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BCL’s P600 million liquidation conundrum

A daunting legal process waits while dust is settling in the explosive fracas between government led by Minister of Mineral Resources, Green Technology and Energy Security, Eric Molale and the outgoing BCL liquidator Nijel Dixon-Warren-the two parties are in a process of solving their differences amicably but the burden of liquidation remains a monkey on the state’s back, now even more heavily.

This week Molale revealed that already the process to get rid of Dixon-Warren, who he believes he has been incompetent with handling BCL liquidation, is ongoing and a “task team” has been installed specifically to handle the liquidation. When presenting his ministry’s Committee of Supply Speech on Tuesday before Parliament, Molale sounded like a man who would not wait to get rid of Dixon-Warren as he suggested his task team is working around the clock in addressing all the aspects of liquidation process, “including shortening of time.”

“Further, my ministry is engaging the Attorney General and Master of High Court to explore options of removing the liquidator. In parallel there are ongoing discussions between the liquidator and the task team towards removing the core mining assets out of liquidation to allow for government to take control of the disposal of the assets or closure if no investor is identified. Cabinet will be briefed in the shortest possible time,” said Molale this week.

The relationship between Molale and Dixon-Warren hit the rocks last year after the two men disagreed on whether there should be more money injected in the liquidation. Government led by Molale also complained that the BCL liquidator was incompetent and asked when Dixon-Warren would wind up BCL assets. Responding to government’s lack of funding on the liquidation, Dixon-Warren trimmed the staff which was hired to do care and maintenance at the mine from 520 to 390 much to the annoyance of Molale who went to Parliament and revealed that he is going to fire the liquidator.

Since last year, Molale has been working on a process to get rid of the liquidator and sources close to the process have revealed that the two men had to reach an amicable solution. According to information received by this publication, the liquidator was already frustrated by government’s lack of funding after finding that Dixon-Warren had P80 million in the liquidation account. According to information Care and Maintenance at the mine is P15 million and totally the liquidation is P20 million per month.

In an interview with this publication Dixon-Warren said he does not understand where the relationship between him and government went sour. The departing liquidator said he just found out that he is being removed and is not fighting it and prefers the amicable exit.
Dixon-Warren revealed that the last time government funded the liquidation was last year August and he was left with raising money from debtors. Around P200 million was collected and has been able to sustain the liquidation since the last quarter of 2018, according to Dixon-Warren.

According to Molale BCL should be placed under judicial management after Dixon-Warren leaves.  The liquidator said government will have to negotiate with him for an amicable pay out as it will be inheriting his assets, all the mine owned by the mining company, BCL mining plants and the infrastructure.. He said he will also have to deal with other creditors and negotiate compensation or any amicable deal.Dixon-Warren said there is going to be a “smooth” transition and an “amicable handover” as operations will continue to make sure nothing is disrupted in winding off of the BCL mine.

BCL stands to gobble a lot from the government budget

Dixon Warren has revealed that P600 million has already been spent on liquidation since the process bega in 2016. According to Molale Government will spend more on BCL rehabilitation this year. The total recurrent budget estimates for the financial year 2019/2020 is P733 061 670 and this represent an increase of P327 127 210 or 81 percent from this year’s allocation of P405 934 460, according to Molale. This significant increase is mainly due to BCL funding for rehabilitation meaning the mine will gobble a lot from government fiscal budget in this coming financial year.

According to Dixon-Warren there is a need for Government to fund drilling and exploration projects which will show what or how the mine is worth. For Phase 1 of the project, Dixon Warren said, around P50 million and P100 million is needed, meaning more money from the Government until winding off.

Investor scare

So far two “serious” investors have shown interest in buying the BCL mine. When speaking to this publication it was not clear to Dixon-Warren whether BCL will find a white night investor or will close down. A new investor is expected to come with at least an injection of between P1.5 billion to P3 billion.

However, according to Dixon-Warren, interest investors are scared of the lack of information on resources and viability of the mine. According to the outgoing BCL liquidator, BCL is an old mine and there should be ongoing exploration operations which should inform potential investors on the viability of the mine. Some would want to know the cost of closing the mine and resources which can be mined underground.

Despite the recent survey or study mining and exploration companies by the respected Fraser Institute showing that Botswana is top when it comes to be an ideal mining jurisdiction for mining and exploration companies, some observers believes otherwise. According to the study, Botswana has encouraging investment in exploration and its jurisdiction is seen to provide attractive mining policies. However observers believe some investors apparently would not touch BCL because Botswana is currently being seen as a risky destination for investment due to the ongoing tension between the incumbent president and his predecessor.

Also, investors who met with Dixon-Warren have qualms with the P2.8 billion which should be set aside for Environmental Rehabilitation Liability even in the event of a closing plan when the mine goes for closure. The sum of P2.8 billion was seen as an environmental rehabilitation and reclamation obligation by a report carried out by Dixon-Warren in 2015 and this amount remains an obligation few buyers would be willing to accept given the present value on site at BCL.

BCL tremors

When his exist was being planned, Dixon-Warren was still investigating the recent tremors which sent the town of Selibe Phikwe into panic. Dixon-Warren revealed that he sought for expertise of a South African consultant who would cost them P120 000. Before seeking the help of the SA consultant, the liquidator revealed that locally the tremors would not be investigated because of lack of resources and capacity, hence the roping in of foreign consultants. The SA consultant however found out that the tremor was minor.

“I had procured a consultant from South Africa. Last week a South African consultant came and investigated the tremors and he said the earth shaking was not serious and very small to cause a disastrous impact on the Phikwe community,” said Dixon-Warren. Dixon-Warren said the noise heard in Phikwe will further need an acoustic specialist to investigate. He said the specialist who is coming in few weeks time will detect the reason for the noise that came out during the tremor.

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Business

Sefalana releases best ever HY Financial results

23rd February 2021
Sefalana MD: Chandra Chauhan

Sefalana released their best ever half year financial results. Revenue grew by 2.3% to BWP2.91 billion (HY 2019: BWP2.85 billion). Gross profit increased by 17.4% to BWP215.1 million (HY 2019:

BWP183.3 million) yielding an improved gross profit margin of 7.4% (HY 2019: 6.4%). Administrative expenses went up by 7.8% to BWP97.0 million (HY 2019: BWP90.0 million). EBITA shot up by 31.5% to BWP138.6 million (HY 2019: BWP105.4 million) translating to EBITA margin of 4.8% (HY 2019: 3.7%).

Investment income was BWP22.8 million (HY 2019: BWP28.2 million). Profit before tax increased by 22.8% to BWP148.7 million (HY 2019: BWP121.1 million). Effective tax rate was lower at 23.9% (HY 2019: 28.4%) translating to a 30.7% hike in profit after tax to BWP113.2 million (HY 2019: BWP86.7 million).

Local Trading consumer goods segment was resilient despite a marginal decline in revenue. Revenue declined by 1.6% to BWP1.59 billion (HY 2019: BWP1.62 billion), however a 2.0% decline in cost of goods sold offset decline in revenue to see gross profit increase by 7.6% to BWP75.6 million (HY 2019: BWP70.3 million), an improved gross profit margin of 4.8% (HY 2019: 4.3%) was realized as a result.

Profit for the period was down 2.4% to BWP34.8 million (HY 2019: BWP35.7 million) mainly impacted by restrictions on liquor sales which have been in place for the entire reporting period. At the beginning of the financial year, the group manned 4 Hyper Stores (“Sefalana Hyper”), 25 Cash& Carry stores (“Sefalana Cash& Carry”) and 29 supermarket retail stores (“Sefalana Shopper”).During the period, Sefalana Shopper retail store in Shakawe, Sefalana Liquor outlet in Tlokweng were opened, and Sefalana Shopper Molepolole store was refurbished.

Lesotho has seen its revenue increase by 30.9% to BWP295.7 million (HY 2019: BWP225.8 million). Profit before tax spiked 162.4% to BWP1.9 million (HY 2019: -BWP3.1 million). Namibia has performed well to place it as the largest contributor to profit before tax. The segment’s revenue increased by 5.5% to BWP896.8 million (HY 2019: BWP850.2 million). Gross profit rose by 25.4% to BWP60.9 million (HY 2019: BWP48.6 million) translating to an improved gross profit margin of 6.8% (HY 2019: 5.7%). Profit before tax went up by 40.6% to BWP39.8 million (HY 2019: BWP28.3 million).

The Manufacturing arm had an excellent performance. Revenue rose by 26.7% to BWP125.0 million (HY 2019: BWP98.7 million). Gross profit increased by 39.4% to BWP28.6 million (HY 2019: BWP20.5 million), producing a gross profit margin of 22.9% (HY 2019: 20.8%). Profit before tax shot up by 96.5% to BWP16.0 million (HY 2019: BWP8.1 million). The profitability of this business is largely driven by the timing of orders placed by Government for its various feeding schemes and availability of raw material.

The milling division has for all six months manufactured and supplied in full to the Government, however only one third of the total contract volumes was awarded to the business in respect of the 24 month contract issued in April 2020. Raw materials have been procured and contracts entered into for procurement of grain to fulfill any additional volumes that the Government might require.

Beverages division was awarded a 24 month supply of milk tender to the Government for the children’s feeding scheme in March 2019 which is currently being fulfilled. There has been a shortage in raw materials in the region due to a reduced number of dairy cows during the pandemic as farmers placed more focus on meat production. Despite an underway catch up on reinstating dairy cow population the business expects shortages to continue in early 2021.

The Trading others segment experienced a decline on its top and bottom line figures. Revenue went down by 43.9% to BWP42.2 million (HY 2019: BWP75.2 million). Gross profit went down by 23.9% to BWP11.5 million (HY 2019: BWP15.1 million). Profit before tax went down 56.8% to BWP3.2 million (HY 2019: BWP7.4 million). The segment was impacted by a reduction in sales of motor vehicles as customers prioritized spending on essential goods and services.

The Property segment in Botswana performed well, with all most all properties tenanted for leases ranging between two-six years. Setlhoa site is complete, comprising of Sefalana Shopper store, petrol station and rentals to Ital Tiles and CTM. Just over 5000sqm of land remains vacant. The space initially set out for the group’s Motor Dealership will be considered for other alternative options in a bid to optimize return from the site. In contra, Zambia performed below the previous period as the past two years elapsed in search of replacement tenants for their premises due to an influx of similar properties.

A 3000sqm warehouse space is expected to commence development in February 2021 to house bottled water and fruit juice plants. Milling division anticipates expansion by the end of 2021, the expansion is to include a wheat milling plant which will leverage on existing infrastructure and complement existing milling activities.

A phase 2 investment in Australian business is expected in May 2021. Five more stores will be acquired through this investment to bring the stores to a total of 12 in that market. The investment amount is anticipated to be around P80 million, to be funded through existing cashflows.

The preference share agreement on the South African consortium matures in July 2022. The group’s appetite for conversion of its investment in to a 30% equity stake will be influenced by the covid-19 pandemic impact. As such a decision will be made closer to maturity date.

The group maintains that its 40% interest in Grow Mine Africa (Pty) Limited, the Preferred Bidder in the National Lottery remains in place. According to management, the judgement of urgent application was in favor of Grow Mine and the formal ruling by the courts will be issued next week. Accordingly, further negotiations with the Gambling Authority are expected in quarter one of 2021.

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Business

Botswana Diamonds secures funding for CKGR exploration

23rd February 2021
Sekaka-Diamonds-Exploration

Botswana Diamond PLC, a Botswana Stock Exchange (BSE) listed exploration company has moved a step closer towards developing it’s much talked about gem deposits around the Central Kalahari area in Botswana.

On Tuesday the company notified its shareholders through a circular published on the BSE, that it has entered into a cooperation agreement to fund exploration of its prospecting licence assets in Botswana with Diamexstrat Botswana Pty Ltd (DESB), which in turn has an alliance agreement with Burgundy Diamond Mines Limited, an Australia Stock Exchange (ASX) listed mining company.

BOD’s prospecting assets comprise the recently acquired Sekaka Diamonds Exploration Pty Ltd (Sekaka) database and Prospecting Licenses, as well as the Prospecting Licences held by BOD’s subsidiary, Sunland Minerals Pty Ltd (Sunland Minerals).

According to the statement from Botswana Diamond, Diamexstrat Botswana and its partner, Burgundy would earn up to a 70% interest in BOD’s Botswana Sunland Minerals and Sekaka’s Prospecting Licences.

On the other hand BOD can earn a 15% interest in Prospecting Licences held by Diamexstrat and its partners on the first US$1.5m spent on exploration by Diamexstrat where BOD’s database assists in the discovery of a primary kimberlite.

On 3rd party Prospecting Licences where targets are identified in BOD’s database, a joint earn-in will be negotiated at the time. For new Botswana Prospecting Licences, Diamexstrat, and its partner, Burgundy can earn up to 70%.  Under the Agreement, the parties have agreed to utilize BOD’s diamond exploration database, which it acquired in last year as part of the acquisition of Sekaka Diamonds Exploration Pty Ltd (Sekaka).

The database contains the results of work undertaken by Sekaka’ former owner, Petra Diamonds, since 2005, and includes data in respect of airborne, including the Falcon survey, and ground magnetics (including gravity and EM), in addition to heavy mineral sampling.

DESB has six months to conduct an initial review of BOD’s database , in order to identify exploration targets within any of BOD’s existing Sunland and Sekaka Prospecting Licences (excluding the KX36 Kimberlite held by Sekaka) (the “Designated PL”).

DESB will be entitled to earn a 50% interest in a Designated PL by meeting the annual minimum exploration expenditure commitment on the Designated PL and in addition either discovering a kimberlite through the intersection of kimberlite in any drill holes or a potential secondary diamondiferous alluvial deposit through the intersection of gravels in a drill hole or pit.

DESB shall be entitled to earn an additional 1%, to hold 51% in any Designated PL, by proving the primary kimberlite or alluvial deposit to be diamondiferous through funding the required micro-diamond analysis or bulk sampling.

DESB will also be entitled to earn a further 19%, to hold 70% in the Designated PL, by subsequently funding and delivering a bankable feasibility study. Any Prospecting Licence not selected by DESB at the end of the six-month period will remain wholly-owned by BOD.

Where it is agreed that geological data present in the database that was not previously available to DESB has assisted in the discovery of a kimberlite or a secondary alluvial deposit within the Exploration Area , BOD shall be granted a 15% free carry for the initial approved US$1.5 million of Exploration Expenditure by DESB on the discovery. Once the Exploration Expenditure has been incurred, each party will contribute funding in accordance with its interest or be diluted pro-rata.

Sunland Minerals holds 12 active Prospecting Licences in the Gope/CKGR (Kalahari) area. As at 30 June 2020, the audited carrying value of BOD’s Sunland Minerals assets amounted to £1.1 million and Sunland’s loss before tax amounted to £43,101.

In the year ended 30 June 2020, Sunland’s Exploration Expenditure, mainly comprising licence fees and the costs of maintaining the licence in good standing, together with agreed fixed costs and expenses, amounted to £65,760.

On 30 November 2020, Botswana Diamonds completed the acquisition of Sekaka which holds three Prospecting Licences in the Central Kalahari Game Reserve in Botswana, PL169/2019, PL058/2007 and PL224/2007, which includes the KX36 kimberlite pipe.

The acquisition also included an extensive database. The consideration comprised a cash payment of US$300,000 and a 5% royalty on future revenues.  The first deferred consideration cash payment of US$150,000 will be payable on 27 November 2021, being the first anniversary of completion of the acquisition and the balance on or before 27 November 2022.

In Sekaka’s audited annual financial statements for the year ended 30 June 2019, Sekaka reported a loss before taxation of Pula 16,875,179 (equivalent to approximately £1.16 million, which included a non-cash foreign exchange loss of Pula 11,688,432 (equivalent to approximately £0.8 million) on the carrying value of the historic intercompany debt which was extinguished on acquisition.

As at 30 June 2019, Sekaka had audited total assets of Pula 6,565,700 (equivalent to approximately £425k). Diamexstrat is a privately owned company focused on diamond exploration in Botswana chaired by Gerard de la Vallee Poussin and with Barry Bayly as the Chief Executive Officer. Both Gerard and Barry have extensive experience in the exploration for diamondiferous kimberlites in Africa.

Commenting on the cooperation between BOD and Diaexstrat , James Campbell, Managing Director, of BOD said the partnership will progress the extensive and highly prospective exploration assets in Botswana which comprises Sekaka Diamonds and with our own drill-ready prospects in Sunland Minerals.

“I look forward to working with the Diamexstrat and Burgundy teams made-up of complimentary highly experienced and leading experts in the field of diamond exploration and project development”.  John Teeling, Chairman of Botswana Diamonds Board of Directors said Botswana is one of the world’s best addresses for diamond exploration. He explained that the combination of a fresh approach and advanced technology, supported by a recovering diamond market, presents both parties with significant opportunities.

“I am delighted to announce this partnership with experienced Diamexstrat, and its ASX listed-partner, Burgundy, which expands and deepens our exploration work.”

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Business

Tlou Energy announces first carbon neutral plant

23rd February 2021
Tlou-Enegery

As countries continue to battle climate change which is a result of increased carbon dioxide in the atmosphere, local coal-bed Methane (CBM) exploration outfit, Tlou Energy this week revealed intent to make the Lesedi Power project the first carbon neutral power project in Botswana.

The multi-listed company, which is focused on generating cleaner power in Botswana for supply into the local and regional power markets said they have already negotiated land access and leasing agreements with relevant land-holders for the power generation facility and new field operations camp.

According to a statement from Botswana Stock Exchange (BSE) listed energy entity, there have been recent steps taken to acquire additional land for carbon sequestration and there is also availability of land and labour within the Lesedi project which favours Tlou Energy in developing carbon neutral power project.

Carbon sequestration involves capturing and storing carbon dioxide from the atmosphere so that it potentially reduces its contribution to global warming.  It is essentially the long-term storage of carbon in soil, plants, and geological formations. Carbon sequestration can occur naturally and as a result of human activities and typically refers to the storage of carbon that has the immediate potential to become carbon dioxide gas.

Tlou Energy Managing Director, Tony Gilby commented: “There is considerable scope for using the savanna ecosystem of the Lesedi region for carbon sequestration by protecting it from burning and intensive grazing leading to an increase in the ability of the vegetation to store carbon over time.” “This will assist Tlou to be able to supply carbon neutral power to the considerable number of potential customers in the region.”

Gilby also revealed that the regional power consumer, Orapa diamond mine operated by Debswana and located north of Tlou’s gas fields has publicly stated their objective to decrease their carbon footprint. According to Tlou Energy MD, the Lesedi project area is considered as shrub savanna containing various tree species. He however noted that subdivisions found within Tlou’s project area are predominantly rural with most of the land being deployed due to livestock agriculture.

“Tlou  is  in  the  process  of  negotiating  the  acquisition  of  land  to  reduce  livestock numbers  and  implement  fire mitigation measures. This will substantially increase the amount of available woody biomass which can be used to claim carbon credits within the project area,” he said.

The company said carbon credits will be offset against the carbon dioxide associated with Lesedi’s gas fired power generation component noting that the gas will in any event produce considerably less carbon dioxide compared to the ones generated by coal and diesel.

“Carbon reduction is part of Tlou’s commitment to the environment and part of the company’s Environmental, Social and Governance (ESG) program aimed at enhancing the lives of the local population and regional communities,” said Tlou energy MD.

“Tlou has a track record of supporting local charities and youth groups and looking to grow local employment with investment in community ventures. This includes programs aimed at growing higher nutritional value crops for local livestock so grazing could be reduced and biomass preserved, as well as promoting wildlife.”

Meanwhile, last month Botswana Government through Ministry of Mineral Resources, Green Technology & Energy Security (MMGE) underscored its intention to support power generation through Coal-Bed- Methane (CBM). Tlou’s MD Gilby commented, “It is great to see that Botswana is open for business and the Government is motivated to get the gas industry up and running.

Gilby revealed that his company plans to start development of the Lesedi project as soon as possible noting that “confirmation of the Government’s enthusiasm to provide the necessary support to ensure commercial development of CBM is very well received.” “In addition, we have also recommenced negotiations with Botswana based project financiers this month as we aim to close a deal for funding as soon as possible.

After what was an extremely challenging year the Company is already making progress in 2021 and anticipate further advancement on all fronts in the coming term. We look forward to updating the market with further developments in due course,” he concluded.

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