The abrupt and controversial liquidation of BCL two years ago has not only affected those who benefited directly from it—a lot who did dealings with the moribund copper-nickel ore smelter like Botswana Diamonds (BOD) which got in an indirect partnership with the mine are apparently frustrated by an unfinished business of an exploration venture.
The BCL liquidation remains a stumbling block on Botswana Stock Exchange and London Stock Exchange listed BOD because it stands on the company’s exploration prospects on lucrative Maibwe Joint Venture which comes with ten licenses. Maibwe is situated in the Gope area in the central region of Botswana.
The Maibwe Joint Venture is currently owned by BCL or BCL Investments which holds a lion’s share of 51 percent, Future Minerals holds 20 percent and BOD subsidiary Siseko has a stake of 29 percent. Siseko is 51 percent owned by BOD. BOD is worried that it cannot get hold of its exploration project sooner that it promised its investors because the company that owns a major stake at Maibwe, BCL Limited or BCL Investments has been liquidated subsequently putting any business that could be done by Maibwe on a freezer.
Initially BCL had wanted to sell its 51 stake in Maibwe Joint Venture following its liquidation in 2016. BOD shown huge interest to buy the shares and team up with its subsidiary Siseko to get a huge chunk from Maibwe but the talks were halted as the BCL liquidator Nigel Dixon-Warren decided to play hard ball in order to get a better deal according to him.
In an interview with BusinessPost, Dixon-Warren also put clarity on the misconception that BOD has direct shares on Maibwe saying, “I do not know of any agreement between BOD and BCL on Maibwe.” The international media and other news websites had suggested in their reports that BOD directly owns Maibwe and has prospects to drill it as its own venture, but Dixon-Warren has not seen a legal bond between Maibwe and BOD. He told this publication that he is going to start by dealing with other shareholders first like Siseko, the BOD subsidiary.
“I am very careful about our Maibwe shares. I am still assessing the value of the shares and I have engaged experts to help me review our Maibwe shares, then I can take a consideration and see when it is fit to sell the shares,” said Dixon-Warren. BOD is still adamant in getting BCL shares because it cannot do any drilling Maibwe according to BOD managing director John Campbell.
The BOD managing director told Mining Weekly last year that they are planning on buying out BCL because the project is currently in “suspended animation” due to high interest results recorded previously on Maibwe at the time the liquidated BCL was drilling the project. This year during a mining conference held in Botswana Campbell also concluded that, “we have put in an offer to the liquidator of BCL and we hope to get a response in the next few months.”
In a recent interview with BusinessPost Campbell also confirmed that BOD has no relationship with BCL or is a shareholder in the Maibwe Joint Venture. “BOD is a shareholder in Siseko, which is a shareholder in the Maibwe Joint Venture. I have been proposed as an alternative director to the Maibwe Jenture Venture by Siseko and a member of the technical committee. In my latter role, I have assisted the liquidator in drafting a prospectus on the Joint Venture which the liquidator is currently finalizing. BOD has no direct relationship with BCL or the liquidator aside from the roles I have already outlined,” said Campbell.
BOD DISCOVERS DIAMONDS ON THE RUINS OF ANGLO BOER WAR
BOD’s latest exploration update released this week says the company has recently found the potential of the Free State to host further commercial kimberlites. It further states that the discovery comes after extensive research which was done in various archives into the history of diamond mining in South Africa.
“This research found that in addition to the well documented iconic operations at Jagersfontein, Koffiefontein and Kimberley, a number of smaller diamond mines existed both to the east of Bloemfontein and extending west to Kimberley,” said the BOD website. What was more interesting about this latest discovery is that it was found around Frees State after a century old of lack of record keeping and documentation on diamonds following the Anglo Boer war of 1899-1902.
According to BOD, there was once a law that barred an exploration intention or information and documentation regarding any diamond discovery in the aftermath of the Anglo Boer war. BOD said this month their team of researchers took a field trip to the Free State and perused into the area which was affected by extensive document loss and destruction consequent to the Anglo Boer war of 1899-1902.
“In spite of this much is still available and there remains considerable anecdotal evidence from the time. It was clearly noted that the industry as a whole was active up until the early 1880's, but that "a wave of financial collapse and depression swept over South Africa…." such that …"even old established diggings like Jagersfontein, Dutoitspan and Bultfontein were partially abandoned and younger [smaller] mines were totally deserted",” said BOD when quoting the researcher’s report on the Free State project.
The BOD exploring specialist also found evidence that there were previous attempts to re-open these “smaller” mines in the early 1900's, but these were frustrated by bureaucratic intervention due to conflicting laws in the lead up to the accession by the Free State Colony into the Union of South Africa. According to BOD, the result was that permission to restart the mines was not granted, these mines have never been reopened, and their history lost with land ownership changes over time.
BOD accounts their latest exploration to their hi-tech ability of using aerial imagery and ground trothing to complete “the jigsaw” which has enabled the company to focus its attention on areas within its Koppiesfontein, Poortjie, Swartrandsdam and Tafelbergsdam properties where historic workings and abandoned equipment are clearly evident.
“Available archived diamond certificates in respect of limited exploration activities around Tafelsbergsdam issued in 1898 disclosed recovery of 111 carats of diamonds valued at approximate £93 each which is estimated by the Company to be in excess of US$300/ct in today’s money,” said BOD. The BOD believes it has done its homework on the research and exploration, with the help of high technology, it is ready for exploration.
BOD Chairman John Teeling, said: “The Free State story is a fascinating one. Starting from document archives from well over a hundred years ago where some of these kimberlites were diamond producers to modern exploration using whole rock geochemistry, kimberlite mineral chemistry through to detailed ground geophysics. The next step is clearly drilling to determine the kimberlites current commerciality. I look forward to providing further updates regarding the drilling programme in due course.”
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”