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Minergy pounces on market undersupply

As major mining companies leave the coal business, under pressure to comply with international campaigns of clean energy, local junior coal producer Minergy says it stands ready to rise to the occasion and service the demand in the regional market. 

On Thursday, the company, which unearths thermal coal from its wholly owned Masama Mine near Medie village in the South East District of Botswana provided a market update to its investors and stakeholders for the six months period ending December 2021.  Minergy is listed on the Botswana Stock Exchange, backed by Government investment arms Botswana Development Corporation (BDC) and Mineral Development Company Botswana (MDC), the company started producing first saleable coal from Masama in August 2019.

The company said it expects the international pricing for Southern Africa coal to remain high, driven by the continued China/Australian standoff and Indonesian export restrictions. “Coal supply is under pressure, with demand increasing as several majors divest from coal given the negative coal narrative. Minergy expects an undersupply in the regional market as a result,” said a statement from the company.  During the second half of the year 2021 substantial progress was made towards reaching nameplate capacity at the Masama Coal Mine.

Achievements included producing the highest six-monthly volumes across all disciplines since the inception of the mine. With support from its mining contractor, Minergy said is now capable of achieving nameplate capacity of 125,000 tonnes per month.  Overburden volumes increased fourfold versus the comparative six-month period. A similar trend was evident in the amount of coal that was extracted, with growth of 100% being achieved. Record tonnage in excess of 110,000 tonnes of coal was mined in October 2021.

Stage 4 of the Processing Plant (Rigid Screening and Stock Handling section) was also successfully commissioned. Plant construction is thus complete, and is now fully operational as designed.  Resulting benefits include savings in processing costs, a stabilised supply, and further support for achieving nameplate capacity.  Daily average feed rates increased significantly and are being consistently achieved. Processed volumes increased in line with mining data, with yields remaining stable, and a record throughput of 108,000 tonnes was achieved in October 2021.

However, lower volumes were recorded during November and December 2021, impacted by the new COVID-19 variant and the related effect on workforce availability and border access, as well as by rain interruptions and lower regional sales as explained below. Minergy said with the nameplate capacity now achievable, going forward strategic focus will now be on sales to support the increased saleable product.

This will enable Minergy to generate sufficient cash flow to stabilise the business. Major cement and steel producers have, however, notified Minergy of plant shutdowns early in 2022. Alternative placement of product will be sought. In terms of the secondary listing, the company says the listing on an internationally recognised stock exchange remains an important strategic objective.  “However, affordability and timing are key considerations, which are constantly being evaluated,” said Chief Executive Officer Morné du Plessis.

The ordinary share capital raise, approved by shareholders in February 2021, has garnered interest and Minergy is actively engaging with interested parties to progress this. Plessis noted that Eskom’s future strategy remains unclear, given the ambiguous messages broadcast by the power utility in recent months, and Minergy is waiting feedback on the requirements for coal supply into the South African power station market.

Minergy believes that countries such as Botswana and Namibia will pursue power independence from South Africa (illustrated by the Botswana tender and discussions with interested parties in Namibia) and finds itself located centrally to supply both South Africa and southern African countries.  Minergy is also basing its fortunes on multibillion pula coal fueled power plant deal with Botswana Government.

The Botswana Government, through the Ministry of Mineral Resources, Green Technology and Energy Security (“MMGE”), has invited the Minergy and three other selected local bidders to tender for the design, finance, construction, ownership, operation, maintenance and decommissioning at the end of its economic life (minimum 30 years) of a 300MW (Net) Greenfields Coal-Fired Power Plant in Botswana, as an Independent Power Producer (“IPP”).

This forms part of the government’s 11th National Development and Integrated Resources Plan. It is expected that the power plant would be operational by 2026. The closing date for the bid is currently 30 March 2022. Minergy is partnering with Jarcon Power to submit the bid.  If successful, Minergy Coal will be responsible for providing coal to the power plant for the duration of the Power Purchase Agreement of 30 years, and other income streams are also being envisaged.

This profitable sale of coal will have the benefit of ensuring a steady cash flow to  Minergy, utilisation of current uneconomical coal seams and diversifying income streams. Importantly, Minergy is the only bidder to have an operational mine.

 

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P300m Phikwe Citrus project first harvest milestone

18th March 2024

The P300 million Selebi Phikwe Citrus project in Botswana has reached its first harvest milestone, with the first export dispatched to the UAE and Saudi Arabia last week. This project, aimed at diversifying the country’s export earnings from diamond mining, is a significant step towards achieving this goal.

The project, which has successfully planted 840,000 seedlings in Phase 1 and completed a 17,000 square meter pack house, is set to employ 1,000 people and create business opportunities across various value chains. These opportunities include manufacturing of juice and packaging materials, transport and logistics, and honey production.

The first export from the Selebi Phikwe Citrus project marks a major achievement for Botswana, as it opens up lucrative export markets in the Middle East and beyond. The project has met market access requirements for countries such as the EU, Canada, China, The Philippines, UAE, and Saudi Arabia, paving the way for future exports to these regions.

The economic impact of the project on the SPEDU region, where it is located, is already being felt. The construction of a 12 km water pipeline and the installation of a power line have driven infrastructure development in the area, benefiting businesses in the vicinity at minimal cost.

The project’s success is the result of collaborative efforts between various government departments and agencies, including the Botswana Investment & Trade Centre (BITC) and SPEDU. Through the BITC’s One Stop Services Centre (BOSSC), the project was able to access red-carpet investor facilitation services and unlock necessary business enablers.

The Ministry of Trade & Industry and the Ministry of Agriculture have played crucial roles in facilitating market access for the project. The Department of Plant Health has opened up protocol and permit markets for citrus exports, ensuring that the project can access international markets with ease.

Botswana has met the European Union (EU), Canada, China, The Philippines, United Arab Emirates and Saudi Arabia market access requirements. “I am happy to report that our desire to export has been actualised as the first consignment was dispatched last week to the United Arab Emirates and Saudi Arabia” Minister Kgafela revealed.

The Selebi Phikwe Citrus project is not only beneficial for the project sponsors but also for other citrus growers in Botswana. With 172 citrus growers in the country, over 90% of whom are small-scale farmers, the project presents opportunities for growth and expansion in the citrus industry.

Massive value chain opportunities are presented by the project, including fertilizer and agrochemical supplies, agro-processing opportunities, and more. The project’s spending on imports presents an opportunity for local production, further boosting the country’s economy.

On 21s March 2024, His Excellency Dr Mokgweetsi EK Masisi will officiate at a ceremony to mark the first harvest of the Selebi Phikwe Citrus project and officially open the pack house. Harvest from this multimillion pula project is expected to reach the United States, Europe and other lucrative export markets.

The project was first launched on the 11th December 2020 with a ground breaking by President Masisi. This multimillion pula private sector funded agricultural enterprise, the likes of which this country has never seen before, is widely touted as a major catalyst to revitalising and catapulting the SPEDU region back to economic glory following the closure of BCL mine in 2016.

The project promoters leased 1500 hectors of land from Mmadinare Multi- Purpose Cooperative Society which will benefit directly through proceeds.

Highlighting the ripple economic impact of the project to the SPEDU region, Assistant Minister of Trade & Industry Honourable Beauty Manake said the Selebi Phikwe Citrus project has been able to drive the development of infrastructure in the area, with the construction of a 12 km water pipeline and ensured the installation of a power line.

She said during a briefing in Gaborone on Thursday that businesses within the vicinity have tapped into these infrastructural developments at minimal cost.

The Selebi Phikwe Citrus project came into being through collective efforts of various government departments and agencies. The Botswana Investment & Trade Centre (BITC) in collaboration with SPEDU courted the investors from South Africa to venture into the project.

Through the Botswana One Stop Services Centre (BOSSC) under the BITC, the project was able to establish and take off by enjoying red-carpet investor facilitation services to unlock required business enablers.

BITC has also through its export promotion arm, facilitated the project by identifying potential export markets in the European Union (EU) and lend crucial support to the Citrus Project to access the identified markets.

About 70 percent of the produce from the Selebi Phikwe Citrus will be exported, while 30% will remain in the country. Assistant Minister Manake revealed that the Ministry of Trade of Industry has been working closely with the project sponsors to explore export markets and facilitate entry into those markets.

The Selebi Phikwe Citrus project’s first harvest and export mark a significant milestone in Botswana’s efforts to diversify its export earnings. With the potential for growth and expansion in the citrus industry, this project is set to have a lasting impact on the country’s economy and agricultural sector.

 

 

 

 

 

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Botswana’s first coal-gas fired power station to start commercial production

18th March 2024

Botswana is set to achieve a significant milestone with the upcoming commencement of commercial production at the country’s first coal-gas fired power station. Tlou Energy Limited, an Independent Power Producer listed on multiple stock exchanges, has been at the forefront of developing this groundbreaking project, which is expected to start generating electricity for both the local and export markets later this year.

Situated in the Central District, just 100 km west of Serowe, the coal-gas fired power station represents a major step towards reducing Botswana’s reliance on expensive power imports. Tlou Energy has confirmed the presence of abundant coal-gas resources in the area, making it suitable for commercial power production. The company has obtained all the necessary approvals, including environmental assessments, production licenses, power generation licenses, and a Power Purchase Agreement, to move forward with the project.

One of the key achievements for Tlou Energy has been the completion of a 100km 66kV transmission line, connecting the power station directly to Botswana’s power grid and the Southern African Power Pool. This connection opens up a vast market for the project, allowing for the sale of electricity both domestically and regionally. The company’s Managing Director, Tony Gilby, expressed optimism about the project’s progress, stating that they are on track to start generating revenue soon.

In terms of the project’s timeline, Tlou Energy is currently focused on completing the construction of the power station, installing generators, and finalizing the gas gathering line. The initial target is to generate around 2MW of power, with plans for rapid expansion to 10MW, generating approximately $10 million in revenue per annum. The company is also in discussions with investors to secure the necessary funds for project completion.

The key remaining items to be completed prior to first power sales, according Tlou Energy, include completing the construction of the power station, installation of generators, completing the short gas gathering line (from the gas wells to the generators) and energizing the power line. “Minor finishing works on the transmission line and the addition of switchgear at Serowe will also be completed prior to first power.  The initial target is ~2MW of power, followed by rapid expansion to 10MW, generating approximately $10m in revenue per annum.” The company has confirmed that it’s in discussions with some investors to secure funds required for project completion.

Tlou’s power is expected to help reduce Botswana’s reliance on expensive power imports. In addition to supplying power in Botswana, the company may sell electricity to the regional market via the Southern African Power Pool, a development which could open up a bigger market for the project.

The successful operation of Botswana’s first coal-gas fired power station will not only contribute to the country’s energy security but also have a positive impact on the regional market. By potentially selling electricity through the Southern African Power Pool, Tlou Energy could tap into a larger market, further solidifying its position as a key player in the energy sector.

Overall, the progress made by Tlou Energy in developing Botswana’s first coal-gas fired power station is a testament to the company’s dedication and vision. With the project nearing completion and commercial production on the horizon, Botswana is poised to enter a new era of energy independence and sustainability.

 

 

 

 

 

 

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Food prices could go up in 2024/2025

18th March 2024

Food prices could potentially go up in 2024/2025 due to the current El Niño conditions in Southern Africa, as reported by the Food and Agriculture Organization (FAO) of the United Nations. The update released by FAO indicates that countries in the region, including Botswana, may experience a decrease in food production, leading to higher food inflation.

The update highlights that Southern Africa has been experiencing below-average rainfall, with key cropping zones in countries such as Malawi, Mozambique, Zambia, Zimbabwe, and Namibia receiving only up to 80 percent of average rainfall quantities between November 2023 and February 2024. This has resulted in significant rainfall deficits, particularly in February, which is a critical period for crop development. The warmer than average temperatures and erratic distribution of rains have further exacerbated the situation, leading to stressed vegetation conditions and potentially lower crop yields in 2024.

In South Africa, the leading cereal producer in the region, a dry spell between late January and February 2024 has negatively impacted crop production prospects. Maize production is expected to fall this year, further contributing to the potential decrease in cereal production in the region.

As a result of the anticipated decline in cereal production in Southern Africa, import needs are projected to increase in the 2024/25 year. This could lead to the importation of cereals from outside of the region, such as the United States of America, Mexico, Brazil, Australia, and Argentina. However, importing food from global markets comes with higher transport costs and import tariffs, which may put upward pressure on food prices in Botswana.

FAO projects that based on the likely scenario of a fall in cereal production in Southern Africa, import needs are set to increase in the 2024/25 year. “Furthermore, if production declines in South Africa and Zambia materialize in 2024, cereal export availabilities in the region would be low and this could necessitate the importation of cereals from outside of Southern Africa.” According to analysts from the organization cereal prices were at higher levels in December 2023 and January 2024 in Southern Africa, reflecting the cumulative impacts of weather shocks on 2023 domestic production, elevated international commodity prices and weak currencies that intensified exchange rate pass-through effects to domestic prices. “Farther ahead, a key risk to the price growth is represented by the impact of El Niño-related rainfall deficits on cereal production in 2024.”

Some local analysts believes that Botswana could import sorghum, maize and wheat from as far as United States of America, Mexico, Brazil, Australia and Argentina as South Africa and Southern African countries which are potential suppliers of cereals, are highly likely to record decline in crop production as a result of the impact of El Niño-related rainfall deficits on cereal production in 2024. The analysts added that food imports from the global markets come with higher transport costs and import tariffs which may have an upward pressure on food prices in Botswana.

Overall, the impact of El Niño-related rainfall deficits on cereal production in 2024 poses a significant risk to food prices in the region. It is important for policymakers and stakeholders to closely monitor the situation and take necessary measures to mitigate the potential increase in food prices in 2024/2025.

 

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