Gov’t 'forgoes' mining stakes

Government will continue to ‘carefully’ evaluate investment options at its disposal as and when mining companies set business in the country, a senior government official has disclosed.  The country’s mining laws empower government, upon issuance of a mining licence, to acquire up to 15 percent working interest participation in a mining operation.

Such share options can only be done soon after the company is granted a mining licence. The 15 percent share option excludes diamond mines, which government has the right to negotiate. “We look at a number of factors before we make any investment decision,” minerals, energy and water resources told Boikobo Paya told BG Business at a recent mining conference.

However, a number of mines have in the past decade or so commenced mining various minerals in the country and government has not revealed whether it has decided to forego such investment rights or not. Such companies include diamond company Lucara, Discovery Metals, Firestone Diamonds, most recently Kimberly Diamonds (which has bought Mantle Diamonds out of Lerala), and the soon to be commissioned Gem Diamonds.

Paya further said, the country’s financial position at any point in time also comes into play before any decision is reached. Until recently, the company’s financial position has been in bad shape. This was further made worse by successive budget deficits and poor economic growth. The Permanent Secretary also said each mine's economic case, that is projected revenue is also considered.

Government has not made a decision to buy a stake at Lucara’s Karowe mine that has posted exceptional results since it was commissioned more than two years ago. Apart from its sound financial position, the company is better known for its exceptional stones, which have even forced the company to construct a specific circuit for such stones.  Paya agrees that Karowe diamond mine has done well since operation commenced. He was quick to point out the size of the mine is also taken into consideration. Gem Diamonds, which owns Ghaghoo mine, is yet to hear if any investment options will be exercised by the state. Negotiations for any investment have not been publicly disclosed, at least by the two parties-government and Gem Diamonds Botswana. 

Meanwhile, Paya recently told a parliament accounts committee that they are hoping to recover investment made at Lerala mine running into millions of Pula after the mine was closed owing to recession. Diamonex, which owned the mine, sold the mine, after the 2008/9 economic recession. The mine has since changed hands from Mantle Diamonds to now Kimberly Diamonds. Kimberly Diamonds has since announced they will re-start operation at the Lerala-based diamond mine.

Government has also failed to make investment at Discovery Metals’ Boteti Copper Project. The mine has been hit by financial challenges, resulting in the Botswana Stock Exchange copper miner failing to re-pay scheduled stop orders for lenders. The mine has since cut jobs to keep afloat. It remains a matter of speculation if government will make any initial capital investment at Khoemacau Copper Mining. The company regional manager, Johannes Tsimako, said they will approach the country’s mining department for a mining licence. The mine is located between Gantsi and Maun.

Government has also not negotiated for any shareholding at Firestone Diamonds’ BK11 mine. The diamond mine, which is located near Orapa, has since shut operations citing poor market prices.  The company, which has since delisted from BSE, has told the media that they will open when market recovers. They are currently spending millions of Pula in maintaining the mine. Two years ago, Botswana failed to exercise the pre-emptive rights to increase stake at De Beers, a leading rough diamonds producer with assets in Africa and Europe. The 40 percent share option chance came after one of South Africa’s richest families-The Oppenheimers decided to sell 40 percent shares at De Beers for $5,1 billion. Johannesburg Stock Exchange (JSE) diversified mining house-Anglo American bought the stake that put it at undisputable 85 percent majority. 

Botswana, which has 15 percent at De Beers, could have taken the historic chance to increase its stake to 25 percent. Paya said the country also looks at the amount of royalties due to them from mining companies, as opposed to outright share purchase in new mines. According to the mines and minerals Act (2009), government is paid up to 10 percent of revenue made by each mining house depending on the mineral mined. To date government has shares at Botash, Debswana, BCL and Tati Nickel. Norilsk has decided it will sell its minority stake at BCL and Tati Nickel as part of its strategy to pull out of Russian assets. More mines are expected to set operations in Botswana if Tlou Energy, African Energy, Pangolin Diamonds, Shumba Coal’s explorations are successful.

Last modified on Friday, 20 June 2014 11:14

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