Global mining conglomerate Anglo American has reported a slight increase in total production for the third quarter of 2018 ended 30th September.
According to a performance overview released by the diversified mining giant this week total production registered a slight hike of 1 percent on copper equivalent basis for the four months ended September 30, 2018. The multi-Exchanges listed global outfit operates major mining undertakings in the world’s richest deposits unearthing almost all mineral varieties from copper, platinum, iron, metallurgical coal as well as diamonds, the latter is through the world’s flagship diamond producer De Beers which Anglo owns on majority shareholding.
De Beers, 15 percent owned by Botswana Government, breaks the world most valuable diamond fields in Botswana and Namibia amongst others. Anglo American reports that De Beers’s productions volumes decreased by 5 percent to 8.7 million carats attributable to expected lower grades at the world richest diamond mine by value, Jwaneng as well as lower volumes at Venetia.
De Beers Botswana operations under the banner of the country’s flagship mining company, Debswana registered production decline of 6 percent recording 5.7 million carats during the third quarter of 2018. Anglo America says the lower production volumes were anticipated because of to the planned processing of lower grade material at Jwaneng.On a more satisfactory note Orapa regime which is a basket of Orapa plants, Letlhakane and Damtshaa mines remained in line at flat figures with insignificant difference to 2017 Q3 production of 2.6 million carats.
Next door to Botswana, Anglo American also have lucrative mining interests in Namibia through another De Beers outfit, Namdeb Holdings a 50-50 venture between De beers and Government of Namibia recorded flat performance at 0.5 million carats. De Beers’ operations in South Africa recorded a production decline of 14 percent to 1.3 million carats due to a planned shutdown at Venetia to upgrade the processing plant ahead of the transition from open cut to underground operations, while Canada production increased by 5 percent to 1.2 million carats, driven by higher grades at Victor, which is approaching the end of its life.
In the overall Anglo American observes that rough diamond sales volumes amounted to 5.0 million carats, 4.6 million carats on a consolidated basis from two sales cycles in Q3 2018, compared to 6.9 million carats-6.5 million carats on a consolidated basis from two sales cycles in Q3 2017.
“Rough sales volumes were down as a result of sight holders being given the opportunity during the seventh Sight of 2018 to re-phase the allocation of some smaller, lower value rough diamonds. Rough sales revenues were broadly in line with Q3 2017,” reads the report. On Anglo American flagship base metal mineral, copper, production volumes hit an impressive hike by 17% to 171,800 tonnes, with production increases at all operations.
Anglo notes that 23 % production increase 95,800 tonnes at Los Bronces was by enlarge driven by continued strong mine and plant performance, supported by significantly lower than usual winter snowfall and planned higher grades. For the company’s traditional revenue spinner Platinum mining operations, production increased by 4 percent to 649,000 ounces while palladium production increased by 1 percent to 410,800 ounces due to improved operational performances across the majority of the portfolio, despite the placing of unprofitable production from Bokoni on care and maintenance in Q3 2017.
Still under platinum basket own mined platinum production decreased by 7 percent to 332,900 ounces and palladium production decreased by 5 percent to 250,200 ounces due to the sale of Union mine to Siyanda Resources on 1 February 2018, after which its production was purchased as concentrate. The United Kingdom incorporated mining giant explains that excluding Union, own mined platinum production increased by 5 percent and palladium production increased by 2 percent.
Refined platinum production decreased by 19 percent to 556,200 ounces and refined palladium production decreased by 29 percent to 321,500 ounces due to a rebuild of the Mortimer smelter in Q2 2018 and its progressive ramp up in Q3 2018 as well as the Polokwane smelter furnace repair that required a full shutdown for 35 days.
Platinum sales volumes with exclusion of refined metal purchased from third parties decreased by 20 percent to 530,100 ounces and palladium sales volumes decreased by 30 percent to 324,300 ounces due to lower refined production. Still during the period under review Anglo American’s Kumba Iron ore production volumes decreased by 9 percent to 10.5 million tonnes, as planned, following rail constraints in half 1 2018, and a small decrease in plant yields as Kumba produced higher quality products to maximize the value of tonnes railed to port.
Export sales decreased by 10 percent to 9.7 million tonnes due to the scheduled refurbishment of a ship loader at the Saldanha Port that reduced loading capacity during the quarter. Total finished product stocks increased from 6.2 million tonnes at 30 June 2018 to 6.6 million tonnes at 30 September 2018, representing ~$175 million of working capital.
For its metallurgical Coal, Anglo recorded 3 percent depreciation in exports to 5.4 million tonnes, with the Grosvenor ramp up being offset by a longwall move at Moranbah, anticipated challenging geological conditions at Grasstree and lower production at Dawson. For thermal Coal production in South Africa, exports increased by 16 percent to 5.1 million tonnes, following operational improvements in the quarter and the impact of a 100-hour safety stoppage in Q3 2017, partly offset by conveyor issues at Zibulo.
While domestic thermal coal production decreased by 68 percent to 2.7 million tonnes due to the completion of the sale of the Eskom-tied operations to Seriti on 1 March 2018. Nickel output increased by 3 percent to 11,500 tonnes driven by enhanced stability arising from operational improvements implemented at Barro Alto during 2018, while Manganese ore production increased by 6 percent to 887,600 tonnes.Manganese alloy production decreased by 7 percent to 34,800 tonnes due to a planned maintenance shutdown of the furnace during the quarter.
Anglo American Chief Executive Officer (CEO) Mark Cutifani, remarked that his company’s focus on driving efficiency and productivity across the business resulted in another strong quarter. “With volumes 1% higher than the solid operational performance seen in Q3 2017. Production per employee has increased by 5 percent in 2018, compared to 2017, as we maintain relentless discipline on controllable costs.”
Cutifani observes that Anglo’s strong operational performance at its Copper assets which delivered a 17 percent increase in production mirrored quarter 3’s best performer, more than offsetting planned lower volumes at De Beers and the impact of rail infrastructure constraints at Kumba in the first half of the year.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at 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. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”