Lucara has appointed Moolman Mining Botswana (Pty) Ltd ("Aveng Moolmans") as its new mining contractor at the company's owned Karowe diamond mine in Botswana.
Aveng Moolmans, a company forming part of Aveng Mining has been contracted for a 6 year period to provide the full suite of mining services at the Karowe mine, including all drill, blast, load and haul functions for both ore and waste. Aveng Moolmans will commence mobilization of equipment to site during January and February 2017 and expects to begin mining activities in early March 2017.
William Lamb, President and Chief Executive Officer commented "We are very pleased to have engaged Aveng Moolmans as our new mining partner at the Karowe mine. Their extensive expertise in working in Botswana and other African countries together with their proven track record and their ability to achieve production volumes over the contract period, makes them a valuable partner as we work to maximize the future value of this incredible resource, at Karowe, for our shareholders and all our stakeholders in Botswana.
"The transition to Aveng Moolmans also provides the Company with increased mining flexibility and capacity to achieve sustainable production and continued strong operating cash flows. "Since December 2016, we have continued to process ore from the south and centre lobe stockpiles and are in line to achieve our production and operating guidance for 2017."
For his part, Stuart White, Operating Group Managing Director, Aveng Mining said "We are grateful for the opportunity of joining the Lucara team at the Karowe mine as its mining department and look forward to adding value to this prestigious diamond mining operation. This long-term project allows us to build on our 15 year presence in Botswana in which we will strive to make a positive contribution to all our stakeholders, including the communities in which we operate.
"Mobilization preparations are underway to ensure a timely start of mining activities, and production to plan." The appointment of a new mining contractor follows Lucara’s decision in December to terminate its contract with Eqstra Botswana which was providing mining related services at its Karowe Mine.
At the time Lucara did not give reasons that led to the termination of the contract other than that the performance of Eqstra under the contract remains a subject of discussion between the parties, before adding that an orderly transition to a new mining contractor is underway. The quick appointment of Aveng Moolmans is to prevent any material impact on production especially after Lucara released its operating for 2017.
The Canadian miner forecasts revenue of between $200 to $220 million excluding the sale of the Lesedi La Rona diamond which is expected to go on sale early this year. The Company continues to recover both large and exceptionally high value diamonds from the mine and is now focused on the higher value south lobe.
“It is difficult to predict incidence of the large high value diamonds and the potential lead time to sell such diamonds at maximum value. The Company therefore considers sales from these diamonds as additional revenue to the baseline $200 to $220 million revenue forecast,” the company said its outlook report for 2017.
The Karowe mine is forecast to process between 2.2 – 2.5 million tonnes of ore, producing between 290,000 and 310,000 carats of diamond. It is expected that the mine will process material largely from the south lobe during 2017. The overall grades of the south lobe are lower than the centre and north lobes resulting in lower diamond production, which is expected. However, the overall diamond quality and value of the south lobe is much higher and has historically resulted in significantly increased revenue and cash flow. The Company plans to issue an updated NI43-101 report following completion of deep drilling work at Karowe.
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”