Canadian miner, Lucara Diamond Corporation has taken a decision to limit expenditure towards Karowe mine expansion project, a multibillion pula undertaking intended to expand the 8 year old mine into an underground operation, the company said on Monday.
A performance report for the second quarter of 2020 released by the Vencuvour headquartered rare gems producer this week shows that revenue for the first six months of the year ended 30 June 2020 has dropped significantly to $41.6 million from $91.2 registered during the first Half year(H1) 2019, predominantly due to COVID-19.
The pandemic did not only curtail movement and restrict shipping of goods but also significantly eroded demand as tail end consumption of jewelry muted to record low levels, the likes of which the industry has never experienced before.
The BSE listed junior miner had initially planned to spend a whopping $53 million (over 600 million) this year on its first phase works for the underground expansion project after a successful feasibility study last year.
Lucara‘s 2020 spending forecast towards the expansion works was pinned to the company‘s operation cash flow and internal revenues, while succeeding works which coil up to $514 million for a period of 5 years would be financed by a combination of internal revenue and debt.
In the Q2 results, Lucara explained that its planned capital spending program for 2020 was to be largely focused on the initiation of an underground expansion project at Karowe and that was to be funded entirely from free cash flow generated by operations.
The top gem producer noted in a commentary alongside the financial results that although the recently announced supply agreement with HB is expected to provide regular monthly cash flow for the remainder of the year, some uncertainty remains around estimating revenue for that period.
“As a result, the underground expansion program has been re-scoped and reduced from the previous budget of $53 million and will focus on long lead time critical-path items through the remainder of the year,” the company revealed.
Lucara further shared that during H1 2020, $5.6 million, around P60 million was spent on project execution activities including detailed engineering and design work and early procurement initiatives.
Karowe mine underground expansion program has an estimated capital cost of $514 million and a five year period of development, with flexibility to adjust capital spending depending on market conditions.
The Canadian miner says it still expects to finance part of the capital cost with debt and the balance from cash flow generated from operations as financing options continue to be assessed.
Lucura directors on Monday noted that the company continues to have a strong availability of working capital, including $13.7 million in cash at the end of Q2 and $31 million available from its revolving term working capital facility with the Bank of Nova Scotia. The $50 million credit facility was extended to May 5, 2021 during the second quarter of 2020.
“As part of the extension, and until Lucara obtains greater clarity on its cash flow projections in the short-term, Lucara has agreed to limit capital expenditures related to the underground expansion project,” revealed President & Chief Executive Officer, Eira Thomas.
Thomas said, “The extension of this facility provides an important source of liquidity to Lucara during a period of significant uncertainty in global markets.”
The Underground mine plans were first reported early last year with positive results from the feasibility Study announced later in the year. Karowe is one of the world’s most prolific producers of large, high value type IIA diamonds and the only diamond mine in recorded history to have produced two +1000 carat diamonds.
The underground expansion would double the mine life, and generate significant revenue and cash flow out to 2040, extending benefits to the Company, its employees, shareholders, communities surrounding the mine, and Botswana.
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 at pre-production capital costs of $514 million for the underground project.
2020 Q2 PERFORMANCE
Due to COVID-19 Lucara made a deliberate decision not to tender any of its +10.8 carat production after early March 2020 amidst the uncertainty caused by the global crisis, and instead entered into a ground breaking supply agreement with HB Group, for the remainder of 2020.
This large, high value production from Karowe has historically accounted for approximately 70% of Lucara’s annual revenues. The company says revenue from this agreement will be realised starting in Q3 2020 based on a polished price mechanism.
Karowe continued to operate throughout the COVID-19 pandemic, and delivered strong production results in Q2, consistent with the original 2020 plan and below budget.
Adjustments were made to the original 2020 mine plan by reducing waste and ore mined through the second quarter to ensure the health and safety of employees operating in the pit and to reduce variable costs.
The process plant continued at full capacity, with additional safety measures in place, processing ore almost entirely from the South Lobe. Overall performance during the second quarter remains consistent with the strong operational results achieved over the past two years.
However the Company recorded a net loss of $13.9 million for Q2 2020 resulting in a $0.04 loss per share for the quarter. This compares to net income of $0.7 million for Q2 2019 and earnings per share of $Nil.
A decrease in total revenue, predominantly from deferral of sales of +10.8 carat stones, had the most significant impact on the current quarter’s results.
Cash flow used in operations in Q2 2020 totaled $4.9 million compared to cash flow earned from operations of $6.5 million in Q2 2019, largely due to the $35.1 million decrease in comparable revenue between the periods and an increased outflow for taxes payable relating to 2019 tax payments required in 2020.
Newly established wholly indigenous citizen owned retail chain Payless Retail (PTY) Ltd is set to partake in the first session of Botswana Stock Exchange (BSE)’s Tshipidi Mentorship Program (TMP) on Monday June 29th.
The TMP aims to train and capacitate SMEs so they can operate as corporates and eventually list on the local bourse. According to local bourse, BSE, the program aims to provide practical training to potential issuers through a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.
Payless Retail is a newly established supermarket chain whose mission is to become a convenient one-stop shopping destination as it is one of the Botswana oldest retailing brands. It started off as Corner Supermarket in January 1976, and to date boasts of nine stores in, among others, Gaborone, Mochudi, Molepolole and Tlokweng. Payless was recently acquired by Ellis Retail Group, which is led by businessman Elliot Moshoke.
The takeover catapulted Ellis Retail to the envious position of being the first wholly indigenous owned major retail chain. “We jumped at this opportunity because it gave us a chance to prove to Batswana that the retail business is open and lucrative.”
The objective is to create a proudly Botswana retail chain that fully supports our national Vision, economic development and citizen economic empowerment ambitions,” Moshoke told BusinessPost.
He further emphasized that Batswana are capable and able to run large scale businesses hence they need to accept invite foreign investors who will come in to support us not take the business. “Our win as Payless in the Fast Moving Consumer goods (FMCG) industry is a win for Batswana. We need their support in this difficult and challenging journey.
As you are aware, Payless is the only retail chain in the hands of Batswana ba Sekei. We need to take advantage of this to generate employment and create small businesses in retail and Agri businesses,” he explained.
The retailer has also partnered with Botswana Investment & Trade Center (BITC) on their #PushaBW campaign with a view to initiating earnest engagement with local producers to iron out bottlenecks and ensure seamless trading.
“Local producers have to be part of the phenomenal growth of the Payless brand. This will in turn facilitate employment creation and economic growth. We did this because we have the utmost respect for local manufacturers and producers,” he mentioned.
Payless is currently restocking all of its stores; a development that Moshoke says is testament to the retailer’s commitment to growing the brand and ensuring continuity of business. He further revealed that renowned retail suppliers like PST and CA Sales have reignited their trust in Payless, opening their doors for Payless as they have faith in the retailer’s new owners.
The takeover has reportedly saved more than 200 jobs and gave a new lease of life to the previously fledging Payless brand. According to a press release from the management team, the Payless work forces are also extremely excited about what the future holds. The TMP is a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.
The program is administered by experts within the listing ecosystem and seeks to bring the potential issuers closer to the listings advisers, investors and leaders of already listed companies. “As a strategic initiative, the BSE decided to set up this mentorship program in a bid to assist SMEs to strategize, corporatize and acclimatize in order to list to access equity finance and expand operations,” said the BSE.
The TMP will avail to SMEs practical insights, knowledge and feedback from institutional investors, increased awareness of the BSE listing requirements as well as an intimate network of advisors and CEOs of listed companies. After training, Payless will graduate with improve governance structures and better knowledge of articulating its business strategy. The retailer will also gain increased visibility through BSE marketing platforms.
Despite Covid-19 interrupting trade worldwide, exporting companies in Botswana which benefited from the Botswana Investment and Trade Centre (BITC) services realised P2.96 billion in export earnings during the period from April 2020 to March 2021.
In the preceding financial year, the sale of locally manufactured products in foreign markets had registered export revenue of P2, 427 billion against a target of P3, 211 billion BITC, which celebrates 10 years since establishment, continues to carry out several initiatives targeted towards expanding the Botswana export base in line with Botswana’s desire to be an export led economy, underpinned by a robust export promotion programme in line with the National Export Strategy.
The main products exported were swamp cruiser boats, pvc tanks and pvc pipes, ignition wiring sets, semi-precious stones, veterinary medicines, hair braids, coal, textiles (towels and t-shirts) and automobile batteries. These goods were destined mainly for South Africa, Zimbabwe, Austria, Germany, and Namibia.
With Covid-19 still a problem, BITC continues to roll out targeted virtual trade promotion missions across the SADC region with a view to seeking long-lasting market opportunities for locally manufactured products.
Recently, the Centre facilitated participation for Botswana companies at the Eastern Cape Development Council (ECDC) Virtual Export Symposium, the Botswana-Zimbabwe Virtual Trade Mission, the Botswana-Zambia Virtual Trade Mission, Botswana-South Africa Virtual Buyer/Seller Mission as well as the Botswana-Namibia Virtual Trade Mission.
BITC has introduced an e-Exporting programme aimed at assisting Botswana exporters to conduct business on several recommended e-commerce platforms. Due to the advent of COVID-19, BITC is currently promoting e-trade among companies through the establishment of e-commerce platforms and is assisting local companies to embrace digitisation by adopting e-commerce platforms to reach export markets as well as assisting local e-commerce platform developers to scale up their online marketplaces.
During the 2019/2020 financial year, BITC embarked on several initiatives targeted at growing exports in the country; facilitation of participation of local companies in international trade platforms in order to enhance export sales of local products and services into external markets.
BITC also helped in capacity development of local companies to compete in global markets and the nurturing of export awareness and culture among local manufacturers in order to enhance their skills and knowledge of export processes; and in development and implementation of trade facilitation tools that look to improve the overall ease of doing business in Botswana.
As part of building export capacity in 2019/20, six (6) companies were selected to initiate a process to be Organic and Fair Trade Certified. These companies are; Blue Pride (Pty) Ltd, Motlopi Beverages, Moringa Technology Industries (Pty) Ltd, Sleek Foods, Maungo Craft and Divine Morula.
In 2019 seven companies which were enrolled in the Botswana Exporter Development Programme were capacitated with attaining BOBS ISO 9001: 2015 certification. Three (3) companies successfully attained BOBS ISO 9001:2015 certification. These were Lithoflex (Pty) Ltd, General Packaging Industries and Power Engineering.
BITC’s annual flagship exhibition, Global Expo Botswana (GEB) to create opportunities for trade and strategic synergies between local and international companies. The Global Expo Botswana) is a premier business to business exposition that attracts FDI, expansion of domestic investment, promotion of exports of locally produced goods and services and promotion of trade between Botswana and other countries.
The portal also provides information on; measures, legal documents, and forms and procedures needed by Botswana companies that intend on doing business abroad. BITC continues to assist both potential and existing local manufacturing and service entities to realise their export ambitions. This assistance is pursued through the ambit of the Botswana Exporter Development Programme (BEDP) and the Trade Promotion Programme.
BEDP was revised in 2020 in partnership with the United Nations Development Programme (UNDP) with a vision to developing a diversified export-based economy. The programme focuses mostly on capacitating companies to reach export readiness status.
Prices for goods and services in this country continue to increase, with the latest figures from Statistics Botswana showing that in May 2022, inflation rate rose to 11.9 percent from 9.6 percent recorded in April 2022.
According to Statistics Botswana update released this week, the largest upward contributions to the annual inflation rate in May 2022 came from increase in the cost of transport (7.2 percent), housing, water, electricity, gas & other Fuels (1.4 percent), food & non-alcoholic beverages (1.1 percent) and miscellaneous goods & services (0.8 percent).
With regard to regional inflation rates between April and May 2022, the Rural Villages inflation rate went up by 2.5 percentage points, from 9.6 percent in April to 12.1 percent in May 2022, according to the government owned statistics entity.
In the monthly update the entity stated that the Urban Villages inflation rate stood at 11.8 percent in May 2022, a rise of 2.4 percentage points from the April rate of 9.4 percent, whereas the Cities & Towns inflation rate recorded an increase of 1.9 percentage points, from 9.9 percent in April to 11.8 percent in May.
Commenting on the national Consumer Price Index, the entity stated that it went up by 2.6 percent, from 120.1 in April to 123.2 in May 2022. Statisticians from the entity noted that the transport group index registered an increase of 7.3 percent, from 134.5 in April to 144.2 in May, mainly due to the rise in retail pump prices for petrol and diesel by P1.54 and P2.74 per litre respectively, which effected on the 13th of May 2022.
The food & non-alcoholic beverages group index rose by 2.6 percent, from 118.6 in April 2022 to 121.6 in May 2022 and this came as a result of increase in prices of oils & fats, vegetables, bread & cereal, mineral waters, soft drinks, fruits & vegetables juices, fish (Fresh, Chilled & Frozen) and meat (Fresh, Chilled & Frozen), according to the Statisticians.
The Statisticians said the furnishing, household equipment & routine maintenance group index rose by 1.0 percent, from 111.6 in April 2022 to 112.7 in May 2022 and this was attributed to a general increase in prices of household appliances, glassware, tableware & household utensils and goods & services for household maintenance.
The prices for clothing & footwear group index moved from 109.4 to 110.4, registering a rise of 0.9 percent during the period under review. Bank of Botswana has projected higher inflation in the short term, associated with the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices and added that the possible increase in public service salaries could add also upward pressure to inflation in this country.