In the results of its last quarterly report (Q2 FY15) of October, November and December 2014, Discovery Metals Limited’ 100% owned Boseto Copper Operation in Botswana, reflected a general decline in performance across most of the company’s metrics. The reports were provided for mining, concentrator performance, metal production and costs for the last three months of 2014.
DML experienced a 13 percent decrease in copper production compared to the 20 percent increase it had in Q1 FY15 (of July, August and September.) In Q2 FY15 the company had a quarterly production of 5,569 tonnes of copper in concentrate produced declining from the quarterly production of 6,428 tonnes copper in concentrate produced it recorded in Q1 FY15.
The company recorded a 19% decrease in material mined (7.56 Mt total material mined) compared with the 3% increase of Q1 FY15 which had 9.31 Mt total material mined. There was also a 3% decrease of High–grade sulphide recovery of 90.0% compared to 3% increase of High–grade sulphide recovery of 93.3%.
The report states that this decline in performance was the result of progressive decommissioning of the Zeta open pit which was the operation’s main source of higher grade sulphide ore. Ore to ROM for Q2 FY15 was delivered from Zeta and Plutus Stage 1 pits during the first month of the quarter.
The main sources of ore supply to the ROM during the last two months of the quarter were sulphide and transitional ore from Plutus Stages 1 and 2 with only minor volumes of sulphide ore still coming from the Zeta pit’s “good bye cuts”.
The process plant continued to be compromised by inconsistent supply of ore during the quarter. Process performance was also affected by the treatment of significant volumes of transitional ore from the Plutus Stage 2 pit and the treatment of the low grade stockpile that had accumulated from the previous quarter.
All pits were redesigned for the change in commodity prices and to allow the new plan to put the Operation into care and maintenance by June 2015 to be implemented. DML revealed that their focus going forward is to safely and effectively execute the new mine plan aimed at putting the Operation into care and maintenance by June 2015 to ensure that production and revenues from the Operation are maximized within this time period. Simultaneously the company will be actively pursuing the commencement of development of the Zeta underground development.
The report further state that total material movement performance was lower as a result of the loss of Excavator 903 (EX903) due to a fire incident and major component change out work on EX902 for a full month. This is said to have had negative impacts on the progress to expose additional ore faces, hence adversely affecting quality ore delivery to the ROM pad.
Copper produced for the quarter was 13% lower than 20% higher of Q1 FY15, while contained silver was 26% lower compared to 41% higher contained silver of Q1 FY15. Decreased metal production was due to reduced higher grade sulphide ore treated from Zeta as this pit was depleted and increased low recovery transitional ore as the Plutus Stage 2 pit started delivering ore to the ROM pad following waste stripping in Q1 FY15. Due to this factors concentrate production also deteriorated by 16% compared to 20% improvement of Q1 FY15.
As for the financial performance C1 cash costs per pound of copper production had a 53% increase ($2.89/lb) compared to 40% decrease (US$1.89/lb) of Q1 FY15. The report explains that the two drivers of the increase were the 13% quarter on quarter decrease in copper in concentrate produced and in Q1 FY15, $9.6m of Plutus Stage 2 overburden waste stripping costs were capitalized to the balance sheet in accordance with applicable accounting standards.
In Q2 FY15, production of the first ore from Plutus Stage 2 (169kt ore mined) was achieved and in line with the accounting standards the cost capitalized ($6.7m) during the quarter was significantly less. The $2.9m reduction in cost capitalized accounted for $0.36 of the $1.00 increase in C1 cash cost.
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”