Sechaba to engage Gov’t on Alcohol levy
Business
Sechaba Brewery Holdings Limited has decided to engage government and negotiate the application of the alcohol levy on its products. The Levy has had a negative impact on the company’s overall earnings in the recent past.
The company hosted a media and analysts day on Tuesday to brief participants about the company’s financial performance for the year 2016 and future prospects.
The common denominator in the briefing was how the alcohol levy has impacted the company in the past and also the likelihood of future negative impacts, as the government is set to increase the levy going forward. The brewery giant hopes to convince the Ministry of Investment, Trade and Industry to engage in a discriminate increase of the levy as a sweeping increase will greatly affect their business.
Sechaba, the local brewing behemoth, said that a new levy was gazetted with the effect date of the first of April, continuing a trend that spans seven years since the introduction of the alcohol levy.
The levy which was introduced in 2009 by President Lt Gen Dr Ian Khama at 30% is now at 55% after successive increments of 5% each year for the past 5 years. The alcohol levy has since inception channelled more than P1 billion as revenue to the government, and the levy’s total collections is expected to breach the P2 billion mark by the end of 2016.
The levy which has become an easy money making scheme for the government is once more expected to raise tempers as the latter and Sechaba face off in negotiating the new calculation method which is expected to have a negative impact on Sechaba’s performance.
It has since been revealed that negotiations are ongoing and that there is mutual understanding between the government and KBL, an associate of Sechaba, on the impact of levy. The final proposals on the new calculation are expected before end of this month.
“We have requested that all alcohol with a percentage greater than 5% should be levied at 55% while the ones under 5% should be levied 50%,” said Johan De Kok, Sechaba’s Managing Director.
Sechaba Brewery Holdings recently reported an 8.5% increase in profits for the year, which was underpinned by increases in sparkling soft drinks and clear beers volume growth. The total volume growth was down by 0.2% after the opaque beverages registered a decline of 16% in volume growth. In terms of volume contribution, sparkling and soft drinks enjoy the largest share of 34%, followed by clear beer at 31%, while the struggling opaque drinks contributes 29%. The Non Alcoholic Beverages (NAB) and Alcoholic Fruit Beverages (AFBs) contribute 4% and 2% respectively.
While the alcohol levy continues to impact the overall performance of the company, the company managed to push the clear beer volume performance by 7.9%, this was despite the out of stock constraints which affected the overall performance considerably. The company highlighted that the growth was driven by the success of the 750ml Returnable Glass Bottle bulk pack at 6% and the phenomenal success of the 440ml Can. Carling Black Label continued to be KBL’s flagship brand with a growth of more than 16% on previous year. Castle Lite volume grew by 4% while the local brand St Louis Lager is on the road to recovery as the brand finished 9% up from previous performance.
Sparkling and Soft drinks registered a solid performance of 6.8% despite the popular coke brand suffering a slight decline. The company says the market share of sparkling and soft drinks was under pressure due to the success of imported products. The opaque beverages suffered the steepest loss as their performance went down by as much as 16%. The decline in volumes was the result of water and electricity challenges which impacted production.
However, the company was pleased with performance in the Northern region where their Chibuku brand is popular and continues to show growth through the 2L and 1L cartons which constitute 97% of the opaque product range. Sechaba is bullish about the 2017 financial performance based on the recent stability and predictability of water supply.
Alcoholic Fruit Beverages (AFBs) pulled an impressive performance, registering growth of 95.7%. The strong showing in performance was driven by the increasingly popular Redds Lemon Vodka while another local brand Core Original played a critical supporting role. Other contributing factors to the strong performance was the preference for the AFBs’ 660ml pack, new product launch and the recovery of Redds Apple which had initial failed to pick momentum.
For the year under review, the Company’s capital expenditure (Capex) was up 33% as the company spent P206.5 million to acquire and upgrade physical assets. The notable increases in spending were largely reserved for introducing new bottle lines, warehouse extensions, production expenditure, fleet replacement and expansion. Sechaba expects to spend more on Capex for the 2017 financial year, with focus on new bottle lines, beer powder expansion, containers, fleet, technical capex and other expenses.
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.