Choppies revenue up 17%
Business
The trailblazing retail giant, Choppies, has posted impressive half year results for the year ended December 2015.
The unaudited group financial results for six months shows that Choppies has not lost steam despite the challenging operating environment made more difficult by slow economic growth.
The Choppies group still relies heavily in its investments in Botswana as its other operations in South Africa, Zimbabwe and Zambia failed to make a thundering positive impact in the latest results.
The group posted a revenue of P3 530 669 000, a 17 percent increase from the corresponding period in 2014. The Earnings Before Interest Tax Depreciation and Amortization (EBITDA) was up 5 percent, while profit before tax stood at P133 474 000, a slight increase of 3 percent. In the end Choppies raked in profit after tax of P104, 103, 000, up by 0.8 percent compared to the six months ended in 2014.
The Botswana based stores remain the main anchor of the group as they contributed 64 percent of the revenue. The revenue was up by 13 percent from the half year period ended in 2014. This modest growth in revenues was despite the sharp devaluation of the rand putting pressure on pula based sales prices.
“However, profitability continued to improve from the scale benefits of our mature infrastructure. We expect this process to continue going forward,” reads part of the statement. In the current period under review, Choppies opened 5 new stores bringing the total number of stores in Botswana to 78.
The Zimbabwe market showed glimpses of opportunity as the revenue shot up to 49 percent but brought in P952, 000 profit before tax, a sharp decline of 87 percent in the previous corresponding period.
“Profitability was negatively impacted by an aggressive pricing and promotions strategy in new stores, and start-up costs for the 8 new stores opened during the period.
Macroeconomic pressures in Zimbabwe continue to affect the spending power of consumers. In addition, deflationary trends have continued due to the strength of the US Dollar” read part of the statement explaining the large drop in profitability.
Choppies entered the Zambian market in November, a month before the end of the six months statement preparation. The late entry brought in a loss before tax of P1 627, 000, amid challenging trading conditions in Zambia which is underpinned by the struggling Kwacha due to the depressed copper prices, the mainstay of the Zambia economy. The resilient Choppies is planning a further expansion of 10 stores in 2016.
In South Africa, the challenging trading conditions saw Choppies fall behind their profitability forecasts as the company posted a loss of about P40 million before taxation.
Despite this, Choppies seems to have an appetite for the elusive South African market as it continues with its expansion; opening 4 new stores to bring the total number of stores in South Africa to 40. In another bold move, the Botswana based company recently acquired 21 Jwayaleni stores in South Africa. This acquisition does not form part of the current financial results as it was concluded after.
The Choppies group boasts of a war chest that comprises of cash and cash equivalents of P221 668 000, after the company spent more than P200 million in investment activities for the period under the review.
The Choppies expansion in Africa follows the Brownfield model, which involves buying existing businesses; this has been confirmed by Ram Ottapathu, co-founder of Choppies in previous interviews. The latest acquisitions involve 10 existing stores in Kenya and the 21 Jwayelani stores in South Africa.
The 21 stores might be Choppies biggest gamble yet as it promises big returns but with the usual risks lurking in the background. The Jwayelani brand generated revenues of over R1 billion with a gross profit margin of 20.35 percent and profit before taxation up by 2.84 percent while the gross profit went up by 8.93 percent.
However, Choppies could lose big time as it still struggles in the South African market which operates on the backdrop of labour strikes, weakening rand, low investor confidence and power shortages. But the Choppies group is confident that the acquisition creates a platform for profitable growth in the South African operations.
A closer look at the recent acquisitions reveals that Choppies is moving away from mining towns whose spending power is largely tied to commodity prices, and with the commodity prices currently down, Choppies is hoping for a safe haven in the KwaZulu-Natal and Eastern Cape through Jwayelani brand.
The investors will be full of anticipation when Choppies finally releases audited results for the end of year in June. Among other things, they will looking at how the recent acquisitions in Kenya and South Africa are faring, and overall it will the group’s expansion plans that will be on trial. No interim dividend has been declared, a final dividend will be declared and distributed after the finalisation of the financial statements for the year ended 30 June 2016.
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.