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Sluggish corporate earnings shrink BSE equity market performance

Botswana Stock Exchange Limited (BSEL) Domestic Company Index (DCI) has depreciated during the 2018 trading period January 1 to September 30. This was revealed by the BSEL market performance report released this week.

The document highlights that in comparison to the 2017 corresponding period where the performance of the DCI declined by 5.0 percent, this year the graphs hit a steeper downward wave as the (DCI) hit a double depreciation to11.5 percent. BSLEL reports that the decline can be attributed to similar challenges experienced last year, which are by in large characterised by sluggish corporate earnings despite the macro economy showing signs slight recovery.

Also, during the period under review the Foreign Company Index (FCI) has depreciated by 0.2 percent, a slightly better performance compared to a more decline of 0.5 percent in 2017. With effect from 1st January 2018, the BSE introduced the Domestic Company Index Total Returns (DCTRI) following Main Committee and Non-Bank Financial Institutions Regulatory Authority (NBFIRA) approvals in December 2017.  

More figures from the report reveals that as at 30 September 2018, the DCTRI had depreciated by 7.2 percent, reflecting the cushioning effect of dividends over the year to date period. The depreciation in market performance during the period under review is also mirrored by a significant decline in equity turnover. Trading activity was noticeably reduced during the period under review. As at 30 September 2018, the BSE has recorded a turnover of P1, 231.3 Million from 470.7 million shares traded.

During the same period in 2017, the BSE had registered a turnover of P2, 144.4 million and a total volume of 655.6 million shares traded mirroring a significant decline in traded shares volume and turnover. An in-depth analysis of the turnover during the period from January to September 2018 depicts that the trading activity was relatively unstable compared to the same periods in the previous four years.

 BSEL observes that a relatively lower number of companies accounted for a relatively larger amount of turnover over this period compared to the same period in 2017.  “This further explains the lower stability of turnover compared to 2017,” reads the report. Zooming into the figures it is evident that the top 3 traded companies in terms of value, on a year to date basis, were; Letshego at P376.8 million, NAP at P293.2 million and CA Sales at P194.4 million and these accounted for 70.2 percent of total turnover during the first three quarters of 2018.

During the same period in 2017, three companies accounted to 50.2 percent of turnover, an indication of turnover concentration in 2018 relative to 2017. This according to BSEL further substantiates the deduction in traded shares volume. During the year to September 2018, local companies contributed 57.1 percent to total turnover compared to 56.9 percent in the corresponding period in 2017.

Furthermore, local individuals contributed 4.4 percent of total turnover recorded during the period 1st January to 30 September 2018 compared to 5.1 percent in the year 2017 corresponding period. On a slight positive note Exchange Traded Funds (ETFs) realised a hike in traded value during the first three quarters of 2018 compared to the same period in 2017.

The value of units traded increased in the year to date period, reaching P216.2 million compared to P133.2 million in the corresponding period in 2017 whereas the number of units traded amounted to 2.4 Million units in 2018 compared to 3.2 Million units in 2017. Another positive performance during the period under review can be noted under the Bond Market, BSEL reports that activity in the bond market has improved compared to the same period in 2017.

The value of bonds traded during the period January –September was P1, 608.6 Million in comparison to P273.0 million traded during the same period in 2017. Bank of Botswana (BoB), on behalf of Government, held three bond auctions this year . At its first bond auction of 2018 on 2 March, additional tranches of BW007 (P77 Million, BW008 (P100 Million and BW011 (P100 Million) amongst other bonds and treasury bills were offered.

At the second auction of the year conducted on 1 June, BoB re-opened three more bonds while the third Government Bond Auction conducted on 31 August saw the re-opening of the BW013 and the issuance of two new bonds; BW014 and BW015. Issuing of long dated bonds by government has been noted by industry commentators as progressive move that sparks confidence and boosts the annuity book across investment & insurance market.

Catherine Lesetedi-Letegele, Chief Executive Officer (CEO) of leading financial services, insurance and investment group Botswana Insurance Holdings Limited (BIHL) also remarked these sentiments early last months. Lesetedi-Letegele noted that government decision to participate more, coming up with a reviewed framework that speaks to a specified and defined interval of bond issuing was commendable.


“We are quite pleased that at the last auction Government came to the market with a new bond BW 0015 which is a 25-year tenure bond, and this is very helpful for anyone who is in the market for annuities to manage their liabilities,” she said. BSLE chief, Tsheole also quoted in previous interviews saying: “We need to have more government bonds issued to maintain a robust risk-free curve and the viability of the existing BSE bond indices.

These wide gaps in the yield curve negatively impact the pricing of assets such as corporate bonds that ordinarily reference risk free assets and this brings distortions in pricing and compromises the liquidity and the appetite for debt instruments,” he said in July 2017. BSLE has registered five corporate bond listings during the first three quarters of 2018, on the back of issuances, the nominal amount in issue of listed bonds increased to P13.8 billion compared to P12.9 billion as at the same period in 2017.

This year BoB has left bank rate unchanged at 5.0 percent on several monetary policy committee sittings, in view of the positive outlook for price stability. With Inflation decreased from 3.2 percent in December 2017 to 2.9 percent in September 2018 BSEL says a low inflationary environment helps the bond coupons maintain purchasing power.

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The  Bulb World CEO selected for Africa’s prestigious award

22nd July 2021

The Bulb World Chief Executive Officer (CEO) and entrepreneur, Ketshephaone Jacob has been selected as a 2021 Top 50 Africa’s Business Hero.

Jacob was chosen from a pool of 12,000 applicants – many of whom are highly-skilled and accomplished entrepreneurs.

Africa’s Business Hero, sponsored by technology entrepreneur, Jack Ma, aims to identify, support and inspire the next generation of African entrepreneurs who are making a difference in their local communities, working to solve the most pressing problems, and building a more sustainable and inclusive economy for the future.

The initiative is as inclusive as possible and applications were open in English and French to entrepreneurs from all African countries, all sectors, and all ages who operate businesses formally registered and headquartered in an African country, and that have a 3 year-track record.

Every year, finalists are selected to compete in the ABH finale pitch competition and participate in a TV Show that will be broadcast online and across the continent.

The finalists will compete for a share of US $1.5 million in grant money.

The Bulb World, is home grown LED light manufacturing company, which was partly funded by Citizen Entrepreneurial Development Agency (CEDA) at the tune of P4 million, to manufacture LED lighting bulbs for both commercial and residential use in 2017.

The Bulb World operate from the Special Economic Zone of Selibe Phikwe. Early this year, The BulB World announced its expansion to South Africa, setting in motion its ambitious Africa expansion plan.

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Mining production down 12 % IN Q1 2021

14th July 2021

During the first quarter of 2021, production in Botswana’s economic nucleus- the mining sector contracted by 12 percent. This is according to Mining Production Index released by Statistics Botswana this week.

The country’s central data body revealed that Index of Mining production stood at 74.4 during the first quarter of 2021, showing a negative year on-year growth of 12.0 percent, from 84.6 registered during the first quarter of 2020.

The main contributor to the decline in mining production came from the Diamonds sector, which contributed negative 11.7 percentage points. Soda Ash was the only positive contributor in the mining production, contributing 0.1 of a percentage point. However Soda Ash’s contribution was insignificant to offset the negative contribution made by Diamonds.

The quarter-on-quarter analysis by Statistics Botswana experts shows an increase of 16.3 percent from the index of 64.0 during the fourth quarter of 2020 to 74.4 observed during the period under review.

Diamond production decreased by 12.1 percent during the first quarter of 2021 compared to the same quarter of the previous year. The decrease was as a result of planned strategy to align production with weaker trading conditions mostly linked to Covid-19 protocols restrictions.

Botswana’s diamond sector is underpinned by Debswana, the country’s flagship rough producer- a 50-50 joint venture between government and global mining giant De Beers Group. The other producer is Canadian based Lucara Diamond Corp through its wholly owned Karowe Mine which is a relatively small but significant production that has made a name for itself worldwide with rare diamond recoveries of unprecedented carat size.

On the other hand, quarter-on quarter analysis shows that production has improved, registering a positive growth of 17.5 percent during the first quarter of 2021 compared to the preceding quarter – 2020 Q4.

Though production was significantly lower in the first quarter, the two producers ended Q2 with rare diamond recoveries. Debswana early last month found the world’s third largest gem diamond – weighing 1098 carat at Jwaneng Mine, its flagship gem quality diamonds producer, also regarded the world’s richest diamond mine.

A week later Lucara  announced its second biggest recovery, the 1174 carat clivage near-gem dug from its Karowe Mine. The diamond is the world third in carat size after the plus-3000 carat Cullinan found in South Africa back in 1905 and the 1758 carat Sewelo unearthed at its Karowe mine in 2019. Debswana and Lucara are investing billions of pulas in underground mining projects to extend the life of its mines, Jwaneng & Karowe respectively.

In terms of Gold which is produced at Mupani mine near Botswana’s second city of Francistown output decreased by 17.9 percent during the first quarter of 2021 compared to the same quarter of the previous year.

Similarly, quarter-on-quarter analysis reflects that production decreased by 21.4 percent during the first quarter of 2021, compared to the preceding quarter. The decrease was as a result of the deteriorating lifespan of the mine as well as the impact of COVID-19 which slowed down the mining activities.

Soda Ash production increased by 11.1 percent during the first quarter of 2021 compared to the same quarter of the previous year. In terms of quarter-on-quarter Soda Ash production also showed an increase, picking up by 2.1 percent during the period under review. The increase in production is attributable to the effectiveness of the plant following refurbishment which occurred in the third quarter of 2020.

Salt production decreased by 34.0 percent during the first quarter of 2021, compared to the same quarter of the previous year. Similarly, the quarter-on-quarter analysis shows that salt production registered a decrease of 32.9 percent during the period under review. Both salt and Sodash are produced by partly government owned Botswana Ash (BotsAsh) operating from Sowa town near Makgadikgadi pans.

Coal production decreased by 11.2 percent during the first quarter of 2021, compared to the corresponding quarter of the previous year. The decrease was attributed to the reduced demand from Morupule B Power Station following the remedial works being undertaken, as one boiler was in operation during the period under review.

Although production fell, Statistics Botswana says there was no shortfall in supply of coal due to stockpiling. On the other hand, the quarter-on-quarter comparison shows that coal production increased by 20.4 percent compared to the preceding quarter.

Botswana’s flagship coal producer is Morupule Coal Mine; a wholly state owned mining company located in Palapye producing primarily for Botswana Power Corporation (BPC)’s power generation plants Morupule A & B.

The other coal producer is Botswana Stock Exchange listed Minergy which operates a 390 MT Coal Resource mine in Masama near Media in the southwestern edge of the Mmamabula Coalfields.

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Gov’t awards mining licence for Gantsi Copper Mine

14th July 2021
Moagi

Department of Mines in the Ministry of Mineral Resources, Green Technology & Energy Security has awarded mining licence to Tshukudu Metals-a subsidiary of Aussie firm Sandfire Resources ,giving the company a green light to start piecing the ground at its Motheo Copper Project near Gantsi.

Lefoko Moagi, minister in charge of mineral resources in Botswana confirmed to weekendpost on Tuesday. Minister Moagi revealed that “the licence has been approved , but Sandfire Resources as a listed company will report to its shareholders and investors then make an official public statement” he said.

Based on a forecast copper price of US$3.16/lb (reflecting current long-term consensus pricing) the Base Case 3.2Mtpa – Ghantsi copper project is forecast to generate US$664 million (over P7 billion) in pre-tax free cash-flow and US$987 million (over P10 billion) in EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation), at a forecast all-in sustaining cost of US$1.76/lb over its first 10 years of operations.

In December 2020, the Board of Sandfire Resources approved the commercial development of the Motheo Copper Mine located in the Kalahari Copper Belt in Botswana, marking a key step in its transformation into a global, diversified, and sustainable mining company.

Tshukudu Metals Botswana (Pty) Limited (Tshukudu) a 100% owned subsidiary will be the owner and operator of the Motheo Copper Mine which is scheduled to produce up to 30,000 tonnes per annum of copper in concentrate over a 12 year mine life.TMB is targeting development of its Motheo Copper Mine in 2021 and 2022, with its first production in 2023.

GOVERNMENT NOT TAKING UP 15 % STAKE ON OFFER

Beginning of this year presentations were made to the Department of Mines as part of the Mining Licence approval process and to the Ghanzi Regional Council, additional information was requested by Department of Mines in April and was duly supplied by the company.

As part of the Mining Licence approval process, the Government of Botswana has a right to acquire up to a 15% fully contributing interest in all mining projects locally. Quizzed on whether government through Mineral Development Corporation Botswana (MDCB) would be taking up stake in the project Minister Moagi said, “No consideration is being made on that regard”.

“Government is not considering taking up a stake in the Ghantsi Copper Mine project, every opportunity is assessed on all risks, but Government makes money all the while from leases, taxes and royalties, remember if you take stake you are liable for liabilities of the project as well,” Moagi said.

MINING CONTRACT

Last month Sandfire announced that it has awarded over P5 billion worth mining contract to African Mining Services (AMS), a subsidiary of Perenti, to deliver the open cast operation.

The contract, which has an estimated value of US$496 million (over 5 billion), is the largest single operational contract for the new Motheo Project covering a period of 7 years and 3 months, with provision for a one-year extension.

The contract according to Sandfire Resources was awarded following a competitive 3-stage tender process which saw a number of key factors taken into consideration when selecting the preferred contractor.

These included Citizen Economic Empowerment, safety culture, equipment suitability and availability, commercial terms and identified improvement opportunities. Under the terms of the contract, AMS has agreed to form a 70:30 Joint Venture with a suitable local Botswana partner or partners.

The JV is expected to be finalized ahead of commencement of mining in early 2022. African Mining Services has been operating in Africa for over 30 years. AMS’ parent company, ASX listed diversified mining services group Perenti, already has a presence in Botswana through Barminco, their underground mining division, at the large-scale Khoemacau Copper Mine located 200km north-east of Motheo.

Last month Sandfire executives said the award of the open pit mining contract represents another key milestone in advancing the Motheo Project towards production, with all components of the contract in line with the key parameters outlined in the December 2020 Definitive Feasibility Study (DFS).

The company said full-scale construction of the US$279 million (over P 3 billion ) mine development is expected to commence immediately upon receipt of the Mining Licence, with mining scheduled to commence in early 2022 ahead of first production in early 2023. This week Sandfire Resources advertised over 10 positions in calling on applications from geologists, mining engineers and geotechnical engineers.

The Motheo mine has an initial mine life of 12.5 years based on production from the T3 pit. The initial development is expected to generate approximately 1,000 jobs during the construction phase and 600 direct full-time jobs during operations, with at least 95% of the total mine workforce expected to be made of up of Botswana citizens.

Later in the week Sandfire Resources announced in the company website that it has received the licence. Sandfire’s Managing Director and CEO, Mr Karl Simich, said the award of the Mining Licence represented a major milestone that would see a significant increase in construction and development activities on site.

“We are absolutely delighted to now be in a position to move to full-scale construction at Motheo, with our construction crews expected to mobilise to site over the next few days. I would like to thank the Government of Botswana for their support throughout the approvals process, which will see Motheo come on-stream in 2023 as one of very few new copper mines commencing production globally.”

Simich said the project is expected to generate approximately 1,000 jobs during construction and 600 full-time jobs during operations, and represents the foundation for Sandfire’s long-term growth plans in Botswana.

“Our vision is that Motheo will form the centre of a new, long-life copper production hub in in the central portion of the world-class Kalahari Copper Belt, where we hold an extensive ground-holding spanning Botswana and Namibia,” he said.

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