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Lucara invests P600 million on Karowe expansion

Canadian based top gem producer Lucara Diamond Corporation, which wholly owns Botswana’s Karowe Mine, has decided to hold onto some of its dividends despite impressive revenue in 2019 coupled with a successful year of cost containment and production efficiency.

According to the company‘s financial results for the year ended 31st December  2019 released this week, the multi-listed rare gem behemoth has suspended the quarterly dividend payment of C$0.025 per share, effective as of Q4 2019. In November 2019, the company announced the results of a positive feasibility study for development of an underground mine at its 100 percent owned Karowe Diamond Mine.

Information from Vancouver, Canada reveals that concurrently with the announcement of the feasibility study, Lucara’s Board of Directors determined that it would be in the best interest of the company and its shareholders to suspend the quarterly dividend payment of C$0.025 per share, effective as of Q4 2019.  During the first three quarters of 2019, Lucara paid a CA$0.025 quarterly dividend, returning $22.4 million, CA$0.075 per share to shareholders in 2019, compared to a dividend pay-out of $30.3 million or CA$0.10 per share in 2018. 

Since inception in June 2014, Lucara has paid $271 million in dividends to its shareholders. According to Lucara, the Karowe underground feasibility study demonstrated the potential to extend the mine life to 2040, while generating significant economic benefits for the company, its shareholders, employees, the communities surrounding the mine and the government of Botswana. 

Furthermore, Lucara noted that after the mine expansion was given the green light, the Board of Directors decided to re-direct the company’s available cash to the early works of the underground including detailed engineering, procurement initiatives and project financing.  The underground mining operation combined with the current open pit mining is expected to yield production figures of up to 7.8 million carats out to 2040 and $5.25 billion in Gross Revenue.  These activities will be funded from operating cash-flow in 2020, under a Board approved budget of up to $53 million (over P587 million).

YEAR END PERFORMANCE

During the year 2019 Lucara raked in $192.5 million in revenues,  mirroring 8 percent increase from the 2018 figure of $176.2 million, beating the 2019 global diamond market downturn and the company’s  guidance of  $170 million to $180 million. Karowe Mine continued on its upward trajectory of unearthing rare diamonds in unprecedented carat weight and value. Single diamonds in excess of 10.8 carats from the mine’s direct milling ore reached heights of 786 stones totalling 24,424 carats recovered, including 31 diamonds in excess of 100 carats, of which 2 stones were in excess of 300 carats.

This included the historic 1,758ct Sewelô diamond which was recovered in April 2019. Specials were also recovered in treatment of historic, pre-XRT recovery tailings, including a 375 carat stone in Q3 2019.  Operating cash costs for the year ended December 31, 2019 were $31.88 per tonne processed down from 2018’s $39.92 per tonne processed. This was also slightly lower than the full year forecast cash cost of $32-$37 per tonne processed, indicative of Lucara’s fruitful cost containment drive.


Lucara explained in the financial results that operating cash cost per tonne processed was positively impacted by a combination of higher tonnes processed and lower overall tonnes mined as planned in 2019 following the completion of a waste stripping campaign in 2018.  “Cost optimisation initiatives and favourable foreign exchange contributed to the lower operating cash cost per tonne compared to guidance. We expect operating cash costs for 2020 to continue to trend between $32-$36 per tonne processed” said Company Directors this week.

Adjusted EBITDA ended the year at $73.1 million as compared to adjusted EBITDA for the same period in 2018 of $60.5 million mirroring and increase of 21 percent. Further highlights indicate that Net income for the year ended December 31, 2019 was $12.7 million compared to net income of $11.7 million in 2018. As at December 31, 2019, Lucara had cash and cash equivalents of $11.2 million, sitting on approximately P120 million with no debt.  In 2019, the company invested $29.0 million in the business, primarily towards the completion of an underground feasibility study, and, improvements to plant and equipment to maximise carat recoveries.

Clara, Lucara’s digital diamond trading and sales platform completed its first year of operations with a total of 15 sales, 27 customers and volume transacted of $8.4 million. Development activities were completed under budget at $0.4 million in 2019. Lucara says Clara is poised to achieve significant growth in 2020 with the addition of further customers and third-party production. 

Commenting on the performance for the year, Lucara President and Chief Executive Officer, Eira Thomas noted that the company’s strong operating results for 2019 reflect Lucara’s continued focus on safe, reliable operations that have delivered increased productivity at lower costs. Thomas explained that this provides a solid foundation to support Lucara’s next stage of growth, an underground expansion at Karowe which has the potential to extend the mine life to 2040, add net cash flow of $1.22 billion and gross revenues of $5.25 billion. 

“Our second business, Clara, continues to deliver solid results and is on track to steadily grow third party supply to the platform over the course of the coming year.  In 2019 Lucara also continued to explore ways and means to maximise the value it receives for its diamonds,” she said. Thomas further added that Lucara will in the year 2020 and going forward enter into cutting edge partnerships to explore opportunities in the horizon.

 “Our ground-breaking agreement with Louis Vuitton in January 2020 is another example of how we are delivering on this commitment. Through this agreement, we will demonstrate that greater collaboration within the supply chain can unlock value and increase transparency from mine to consumer,” she said.

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Inflation spike building further upwards

27th October 2020
Inflation spike

In the coming months prices will go up and inflation will shoot sharply above the target of 3 percent to 6 percent towards the third quarter of 2021, the Bank of Botswana on the other hand will continue to withhold its knife on the Bank Rate. This is according to a forecast made by Kgori Capital in its recent Market Watch Segment.

Statistics from Statistics Botswana show that the recent 1.8 percent increase in the September inflation, from 1 percent in August, was a reflection of the upward adjustment in public transport fares (Transport (from -6.9 to -3.9 percent) in September 2020, which is estimated to have increased inflation by approximately 0.64 percentage points.

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Plans to erase Edgars, Jet trademark from Botswana malls underway

27th October 2020
Edgars Jet trademark

Local anti-trust body, Competition and Consumer Authority (CCA), this month received back to back acquisition proposals from South African clothing retailers to wipe out their former rivals, Edcon, from Botswana malls.

Last week BusinessPost was in possession of Merger Notice No 23 of 2020 whereby a South African clothing retailer owner, Retailability Proprietary Limited, through Oclin Proprietary Limited, proposed to acquire parts of the Edgars business conducted by Edcon in Botswana (through Edcon Botswana), as a going concern, consisting of certain assets and identified liabilities.

South African government’s Business Rescue Practitioners earlier this year announced that Retailability will buy Edgars, after the latter filed for a business rescue plan in April after it failed to pay suppliers. This move will see Retailability add Edgars to its portfolio consisting of brands such as; Legit, Beaver Canoe and Style.

Retailability landed on Botswana shores 18 years ago with its flamboyant urban fashion Style which had 17 stores. Style, having almost the same target market as Edgars as it offers men’s and ladies’ contemporary and formal fashion, gave the 91 year old legendary clothing retailer a run for its money, and has won the battle as its parent company has taken over Edgars.

Retailability brands are synonymous with Botswana shopping centres and there are currently five (5) Beaver Canoe stores, 10 Style stores and seven (7) Legit stores across this country. The Beaver Canoe stores sell clothing apparel for men and boys only. The Legit stores have a fashion store format which focuses on the retailing of clothing, footwear, accessories, colour cosmetics and cellular products.

Retailability operates in over 460 stores across South Africa, Namibia, Botswana, Lesotho, and Eswatini. Many observers suggest that because of the deal with Retailability to swallow Edcon, most Edgars stores in Botswana will change their name and be branded Style. A sad tale for religious consumers of the Edgars trademark who got used to love their favourite brand for years.

According to CCA’s Merger Notice No 23 of 2020, Retailability is controlled by Clifford Raymond Lines (through a company which functions solely as a holding company of his interests in Retailability) and Metier Investment and Advisory Services Proprietary Limited (“Metier”). Metier is a private equity enterprise with investments in a number of industries spanning from healthcare, hospitality, FMCGs and telecommunications.

Retailability directors are mostly South Africans; Clifford Raymond Lines, Mark Richard Friday and Norman Victor Drieselmann. Only Nasreen Essack, who was appointed February this year, is a Motswana. He comes after Brian Thuto Tsima left on the same date. Retailability 100 percent owns Oclin Proprietary Limited, the company it is acquiring Edgars with, by a capacity of 3000 shares.

The target business, Edgars, offer textiles, cosmetics and cellular products. Edcon has a Motswana director, Charles Mzwandile Vikisi, a South African, Shane Van Niekerk and Zimbabwean Jethro Kamutsi.

“The Target Business comprises of two (2) Edgars franchise brands and private label stores across Botswana. These stores target middle to upper income customers and are home to a range of private label brands such as Free2BU, Charter Club and Stone Harbour, and a wide range of market label brands (such as Levi’s and Guess) for clothing, footwear and cosmetics.

In addition, the Target Business operates iconic Edgars Home and Edgars Beauty stores as store-in-store formats rounding out the department store offering in Botswana,” said CCA.
Foshini also lines up to take Jet Botswana from Edcon.

The Foschini Group (TFG) released a statement confirming its latest intentions to acquire Edcon assets or Jet for a cash purchase consideration of R480 million. This was after the business rescue practitioners offered TFG to buy Jet by that amount.

CCA is currently mulling on a proposed merger by TFG to take over Jet operations in Botswana. Merger Notice No 21 of 2020 from TFG came a few days before the Retailability proposal. In this merger TFG, acting through Foschini Botswana, want to take over “parts” of the Jet business conducted by Edcon through Jet Supermarkets Botswana.

TFG will be willing to add Jet to its portfolio of 30 retail brands that trade in clothing, footwear, jewellery, sportswear, homeware, cell phones, and technology products from value to upper market segments throughout more than 4085 outlets in 32 countries on five continents. TFG will also get Jet’s distribution centre located in Durban and certain stores in Botswana, Lesotho, Namibia and Eswatini. Also part of this fat deal is that the company is looking to also acquire JET Club and all existing JET stock of no less than R800 million.

Johannesburg listed TGF owns Foschini Retail Group which owns the local operations called Foschini Botswana, the acquiring enterprise according to CCA merger notice. “TFG is not controlled by any enterprise/s and for completeness, the three largest shareholders of TFG holding shares greater than 5% as at 27th March 2020 are: Government Employees Pension Fund (16.2%) Public Investment Corporation (13.2%); Old Mutual Limited (6.7%); and Investec Asset Management (6.3%). The remaining issued share capital in TFG is widely held,” said the merger notice.

Only Abdool Rahim Khan is a Motswana in the Foschini Botswana directorship, the rest; Ganeswari Shani Naidoo, Anthony Edward Thunström and Gustav Jansen (alternate director) are South Africans.

According to the CCA merger, the Jet Business is Edcon’s discount department store division, selling clothing, footwear, homeware and some cosmetics as well as cellular products and targets lower-to-middle income consumers throughout Botswana. The Jet Business does not directly or indirectly control any enterprises, says the notice. CCA seeks any stakeholder views for or against the proposed merger, which may be sent within 10 days from date of this publication to the following address.

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BOCRA, associates to provide broadband internet in schools

27th October 2020

Botswana Communications Regulatory Authority BOCRA signed a memorandum of Agreement (MoA) with the Ministries of Transport and Communications (MTC), Basic Education (MoBE) as well as Local Government and Rural Development (MLGRD).

The MoA seeks to continue the collaboration that dates back to 2016 when the three parties first agreed to work together in a project aimed at computerizing and providing broadband Internet to primary schools in remote and underserved areas of Botswana.

The project benefitted 68 primary schools and 9 secondary schools through the construction of Local Area Network (LAN) in each primary school, provision of 5 Mbps dedicated broadband Internet to each Primary School and provision of Wi-Fi enabled tablets, laptops and related peripherals such as printers and copiers.

Further, the project will see the augmentation of computers in 9 Junior Secondary Schools with 30 laptops per identified school and employment of Information Technology (IT) officers at each primary school.

When speaking at the signing ceremony in Gaborone, Chief Executive of BOCRA and Chairperson of Universal Access and Service Fund (UASF) Board of Trustees Martin Mokgware said the project’s ultimate goal is to facilitate pupils in schools and host villages to be able to play a meaningful role in the digital economy.

Mokgware indicated that this necessitates upgrading of existing Telecommunications infrastructure to high capacity broadband that will support delivery of education, accessibility to the quality Internet and usage of ICTs.

The Fund began its inaugural programme by sponsoring the provision of WiFi hotspots in public areas around the country as its first project. Following the successful implementation of public WiFi hotspots, the Fund identified Kgalagadi, Ghanzi and Mabutsane areas for mobile network upgrades, schools computerization and internet provision.

Conscious that the project would not be possible without buy-in and support from MoBE, MTC and MLGRD, the Fund facilitated the signing of the first MoU between the three parties in 2016 for implementation of the project.

BOCRA Chief Executive said the signing of this agreement is aimed at benefitting the Kweneng District, adding that they have already assessed the area and have determined that they will be covering 62 underserved villages and 119 schools, 91 of which are primary schools.

“This is a project for which the partner Ministries need to re-commit for its success. Lessons from the previous schools’ computerization and internet connectivity project require that we increase our involvement and resources dedicated to the project for it to be successful. It is my belief as the project coordinator, that we will not do things the way we did them during the first project, for if we do, then we will not have learnt anything,” he said at the signing ceremony.

The purpose of learning is so that there can be continuous improvement to minimize the length of time and amount of resources utilized, he said expressing confidence that their partners will step up to the plate and ensure they play their part in the implementation of the project and that it will progress smoothly having already tread along a similar path.

UASF’s role lies mainly in funding and project management. According to Mokgware, once the project is completed, the work to integrate ICTs into the classroom begins in earnest. Therefore, he said, the project will not succeed without full cooperation and oversight of partners.

“MoBE will put in place the necessary content and ensure that the curriculum is available to all. MLGRD will provide, among others, the enabling environment by ensuring readiness of the school’s infrastructure and necessary security.”

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