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Australian miner eyes Botswana’s biggest thermal coal investment

The development of the Trans Kalahari railway line will be pivotal in the viability of the biggest thermal coal mining project in Botswana to date. Even with unguaranteed buyer markets for Botswana coal, emerging market economies such as India and China are set to become major consumers of coal globally, with projected increases in consumption by 2020.

Australian junior miner, Walkabout Resources, this week announced the results of a scoping study into the Takatokwane thermal coal project, in Botswana, estimated that the mine would cost $767 million (P7,5 billion) to develop, the biggest such project in the country to date.

The conceptual operation at Takatokwane was based on two open-pit strip mines, each delivering six-million tonnes a year of coal. Some of the product would be upgraded through a modular two-stage washing plant, and the project was expected to deliver three saleable products.

Takatokwane is located just 195kilometres from the capital, Gaborone, in the southern belt of the Central Kalahari Sub-Basin and is directly accessible by a well-maintained bitumen road. The area was previously drilled by BP Coal Botswana Exploration in the 1970’s and more recently, by Homeland Mining in 2008.

The scoping study was based on the over seven-billion-tonne Joint Ore Reserves Committee-compliant resource at Takatokwane, with the mine design focused on a target mining area where 748-million tonnes had been classified as indicated resource.

“It was always important that we understood the optimum profile for mining the huge Takatokwane deposit. We now know that we will be building large-scale, open-cut strip mines employing drag-lines and rope excavators that will produce coal for many years to come,” Walkabout MD Allan Mulligan was quoted as saying, in statement from the company.

While the scoping study had initially opted for a 12-million-tonne-a-year production rate, Mulligan noted that this could be significantly increased in modular extensions.

Based on the 12-million-tonne-a-year output, the Takatokwane mine was currently estimated to have a net present value of $850-million and an internal rate of return of 14 percent.

However, Mulligan noted that the development of the Takatokwane project remained dependent on the construction of suitable rail infrastructure to move the coal product, which had been targeted for sale to South African power stations and for export through the Port of Walvis Bay, in Namibia.

The government of Botswana is currently investigating the feasibility of the Trans-Kalahari rail project, and the project was slated for completion by 2019/20.

The railway line 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, the consultant for the rail line project, has given the resultant capital expenditure costs at a total of USD14.2 billion (P136 billion), comprising USD8.6 billion for electrified rail, and USD1.9 billion for above rail, and USD3.6 billion for the port.

The finalisation of the Development Plan for the Trans Kalahari Railway line will be possible after the following are completed: Finalisation of Supply Chain Infrastructure;  Master Plan mapping of clusters and connections to copper/manganese; Finalisation of the commercial model assessment for the TKR; Incorporating the commercial outcome from the mine to ship modelling; Finalisation of structure assessment and impact on Government of Botswana; Funding sources identified and the Project Memorandum being developed to engage with the market in the next stage.

Takatokwane has one tenement: PL035/2007 which consists of 500 square kilometres of land holding and is 100 percent owned by Wizard Investments (Pty) Ltd. Walkabout Resources Ltd (WKT) has earned 70 percent of Wizard Investments (Pty) Ltd through its work on the ground to date.

Takatokwane South consists of two tenements: PL157/2009 and PL160/2009; and is 100 percent owned by Triprop Energy (Pty) Ltd. WKT has a 40 percent interest and is earning 65 percent of Triprop Energy (Pty) Ltd.
In August 2012 the Company announced an upgrade to the maiden JORC Inferred Resource giving a combined total of 6.88 billion tonnes of raw coal and a washed Resource of some 3.6 billion tonnes.

In April 2013, the Company announced an Indicated Resource of 478 million tonnes within the Target Mining Area.

Completion of Phase 2 drilling over a targeted zone, where shallow and thicker coal seams coincided with a lower incidence of sulphur, highlighting a large area that would be amenable to large scale surface and strip mining methods, subsequently designated as the Target Mining Area.

In April 2013, the Company commenced with a Pre-feasibility Study over the combined Takatokwane Project, which is this latest coping study, is part of.

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P230 million Phikwe revival project kicks off

19th October 2020
industrial hub

Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status.  The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.

This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago.  In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.

However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced.  Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.

The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.

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IMF projects deeper recession for 2020, slow recovery for 2021

19th October 2020

The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.

On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April.  For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.

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Botswana partly closed economy a further blow of 4.2 fall in revenue

19th October 2020

The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.

Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.

Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).

“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.

Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.

This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.

For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.

Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers.  “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.

‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’

According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.

Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.

“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.

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