Cupric Canyon Capital, a private equity company is set to spend $200 million to bring its Khoemacau copper-silver mine to production, the company revealed this week.
Addressing the media this week, Cupric Africa Chief executive Sam Rasmussen said Construction of the mine, is set to start in 2016 with the first copper expected to be shipped to the markets in 2018.
Rasmussen told reporters that the mine would produce 50,000 tonnes of copper and 1.8 million ounces of silver per year. “The cost of the mine would have been much higher had it not been for the processing plant we have acquired,” he said.
Khoemacau recently concluded a deal to buy the suspended Boseto Mine, which is 30km (18 miles) away from its new mines site. The declining Copper prices were among major factors which resulted in the closure of both the Discovery Metals Boseto Copper mine in Toteng and African Copper Mowana mine in Francistown.
According to Rasmussen the acquisition of Boseto Copper mine is expected to simplify the development of Khoemacau mine, provide savings and reduce project financing requirements.
He added that they had always known that the Boseto operation with its 4 years of open pit struggled for various reasons.
“We have taken a different approach of underground mining with higher grade mining and low streaking rations that will help the company decrease the unit operating cost with more copper and silver and more robust mining operating plan that helps in the survival of the copper commodity market that has its ups and downs,” he said.
The company is said has spent about USD70 million in exploration and study costs in the area, with additional costs on defining the study resources as well as what the project could be. An additional USD33.7 was used to acquire Boseto assets and associated licenses formerly owned by Discovery metals.
Khoemacau is said to be advancing the zone 5 projects to start cutting the box and the declines which will access the mine in the next 12 months with more work to be done after two years to start production. The mine has suggested an annual average production rate of up to 80,000 tons of copper and 1.8 million ounces of silver.
Khoemacau country manager Johannes Tsimako said they are currently engaging government with the view of a possible 15% investment opportunity onto the project and they expect response soon.
He added that the company is in negotiations with the government to connect the North-Western copper region to the electricity national grid. The deposit area name, Zone 5 is set to later change to suit local taste. At least 800 jobs will be created by zone 5 and Boseto.
Tsimako indicated that there is a plan to ensure water supply and the power grid to be delivered to the North Western part of Botswana will ensure power supply by 2018.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”