Shumba eyes local supplies to IPPs in 2016
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.
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.
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Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.
Food import bill slightly declines
The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.
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