consolidated accounts, which show strong financial performance for the six months ended 31 December 2023, with improvements across all key metrics.

The Company commenced the financial year with the appointment of a Deputy Chairperson, Mr Mooketsi Maphane, in order to bolster its governance and enhance leadership continuity through the development of a Board and Executive Management Succession Plan.

At operational level, LLR increased its shareholding in Railpark Mall from 32.79% to 57.79% and proudly took over the management of this prime asset.

The CEO of LLR, Ms Kamogelo Mowaneng commented “During the period under review, our portfolio continued to perform strongly, with improvements across all key metrics as a result of our ongoing focus on portfolio growth and optimisation.

“We are pleased to report a successful first half of the 2024 financial year, where we managed to not only grow the portfolio through strategic acquisitions and value accretive refurbishments but also recycled capital through the disposal of Moedi House as well as the ongoing sale of section titles at Red Square Apartments. The acquisition of an additional 25% stake in JTTM Properties significantly uplifted the value of our investment portfolio to P2.0 billion at a Group level. Our investment portfolio was further differentiated by the quality of our tenant base, as demonstrated by above market occupancy levels of 99.15% and strong collections of above 100% for the period”.

The growth in contractual revenue of 9% from the prior year’s P48.0 million to the current year P52.2 million, increased income from Railpark Mall, coupled with high collection rates, has enabled the company to declare a distribution of 9.11 thebe per linked unit, which is in line with the prior year.

 

In line with its strategic pillars of ‘Streamlined and Expanded Botswana Portfolio’ as well as ‘Quality African Assets’, the Group continuously monitors the performance of its investments to ensure that they meet the targeted returns.

“The Group continues to explore yield accretive opportunities for balance sheet growth and funding options that can be deployed to finance that growth” further commented the CEO of LLR Ms Kamogelo Mowaneng.

Ms Mowaneng further thanked the Group’s stakeholders for their continued support and stated that they look forward to unlocking further value in the Group.

 

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Business

Botswana’s Electricity Generation Dips 26.4%

9th April 2024

The Botswana Power Corporation (BPC) has reported a significant decrease in electricity generation for the fourth quarter of 2023, with output plummeting by 26.4%. This decline is primarily attributed to operational difficulties at the Morupule B power plant, as per the latest Botswana Index of Electricity Generation (IEG) released recently.

Local electricity production saw a drastic reduction, falling from 889,535 MWH in the third quarter of 2023 to 654,312 MWH in the period under review. This substantial decrease is largely due to the operational challenges at the Morupule B power plant. Consequently, the need for imported electricity surged by 35.6% (136,243 MWH) from 382,426 MWH in the third quarter to 518,669 MWH in the fourth quarter. This increase was necessitated by the need to compensate for the shortfall in locally generated electricity.

Zambia Electricity Supply Corporation Limited (ZESCO) was the principal supplier of imported electricity, accounting for 43.1% of total electricity imports during the fourth quarter of 2023. Eskom followed with 21.8%, while the remaining 12.1, 10.3, 8.6, and 4.2% were sourced from Electricidade de Mozambique (EDM), Southern African Power Pool (SAPP), Nampower, and Cross-border electricity markets, respectively. Cross-border electricity markets involve the supply of electricity to towns and villages along the border from neighboring countries such as Namibia and Zambia.

Distributed electricity exhibited a decrease of 7.8% (98,980 MWH), dropping from 1,271,961 MWH in the third quarter of 2023 to 1,172,981 MWH in the review quarter.

Electricity generated locally contributed 55.8% to the electricity distributed during the fourth quarter of 2023, a decrease from the 74.5% contribution in the same quarter of the previous year. This signifies a decrease of 18.7 percentage points. The quarter-on-quarter comparison shows that the contribution of locally generated electricity to the distributed electricity fell by 14.2 percentage points, from 69.9% in the third quarter of 2023 to 55.8% in the fourth quarter. The Morupule A and B power stations accounted for 90.4% of the electricity generated during the fourth quarter of 2023, while Matshelagabedi and Orapa emergency power plants contributed the remaining 5.9 and 3.7% respectively.

The year-on-year analysis reveals some improvement in local electricity generation. The year-on-year perspective shows that the amount of distributed electricity increased by 8.2% (88,781 MWH), from 1,084,200 MWH in the fourth quarter of 2022 to 1,172,981 MWH in the current quarter. The trend of the Index of Electricity Generation from the first quarter of 2013 to the fourth quarter of 2023 indicates an improvement in local electricity generation, despite fluctuations.

The year-on-year analysis also reveals a downward trend in the physical volume of imported electricity. The trend in the physical volume of imported electricity from the first quarter of 2013 to the fourth quarter of 2023 shows a downward trend, indicating the country’s continued effort to generate adequate electricity to meet domestic demand, has led to the decreased reliance on electricity imports.

In response to the need to increase local generation and reduce power imports, the government has initiated a new National Energy Policy. This policy is aimed at guiding the management and development of Botswana’s energy sector and encouraging investment in new and renewable energy. In the policy document, Minister of Mineral Resources, Green Technology and Energy Security Lefoko Moagi stated that the policy aims to transform Botswana from being a net energy importer to a self-sufficient nation with surplus energy for export into the region. Moagi expressed confidence that Botswana has the potential to achieve self-sufficiency in electric power supply, given the country’s readily available energy resources such as coal and renewable sources.

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Business

MMG acquires Khoemacau in a transaction valued at P23Bn

9th April 2024

MMG Limited, the Hong Kong-based mining company specializing in base metals, has successfully concluded the acquisition of Khoemacau Copper Mine, a state-of-the-art, world-class copper asset nestled in the northwest of Botswana.

On Monday, MMG announced that the acquisition of Khoemacau Mine in Botswana was finalized on 22nd March 2024. “This acquisition enriches the company’s portfolio with a top-tier, transformative growth project and signifies a monumental milestone in the Company’s journey,” MMG communicated in an official statement published on the Hong Kong Stock Exchange.

Upon completion of the acquisition, MMG remitted to the Sellers an Aggregate Consideration of approximately US$1,734,657,000 (over P23 billion), a sum subject to potential adjustments post-Completion.

In addition to the Aggregate Consideration, MMG, in accordance with the Agreement, advanced an aggregate amount of approximately US$348,580,000 (over P4.5 billion) as the Aggregate Debt Settlement Amount, to settle certain debt balances of the Target Group (Cuprous Capital/Khoemacau).

On November 21, 2023, Khoemacau announced that the shareholders of its parent company [Cuprous Capital] had agreed to sell 100% of their interests to MMG Limited.

MMG is a global resources company that mines, explores, and develops copper and other base metals projects on four continents. The company is headquartered in Melbourne, Australia, and has a significant shareholder, China Minmetals Corporation, which is China’s largest metals and minerals group owned by the Government of the People’s Republic of China.

On December 22, 2023, Khoemacau Copper Mining (Pty) Ltd received the approval from the Minister of Minerals and Energy of Botswana regarding the transfer of a controlling interest in the Project Licenses and Prospecting Licenses associated with the Khoemacau Copper Mine, a result of the Acquisition.

 

The Botswana Competition & Consumer Authority (CCA) on January 29, 2024, notified the market that it had given its approval for the takeover of Khoemacau Copper Mining by MMG Limited.

On January 29, 2024, the CCA issued a merger decision to the market, stating that after conducting all necessary assessments, it was ready to proceed.

The Competition Authority affirmed that the structure of the relevant market would not significantly change upon implementation of the proposed merger as the proposed transaction is not likely to result in a substantial lessening of competition, nor endanger the continuity of service in the market of mining of copper and silver ores and the production, and sale or supply of copper concentrate in Botswana.

Furthermore, the CCA stated that the proposed merger would not have any negative impact on public interest matters in Botswana as per the provisions of section 52(2) of the Competition Act 2018.

Earlier this month, Minister of Minerals & Energy, Lefoko Maxwell Moagi, informed parliament that his Ministry was endorsing the Khoemacau acquisition by MMG Limited. He noted that not only was the company acquiring the existing operation but also committing to an expansion program that would cost over $700 million to double production, create more jobs for Batswana, and increase taxes and royalties paid to the Government.

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