Local coal miner, Shumba Coal, has endured a tough year of operations as the junior mining sector saw falling stocks with cost reductions, contraction, and suspension of operations by most miners, in a bid to survive.
However, Shumba board chair Allen Clegg, is still upbeat, future prospects, saying that: “Shumba is continuing to focus on low cost coal production for local supply to the spot market and its IPP projects in the short term,” adding that Shumba will then “export onto world spot markets into the sweet spot of the upturn medium term, giving significantly higher than normal returns, and the future is certainly bright.”
Already, Shumba is projecting sales to local power producers of coal supply of up to 1.5 Mtpa of quality thermal coal to existing nearby power producers by 2016.
“Management continues to execute it plans with a low cost overhead structure in the Company and focus on expenditure and investment for project value growth with a well-considered and controlled outsourcing model for critical expertise towards early project execution for Sechaba with consideration for a 300MWe IPP potentially supplying NamPower in Namibia,” stated Clegg in a statement that accompanied the financial results of the company for the year ended 30 June 2015.
The expansion of the Mine to produce and supply an additional 1.5 Mtpa (Total of 3 Mtpa saleable) and construction and commissioning of our Sechaba Energy 300MWe IPP, utilising this expansion in production for generation and distribution to regional grids, with NamPower targeted for end of 2017.
“Analysts continue to predict that established energy markets and producers will continue to struggle in the short term, but also indicate the attractiveness at current levels of emerging energy markets like Africa where Shumba is in prime position. The power deficits embedded in the Southern African sector and SADEC region plays to Shumba’s growing strength in its asset base as our projects advance to energy supplier and we see this continuing to underwrite our future,” stated Clegg.
Shumba, as well as other miners are currently feeling the effects of low commodity prices. The downward spiral of the sector is said to be abating according to most observers.
“The potential rebound in the market and in particular for those companies like Shumba that have shown the resilience, prudence and diligence to continue to advance despite the past difficult environment remains a high probability and possibility,” said Clegg.
With the whole sector pondering on the timing of the recovery, however, an analysis carried out by the Board led them to posit “that it is not too far away based on macro trends in currency adjustments and devaluations, the need to bring interest rates to sensible levels and inflationary pressures that will result.”
On the markets for thermal coal, Shumba believes the markets will correct by 2017/18 based on the known energy demand across South-East Asia – not including major buyers, India and china- which is estimated to require an additional 40Mt of coal supply per annum with “the market is still heading for a significant deficit within 3 to 5 years which will force prices upward to potentially unseen levels and highs.”
Looking at the region, the Southern African power pool has a major net deficit of over 30GWe that is growing as older power plants (some 40GWe) are closed down and need replacement hence the planned Shumba Sechaba and Mabesekwa IPP’s will enter a readymade high demand market for security of return on investment for the long term.
2015 HIGHLIGHTS In total the Group raised USD $5.95 million during the year from two separate private placements with institutional and private investors in Botswana (USD $3.19m) and Mauritius (USD $2.76m) representing a 92 percent increase in the previous year “in more difficult times.”
Total Group expenditures on Exploration and Evaluation during the year were USD $ 1,001,754.
The Group’s net assets at the end of the year were USD $8,836,183.
Cash and Cash Equivalents of the Group as at the reporting date were USD $3,415,208.
Completion of the full project PFS for Sechaba Mine & Beneficiation project with export products.
Acquisition in September 2014 of the Lethlakeng deposit prospecting licence No. PL308/2014 with estimated coal resources of 500Mt and expenditures of USD $330,000 for the next three years to investigate the strong potential for development of a UCG (Underground Coal Gasification) project.
Acquisition in February 2015 of the 800Mt Mabesekwa Opencast Coal Mine Project and prospecting licence No. PL428/2009 in a binding agreement from Daheng Group for USD $4 million in shares and deferred cash/shares payments.
Execution of a legally binding JDA (Joint Development Agreement) with Mulilo Renewable Project Developments Pty Ltd of Capetown, for the joint development of the 600Mw Mabesekwa Independent Power Plant (MEIPP).
Completion of a strongly positive Mining Prefeasibility Study (PFS) for Mabesekwa strongly underwriting the MEIPP plan of the Company under the JDA with Mulilo.
The confirmation of the renewal of the Sechaba Licence in April 2015 by the Botswana Government underlining the confidence in the delivery capability of Shumba.
The confirmation in April 2015 of the full transfer of rights to Mabesekwa into the name of Shumba as a further show of confidence from the Botswana Government in the delivery capability of Shumba.
Management’s commitment and demonstrated competence in the disciplined maintenance of a low cost structure within the Group shown clearly in the Company’s continued advancement detailed above.
The Group remains adequately funded to meet its planned expenditure requirements in the coming financial year.
Botswana’s economy showed slight growth signs in the first quarter of 2021, following a devastating year in 2020.
During 2020, the entire second quarter was on zero economic activity as the country went on total lockdown in an effort to curb the spread of the virus.
Diamond trade plummeted to record low levels as global travel restrictions halted movement of both goods and people and muted trade.
The end result was a significant decline for the local economy, at an estimated 7 percent contraction, just marginally below the 2008/09 global financial crises.
According to figures released by Statics Botswana this week, the country’s nominal Gross Domestic Product for the first quarter of 2021 was P47.739 billion compared to a revised P45.630 billion registered during the previous quarter.
This represents a quarterly increase of 4.6 percent in nominal terms between the two periods.
During the quarter, Public Administration and Defence became the major contributor to GDP by 18.4 percent, followed by Wholesale & Retail by 11.4 percent. The contribution of other sectors was below 6.0 percent, with Water and Electricity Supply being the lowest at 1.6 percent.
Real GDP for the first quarter of 2021 increased by 0.7 percent compared to a contraction of 4.6 percent registered in the previous quarter.
The improvement in the first quarter 2021 GDP reflected continued efforts to reopen businesses and resume activities that were postponed or restricted due to the COVID-19 pandemic.
The real GDP increased by 0.7 percent during the period under review, compared to an increase of 1.2 percent in the same quarter of 2020.
The recovery in the domestic economy was observed across majority of industries except Accommodation & Food Services, Mining & Quarrying, Manufacturing, Construction, Other Services and Agriculture, Forestry & Fishing.
The overall slow performance of the economy was mainly due to the impact of measures that were put in place to combat the spread of the COVID-19 pandemic.
The Non-mining GDP increased by 4.1 percent in the first quarter of 2021 compared to 4.0 percent increase registered in the same quarter of the previous year.
Agriculture, Forestry and Fishing industry decreased by 2.0 percent in real value added during the first quarter of 2021, relative to a contraction of 5.2 percent registered during the same quarter of 2020.
The main driver of the unfavorable performance stems from a decrease in real value added of Livestock farming by 3.0 percent.
Mining and Quarrying registered a decrease 11.4 percent in the real value added, this was mainly influenced by the drop in the Gold and Diamond real value added by 17.5 and 12.5 percent respectively.
Diamond production in carats went down by 12.1 percent while the tonnage of Gold produced went down by 17.5 percent.
The poor performance of the diamond sub-industry is attributed to the reduction in production due to a lower grade feed to the plant at Orapa in response to heavy rainfall and operational issues, including continued power supply disruptions.
With regard to Gold is due to diminishing resource base which affect production.
The Manufacturing industry recorded a decline of 7.4 percent in real value added during the first quarter of 2021, compared to a decrease of 2.3 percent registered in the corresponding quarter of 2020.
The deep low performance in the industry is observed in the two major sub-industries of Beverages & tobacco and Diamond cutting, polishing and setting by 57.0 and 38.5 percent respectively.
The reduction in Beverages is attributed to alcohol sale ban imposed during the quarter under review in order to reduce the spread of the COVID-19 virus. On the other hand, exports of polished diamonds went down by 24.9 percent compared to a decrease of 11.5 percent registered in the same quarter of the previous year.
The construction industry recorded a decline of 4.8 percent compared to an increase of 4.3 percent realized in the corresponding quarter in 2020.
This industry comprises of buildings construction, civil engineering and specialized construction activities. The industry is still showing signs of the consequences of COVID-19 pandemic. The industry recorded a negative growth of 7.4 percent in the previous quarter.
Water and Electricity Water and Electricity value added at constant 2016 prices for the first quarter of 2021 was P506.2 million compared to P378.2 million registered in the same quarter of 2020, recording a growth of 33.8 percent.
In the first quarter of 2021, Electricity recorded a significant growth of 62.4 percent compared to a decrease of 67.6 percent recorded in the corresponding quarter of 2020.
The local electricity production increased by 22.4 percent while Electricity imports decreased by 33.3 percent during quarter under review. The water industry recorded a value added of P231.3 million compared to P209.0 million registered in the same quarter of the previous year, registering an increase of 10.7 percent.
Wholesale and Retail Trade real value added increased by 11.4 percent in the first quarter of 2021 compared to an increase of 5.5 percent registered in the same quarter of the previous year. The industry deals with sales of fast moving consumer goods.
Diamond Traders recorded a significant growth of 112.7 percent as opposed to a decline of 22.7 percent recorded in the corresponding quarter last year. The positive growth is due to improved demand of diamonds from the global market.
The Transport and Storage value added increased by 0.6 percent in the first quarter of 2021, compared to a 2.4 percent increase recorded in the same quarter of the previous year.
The slight improved performance of the industry was mainly attributed to the increase in real value added of Road Transport and Post & Courier Services by 4.3 and 2.1 percent respectively.
The slow growth was influenced by a significant reduction in Air Transport services of 69.7 percent due to reduced number of passengers carried. Rail goods traffic in tonnes went down by 6.4 percent and passenger rail transport was not operating during the quarter under review.
Accommodation and Food Services Accommodation and Food Services real value added declined by 31.7 percent in the first quarter of 2021 compared to a decrease of 4.4 percent registered in the same quarter of the previous year. The reduction is largely attributed to a decrease of 42.1 percent in real value added of the Accommodation activities subindustry.
The suspension of air travel occasioned by Covid-19 containment measures impacted on the number of tourists entering the borders of the country and hence affecting the output of Hotels and Restaurants industry. COVID-19 restriction measures resulted in reduced demand for leisure and conferencing activities, as conferences are largely held through virtual platforms.
Finance, Insurance and Pension Funding industry registered a positive growth of 8.3 percent due to the favorable performance from monetary intermediation and Central Banking Services by 16.4 and 5.4 percent respectively during quarter under review.
It is still tough in the tourism industry — big players in this sleeping giant are not having it easy, but options are being explored to keep the once vibrant multibillion Pula sector alive until the world gets back to normalcy.
One of the primary measures against the spread of Covid-19 is to stay home; this widely pronounced precaution against the global contagion that has claimed over 4 million lives across the world is however a thorn in the flesh of one of the major industries in the global economy — the tourism sector .
This sector is underpinned by travel – an act which is the virus‘ number one mode of spread, especially across borders.
Chobe Holdings Limited, one of Botswana’s leading high end eco-tourism giants said its survival strategies are underpinned by well-crafted stakeholder engagements in the mist of these unprecedented times of muted trading activity.
“Throughout the COVID-19 pandemic, Chobe continued to invest in and strengthen its relationships with key stakeholders in both its traditional markets and the SADC region,” the company directors updated shareholders this week.
To keep the business afloat, the company which owns and operates some of the exquisite tourism destinations along the banks of the mighty Chobe said it has triggered its existing available debt financing avenues.
Chobe revealed that its current overdraft of BWP 25 million has been extended on favourable terms.
The company shared that it has negotiated a further USD 1.5 million (over P16 million) standby loan with a flexible settlement terms and preferable cost implications to the bottom line.
“We are confident that the Group has sufficient cash inflows, cash reserves and un-utilized prearranged borrowing in place to settle any liabilities falling due and support the smooth recovery of operations in the short and medium term,” the company directors said, noting that they will retain the flexibility to vary operations should market conditions change.
Early this year, Chobe announced that the ongoing crisis in the tourism industry forced the company to draw from its prearranged overdraft facility of P25 million to the extent of P11.6 million.
Last year Chobe’s occupancy levels around its lodges and hotels went down 89 percent. This resulted in unprecedented revenue decline of 93% to P27.78 million from the P373.94 million in the previous year ended February 2020.
Operating profits went down 159% with profit after tax down 170%, mirroring a loss of over P67 million.
Chobe management said during the last half of the financial year they have done all they could to contain costs across the company’s operations.
During the last half of the year Chobe’s marketing and reservations teams continued to pursue the “don’t cancel but defer policy”.
“We thus continue to hold advance travel receipts, to the value of about P34 million at the financial year end,” the company revealed early this year.
Chobe said it continues to engage Government, through HATAB and BTO to prioritize the vaccination of workers in the tourism sector.
“Throughout the pandemic we have ensured that employees are trained in and comply with COVID-19 infection mitigation protocols as well as ensuring that all visitors to our remote camps and lodges as well as our staff and contractors are tested for COVID-19 before reaching the camp or lodges,” the company said.
However, the company said vaccinating the tourism staff will provide the best way to ensure that both employees and guests are protected from the virus.
“We continue to manage our cashflow through stringent cost control measures, balanced against the protection of the Group’s physical assets and the wellbeing and retention of its people,” the company said.
Chobe has successfully retained its top management through the pandemic. To this end the company directors continue to closely monitor the Group’s recovery from COVID-19 and adjust salary reductions to support operations and aid retention.
Domestic and regional travel resumed during the second quarter of the 2020/21 financial year with the Group opening a strategic mix of camps and lodges.
A comprehensive domestic, regional and international marketing plan was put in place to support these openings.
International travel resumed in the first quarter of the 2021/22 financial year with occupancies forecast to steadily increase, albeit from a low base, through the second quarter.
The company is optimistic that forward bookings are strong for the 2022/23 financial year.
“There is pent-up demand from our traditional source markets to travel now, but this is tempered by uncertainty and access constraints,” the company stated.
“Both the domestic and international markets are sensitive to such uncertainty, and it is critical that both the private and public sector work together to develop and publish clear, authoritative and consistent travel information in order to build confidence”
Chobe entered the pandemic with the Shinde camp rebuild in progress — one of its high end camps and this was completed in the first half of the 2020/21 financial year accounting for the majority of the Group’s capital expenditure for that period.
De Beers Group, the world’s leading rough diamonds producer by value and Botswana’s partner in the diamond business, ramped up its production in the second quarter of 2021, in response to stronger demand for rough diamonds in the global markets.
The London headquartered diamond mining giant revealed in its production report this week that rough diamonds output increased by 134% to 8.2 million carats in the three(3) months of quarter 2 2021, “reflecting planned higher production to meet stronger demand for rough diamonds”.
This was against the backdrop of curtailed demand in the same quarter last year, mirroring the impact of Covid-19 lockdowns across southern Africa during that period.
In Botswana, where De Beers sources majority of its rough diamonds through partly government owned Debswana, production increased by 214% to 5.7 million carats. The percentage jump mirrored planned low production in the second quarter of 2020 where output was adjusted to market demands and implemented Covid-19 protocols.
Debswana operates four (4) Mines: Jwaneng Mine- being its flagship producer and largest revenue contributor. Jwaneng Mine which is the wealthiest diamond mine in the world by value is envisaged for multi-billion expansion to an underground operation in future to stretch its existence by few more decades.
The underground project which is anticipated to cost a whooping P65 billion will be the world‘s largest underground diamond mine.
The company which accounts for over 65 % of De Beers’s global production also operates Orapa Mine- one of the world’s largest by area, Letlhakane Mine currently a tailings treatment operation and Damtshaa Mine which is under care and maintenance following market shrink in 2020.
Namibia production decreased by 6% to 0.3 million carats, primarily due to planned maintenance of the Mafuta vessel which was completed in the quarter and another vessel remaining demobilized. In Namibia De Beers sources diamonds both in land and marine through Namdeb and Debmarine respectfully.
In South Africa-the spiritual home ground of De Beers Group, production increased by 130% to 1.3 million carats, due to planned treatment of higher grade ore from the final cut of the Venetia open pit, as well as the impact of the Covid-19 lockdown in Q2 2020.
Production in Canada increased by 14% to 0.9 million carats, primarily reflecting the impact of the Covid-19 measures implemented in Q2 2020.
De Beers said consumer demand for polished diamonds continued to recover, leading to strong demand for rough diamonds from midstream cutting and polishing centers, despite the impact on capacity from the severe Covid-19 wave in India during April and May.
Rough diamond sales totaled 7.3 million carats (6.5 million carats on a consolidated basis), from two Sights, reflecting the impact of the reduced Indian midstream capacity on Sight 4, compared with 0.3 million carats (0.2 million carats on a consolidated basis) from two Sights in Q2 2020, and 13.5 million carats (12.7 million carats on a consolidated basis) from three Sights in Q1 2021.
The H1 2021 consolidated average realized price increased by 13% to $135/ct (H1 2020: $119/ct), driven by an increased proportion of higher value rough diamonds sold.
While the average price index remained broadly flat, the closing index increased by 14% compared to the start of 2021, reflecting tightness in inventories across the diamond value chain as well as positive consumer demand for polished diamonds.
Full Year Guidance Production guidance is tightened to 32–33 million carats (previously 32-34 million carats (100% bases)), subject to trading conditions and the extent of any further Covid-19 related disruptions.
When commenting to 2021 quarter 2 production figures, Mark Cutifani, Chief Executive of Anglo American- De Beers parent, said the entire Anglo American Group delivered a solid operational performance supported by comprehensive Covid-19 measures to help safeguard the lives and livelihoods of its workforce and host communities.
“We have generally maintained operating levels at approximately 95% of normal capacity and, as a consequence, production increased by 20% compared to Q2 of last year, with planned higher rough diamond production at De Beers” he said.