SCBB has exposures to BCL Group, employees
Business
Standard Chartered Bank Botswana has become the first bank to confirm that it has significant exposures to BCL Group.
The confirmation by the bank comes after a month of uncertainty and speculation concerning the after effects the closure of the mines will have in the overall economy, particularly the banking sector. The bank finds itself in a tough spot after posting lower profits in their previous two reporting periods. The latest announcement will most likely hamper the bank's efforts towards increased profits.
"In terms of the listing requirements of the Botswana Stock Exchange, the Board of Directors hereby notifies shareholders that Standard Chartered Bank Botswana (SCBB) has considerable exposures to the BCL Group and its employees, its liquidation could adversely impact the 2016 performance," the bank said in a cautionary statement to shareholders, also adding that the bank continues to have sufficient liquidity and capital to deliver on its strategy imperatives.
In early October the government announced that they are placing BCL Group under provisional liquidation, effectively meaning that the country's largest copper mine in Selibe Phikwe and Tati Nickel mine in Francistown will cease to operate pending the liquidator's assessment which is expected to take four months. The liquidator is expected to determine whether the mine could be restructured and salvaged or liquidate BCL group's assets to meet its credit obligations.
While liquidation process is underway, the liquidator Mr. Nigel Dixon-Warren has since issued out retrenchment letters to more than 5000 employees of BCL group. Furthermore, the affected employees have been issued letters pertaining to their terminal benefits. The sudden closure of the mines has rattled the banking sector which has not only provided credit lines to the group but also to the axed employees.
When the news of the liquidation broke, Barclays Bank of Botswana acted swiftly to assure its shareholders and clients that its exposure to the struggling miner is shielded by a guarantee from the government. The bank had extended P1 billion guaranteed credit to the mine, meaning that should the mine fail to pay, the government will pick up the tab.
The other commercial banks have so far avoided stating their exposure, instead offered that they cannot discuss confidential matters between a bank and a client with a third party. But behind the scenes, the banks have been frantically assessing and trying to mitigate the impact the closure of BCL will have on their books.
The revelation by Standard Chartered Bank Botswana about its considerable exposure to the BCL group and its employees is the first of many expected from listed banks as they approach the reporting season. The listing requirements require that listed companies warn their shareholders if they expect their financials to be impacted.
With Barclays and Standard Chartered Bank Botswana having declared their positions, the eyes are on the country's biggest bank- First National Bank Botswana- to state its position, with analysts speculating that there is no way the bank will emerge from this unscathed.
It has been an awful year for Standard Chartered Bank Botswana and their announcement will put more pressure on the bank which has been operating in a tough trading environment. The bank was in a shock 85 percent profit drop for the year ended 2015.
"Our performance in 2015 was impacted by the challenging trading environment, characterized by subdued macro-economic conditions, low interest rates and a significant decline in market liquidity. These factors resulted in a substantial increase in our cost of funding, causing considerable margin compression, which ultimately reduced income and profit.
Throughout these challenges, the group remained focused on implementing long term sustainable solutions to keep the statement of financial position resilient and ensure that the group remains here for good for our customers and stakeholders, " Mr. Moatlhodi Lekaukau, the bank's CEO said in March in a press conference with analysts and the media following the release of the end of year results.
The bank's performance was dragged down by a huge surge in net impairments which jumped by 7200 percent from P1.4 million to P104 million. The increase came as a result of the company’s exposure to businesses that have been operating under challenging market conditions, particularly those in the mining sector which has seen commodity prices plunge. The bank was later revealed to have had a significant exposure to a diamonds dealing company.
The harrowing experience caused the bank to limit its role in diamond financing deals. While the bank remained optimistic about future operations, the bank's interim profit for the half year ended June 2016 dropped by 5% following a 42% surge on net impairments losses. The results at the time sparked fresh fears that the bank might post profit lower than the one realized in 2015. Now it looks likely that the bank's upcoming end of year results will be materially impacted in light of their significant exposure which is expected to push up net impairment losses.
The statement from the bank advised shareholders to exercise when dealing in the bank's securities until the results are announced. The bank has performed badly in the stock market this year with its share price dropping by 30 percent to trade at P7.79. The precipitous drop in the share price has wiped over a billion pula from the bank's market valuation, leaving the bank with a market capitalization of P2.3 billion down from P3.3 billion in the beginning of the year.
Business
New Khoemacau owners commit to mine’s multibillion Pula expansion
The future of Botswana’s largest copper and silver operation, Khoemacau Copper Mining, looks promising as the new owners, MMG Group, commit to the mine’s expansion plans. MMG, an Australian headquartered company owned by China, has expressed its dedication to doubling Khoemacau’s production and transforming it into one of the most significant high-grade copper operations in Africa.
Nan Wang, the Executive General Manager for Australia and Africa at MMG, stated that while the immediate focus is on maintaining a consistent production level of 60ktpa, there are solid plans to increase Khoemacau’s production capacity. The company aims to double its production from 3.65Mtpa to 8.15Mtpa, resulting in an increase in payable copper from approximately 60ktpa to around 130ktpa.
To achieve this expansion, Khoemacau has completed a pre-feasibility study on the project and a solar power initiative. The next step is to conduct a feasibility study, which will pave the way for increased production capacity. Additionally, Khoemacau has identified extensive exploration opportunities across its license area, positioning the company for an exciting new phase of development.
The current Khoemacau operation reached full production and nameplate capacity in December 2022, following over a decade of investment totaling over P10 billion. This significant investment allowed for an intense exploration program, resulting in the development of the most automated underground mining operation in Botswana. The first concentrate was produced in June 2021, and the product entered the export market in July of the same year. Throughout 2022, the company has been working on the pre-feasibility study for the expansion project, with the feasibility study scheduled for the following year.
The expansion plans will involve the construction of a new world-class process plant in Zone 5, where the current mining of ore takes place. This new plant will be larger than the existing one in Boseto, which currently receives ore from Zone 5. The expansion will also involve the development of new underground mines, including Mango, Zone 5 North, and Zeta North East. These additional mines will bring the total number of underground shafts at Khoemacau to six. The ramp-up of production from the expansion is expected to occur in 2026.
Khoemacau, which acquired assets in the Kalahari Copper Belt after the liquidation of Discovery Metals in 2015, currently employs over 1500 people, with the majority being Batswana. The Khoemacau Mine is located in north-west Botswana, in the emerging Kalahari Copperbelt. It boasts the 10th largest African Copper Mineral Resource by total contained copper metal and is one of the largest copper sedimentary systems in the world outside of the Central African Copperbelt.
The mine utilizes underground long hole stoping as its mining method and conventional sulphide flotation for processing. Resource drilling results have shown the existing resources to have continuity at depth, and there are several exploration targets within the tenement package that have the potential to extend the mine’s life or increase productivity.
The Zone 5 mine has already ramped up production, and further expansion in the next five years will be supported by the deposits in the Zone 5 Group. The estimated mine life is a minimum of 20 years, with the potential to extend beyond 30 years by tapping into other deposits within the tenement package.
In conclusion, the commitment of MMG Group to Khoemacau’s expansion plans signifies a bright future for Botswana’s largest copper and silver operation. With the completion of pre-feasibility and feasibility studies, as well as significant investments, Khoemacau is poised to become one of Africa’s most important high-grade copper operations. The expansion project will not only increase production capacity but also create new job opportunities and contribute to the economic growth of Botswana.
Business
Khoemacau Copper Mining to be acquired by MMG Limited
Khoemacau Copper Mining, a leading copper mining company, has recently announced its acquisition by MMG Limited, a global resources company based in Australia. This acquisition marks a significant milestone for both companies and demonstrates their commitment to continued investment, growth, and sustainability in the mining industry.
MMG Limited is a renowned mining company that operates copper and other base metals projects across four continents. With its headquarters in Melbourne, Australia, MMG has a strong track record in mining and exploration. The company currently operates several successful mines, including the Dugald River zinc mine and the Rosebery polymetallic mine in Australia, the Kinsevere copper mine in the Democratic Republic of Congo, and the Las Bambas Mine in Peru. MMG’s extensive experience and expertise in mining operations make it an ideal partner for Khoemacau.
MMG’s commitment to sustainability aligns perfectly with Khoemacau’s values and priorities. Khoemacau has always placed a strong emphasis on safety, health, community, and the environment. MMG shares this commitment and applies the principles of good corporate governance as set out in the Corporate Governance Code of the Hong Kong Listing Rules. As a member of the International Council on Mining and Metals (ICMM), MMG adheres to sustainable mining principles, ensuring responsible and ethical practices in all its operations.
Over the past 12 years, Khoemacau’s current shareholders have made significant investments in the development of the company. With approximately US$1 billion deployed in the project, Khoemacau has successfully transformed from an exploration and discovery phase to a fully-fledged operating copper mine. The completion of the ramp-up of the Zone 5/Boseto operations has set the stage for the next phase of expansion.
With the acquisition by MMG, Khoemacau is poised for an exciting new chapter in its development. The completion of a pre-feasibility study on the Khoemacau expansion and a solar power project has paved the way for increased production capacity. The feasibility study will be the next step in doubling the production capacity from 3.65 million tonnes per annum (Mtpa) to 8.15 Mtpa, resulting in a significant increase in payable copper from approximately 60,000 tonnes per annum (ktpa) to 130,000 ktpa. Additionally, Khoemacau has extensive exploration opportunities across its license area, further enhancing its growth potential.
The CEO of Khoemacau, Johan Ferreira, expressed his gratitude to the current owners for their stewardship of the company and their successful transformation of Khoemacau into a fully operational copper mine. He also highlighted the company’s focus on the expansion study and its vision for the future with MMG. Ferreira emphasized that the partnership with MMG will ensure Khoemacau’s long-term success, delivering employment, community benefits, and economic development in Botswana.
MMG Chairman, Jiqing Xu, echoed Ferreira’s sentiments, stating that the acquisition of Khoemacau aligns with MMG’s growth strategy and vision. Xu emphasized MMG’s commitment to creating opportunities for all stakeholders, including shareholders, employees, and communities. He expressed confidence in Khoemacau’s expansion potential and the company’s ability to realize its full potential with the support of MMG.
The sale of Khoemacau to MMG is subject to certain conditions precedent and approvals, with the expected closing date in the first half of 2024. This acquisition represents a significant step forward for both companies and reinforces their commitment to sustainable mining practices, responsible resource development, and long-term growth in the mining industry.
In conclusion, the acquisition of Khoemacau Copper Mining by MMG Limited signifies a new era of investment, growth, and sustainability in the mining industry. With MMG’s extensive experience and commitment to responsible mining practices, Khoemacau is well-positioned for future success. The partnership between the two companies will not only drive economic development but also ensure the safety and well-being of employees, benefit local communities, and contribute to the overall growth of Botswana’s mining sector.
Business
BPC Signs PPA with Sekaname Energy
The Botswana Power Corporation (BPC) has taken a significant step towards diversifying its energy mix by signing a power purchase agreement with Sekaname Energy for the production of power from coal bed methane in Mmashoro village. This agreement marks a major milestone for the energy sector in Botswana as the country transitions from a coal-fired power generation system to a new energy mix comprising coal, gas, solar, and wind.
The CEO of BPC, David Kgoboko, explained that the Power Purchase Agreement is for a 6MW coal bed methane proof of concept project to be developed around Mmashoro village. This project aligns with BPC’s strategic initiatives to increase the proportion of low-carbon power generation sources and renewable energy in the energy mix. The use of coal bed methane for power generation is an exciting development as it provides a hybrid solution with non-dispatchable sources of generation like solar PV. Without flexible base-load generation, the deployment of non-dispatchable solar PV generation would be limited.
Kgoboko emphasized that BPC is committed to enabling the development of a gas supply industry in Botswana. Sekaname Energy, along with other players in the coal bed methane exploration business, is a key and strategic partner for BPC. The successful development of a gas supply industry will enable the realization of a secure and sustainable energy mix for the country.
The Minister of Minerals & Energy, Lefoko Moagi, expressed his support for the initiative by the private sector to develop a gas industry in Botswana. The country has abundant coal reserves, and the government fully supports the commercial extraction of coal bed methane gas for power generation. The government guarantees that BPC will purchase the generated electricity at reasonable tariffs, providing cash flow to the developers and enabling them to raise equity and debt funding for gas extraction development.
Moagi highlighted the benefits of developing a gas supply industry, including diversified primary energy sources, economic diversification, import substitution, and employment creation. He commended Sekaname Energy for undertaking a pilot project to prove the commercial viability of extracting coal bed methane for power generation. If successful, this initiative would unlock the potential of a gas production industry in Botswana.
Sekaname Energy CEO, Peter Mmusi, emphasized the multiple uses of natural gas and its potential to uplift Botswana’s economy. In addition to power generation, natural gas can be used for gas-to-liquids, compressed natural gas, and fertilizer production. Mmusi revealed that Sekaname has already invested $57 million in exploration and infrastructure throughout its resource area. The company plans to spend another $10-15 million for the initial 6MW project and aims to invest over $500 million in the future for a 90MW power plant. Sekaname’s goal is to assist BPC in becoming a net exporter of power within the region and to contribute to Botswana’s transition to cleaner energy production.
In conclusion, the power purchase agreement between BPC and Sekaname Energy for the production of power from coal bed methane in Mmashoro village is a significant step towards diversifying Botswana’s energy mix. This project aligns with BPC’s strategic initiatives to increase the proportion of low-carbon power generation sources and renewable energy. The government’s support for the development of a gas supply industry and the commercial extraction of coal bed methane will bring numerous benefits to the country, including economic diversification, import substitution, and employment creation. With the potential to become a net exporter of power and a cleaner energy producer, Botswana is poised to make significant strides in its energy sector.