‘Govt cannot save DML’ – Mokaila

Discovery Metals Limited has failed to pay government royalties amounting to P24 million, the Minister of Minerals, Energy and Water Resources, Kitso Mokaila, has disclosed.Speaking in an interview regarding whether the government could rescue the mine from liquidation, Mokaila pointed out that there is not much that can be done for the indebted Australian junior miner.

The minister pointed out that when the company came complaining of its high cost base, the government tried to relieve it by exempting it from paying royalties. “The problem is that DML was already high in debt and there was nothing that could be done,” he said.Mokaila said his ministry is greatly concerned by the massive job losses within the mining industry, even so saying there was nothing much that could be done because the industry was subject to market forces.

The minister said DML’s troubles had come a long way to its current debt of $110 million (approximately P880 million) in addition to failing $40 million (about P320 million) needed to transition the mine to underground, prompting creditors to grow uneasy.The miner reportedly often complained about a high electricity generation bill that gobbled up to 50 percent of the company’s costs. Its use of open-cast mining automatically subjected it to a stripping ratio of 13:1 that gave it only one tone of ore from 13 tones of dirt mined. The high cost of doing business was aggravated by unstable commodity prices, worsening the junior miner’s problems.

“All we could do was put our heads together and hope to come up with solutions,” Minister Mokaila said. He pointed out that government was already connecting power grids towards Maun to relieve the mines in the area of power challenges.Commenting on the diamond market, Mokaila said the main challenge with cutting and polishing companies was the high pricing of rough diamonds as determined by industry players. “The challenges differ with different companies, depending on size and business model,” he said.
Diamond companies deferred training for the past five years as a way of relieving them of operation costs.

Mokaila revealed that the situation was different at government-owned BCL Mine in Selebi-Phikwe because the company was immune to market volatilities as it was focused on diversification.
He pointed out that BCL’s was using a growth orientated operation model that allowed diversified mining of various commodities. “BCL is working towards value addition, such as refining, which will come with stability to its operations,” the minister said.

Last modified on Monday, 23 March 2015 12:06

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