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Investors eye stake in Trans Kalahari rail project


The Australian consultant engaged by Botswana Government to determine the feasibility of the Trans Kalahari railway line, last week handed over the final assessment report, the Trans Kalahari Railway Development Plan.


Coal Development Unit coordinator, Obakeng Moumakwa, told BusinessPost that “We met with the consultants the other week and they gave us their final report, which basically set out the financials and the realigned routes of the railway line.”
“The project is continuing,” declared Moumakwa, contrary to recent reports that the project has been shelved.


“Now we need to create a legislator framework for both safety and economic regulation and this will see some laws will having to be changed in Botswana and Namibia, to allow for the setting and operation of the railway,” said Moumakwa.
“The project, owned by both countries, could have been opened as early as January 2015 but will open any time and the countries will deal with staffing issues,” he said.


Moumakwa said that the railway line is an investment opportunity for anybody with money and he also revealed that potential investors call all the time with enquiries and they are awaiting Government to complete its initial processes.


Government is in the process of informing itself of the modalities of the project, something Moumakwa admits is “taking a bit long” to complete. “We are still to do a bankable feasibility study,” Moumakwa asserted.


However, Moumakwa said that as things stand none of the coal mining companies have expressed a wish to own the TKR, in part or the whole project.


The railway line, which comes with a P136 billion price tag, is expected to unlock the monetisation of Botswana’s coal resources, which are seen as a way to augment the depleting diamond resources that have been the mainstay of the country’s economy.
Aurecon has given the resultant capital expenditure costs at a total of USD14.2 billion, comprising USD8.6 billion for electrified rail, and USD1.9 billion for above rail, and USD3.6 billion for the port.



The “Pre-Feasibility Study of the TKR Report” prepared by Canadian firm, CPCS in 2011, contained capital and operating costs estimates for the rail and port but the new assessment by Aurecon is said to be 90 percent different due to several considerations such as, a high level review of these costs having been undertaken as a result of a number of issues; changes to the construction market since 2011; changes in operating philosophy of the rail, and proposed enhancements to the project.


Since the signing of the Memorandum of Understanding between Botswana and Namibia in early 2014, the Bilateral Agreement coal prices have fallen significantly.


The Bilateral Agreement envisaged a Public Private Partnership procurement method using the DBOOT model with the private sector financing the project and taking on demand risk. Until prices return to greater than $85/t a demand risk PPP will not be bankable.


However, Government has been presented with the option to fund up-front, over time or provide a state backed guarantee to the project company though “this is likely to be unaffordable to government”.


According to consultants Aurecon, future considerations regarding the structuring of the project will ultimately depend on the composition of the mining players at the time and this may also influence the regulatory regime.


As recommendations for the way forward, Government has been asked to simply acknowledge that the project is conditional upon the coal price. The report also states that, at the current coal price the project is not viable although long term outlook may be positive.


Government has also been urged to show commitment to the project by announcing an undertaking to resolve those project risks that the government can control. The foremost factors that will form the foundation for the project include, alignment (optimising and purchasing); Wildlife and stock management along alignment; Cross border regulations and the Electric vs diesel traction.


Key risks to the whole project include Coal Price; Cross Border Project; Land Acquisition; Alignment of participants and the presence of migratory animals in the likely path of the rail line along the three main wildlife corridors identified, linking the Kgalagadi Transfrontier Park and the Central Kalahari Game Reserve.


The master planning as set in the development plan by the consultants, has identified clusters of potential coal mines and developed connections to the Trans Kalahari Railway line, 11 clusters in total – some more likely to develop than others.


The main line of the rail way will start at the Mmamabula Coal Fields and pass through some clusters owned by Walkabout Resources. The north eastern extension of the rail line will reach clusters owned by among others, Anglo Coal (Pty) Ltd, Weldon Asenjo, African Energy Botswana (Pty) Ltd.


Mineral resources along the TKR corridor in Namibia may further improve the viability of the TKR, though this factor has not been assessed. Other potential contributors to the TKR identified include Copper deposits from North West Botswana and Manganese in southern Botswana.


Giving comment on the progress of the TKR, the Managing Director of Botswana Shumba Coal, and Mashale Phumaphi said, “I believe that the railway line is of strategic national importance to Botswana. The progress of the development is not as fast as one would want, however given the current constraints of lack of funding for the project and low coal prices it is understandable.”


When asked about confidence on the project, Phumaphi said, “The commodity markets tend to be cyclical, therefore the falling prices are not a worry to me, given that the developing countries have a huge appetite for gravel, lumber, steel, coal for energy and other materials needed to build roads and public works. This building spree is being prompted by population growth and increasing urbanization and thus I believe that over the medium to long term, coal prices will recover and continue to increase.”


He however revealed that Shumba would not invest on the project yet. “We do not have that intention at the moment but this may change in future,” he asserted.


“If the coal sector is developed in tandem with the power sector and thus making Botswana a regional power hub, I am of the belief that the revenues and jobs created would easily compete with the diamond sector,” Phumaphi posited.


South African mining Consultancy Analytika Holdings Director, Alan Golding was previously quoted in the media as saying the coal industry in Botswana was “moribund” due to little or no coal mining exploration underway in the country.
Golding also said that a more facilitative approach should be considered to develop the country’s coal resources and mitigate any challenges.


“If several smaller mines, with a one-million to two-million yearly production capacity, could be brought to production, it would be easier for the existing infrastructure and rail to cope with international exports and the required capacity,” Golding was quoted in South African media reports.


According to Golding, the mines could develop the required human resources and increase the local skills pool, as well as supply the local power generation market, which would allow for expansion in the coal mining industry and for the export of power to neighbouring countries that have shortages.


 “In the long term, Botswana could supply the international or African markets if the price is right,” Golding said.


He however also said that there should be no rush to invest in the coal sector since a no profit is currently expected to be gained from its mining. He further noted that current  coal prices, which averaged $66 per tonne to $67 per tonne for December 2014, and January 2015 shipments were negatively affecting the coal export market, as well as the ability of exploration companies to bring operations into production.

“Investors are not prepared to invest in exploration if they cannot, in the long term, see a deposit brought in to production,” Golding said, emphasizing that if the product cannot be taken to market, it remains only a resource and not a reserve.

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Matsheka seeks raise bond program ceiling to P30 billion

14th September 2020
Dr Matsheka

This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.

“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.

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Lucara sits clutching onto its gigantic stones with bear claws in a dark pit

14th September 2020
Lesedi La Rona

Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.

A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.

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Botswana Diamonds issues 50 000 000 shares to raise capital

14th September 2020
Diamonds

Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.

A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.

Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.

In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.

The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.

In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.

Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.

The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”

In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.

Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.

The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.

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