BCL scammed

Dikarabo Ramadubu - BG reporter
Tuesday, 18 October 2016
BCL scammed

Only a handful of companies namely Bankers, Lawyers and Accountants firms stands to benefit in the liquidation and subsequent closure of the BCL mine, Botswana Guardian Investigations have established.

It’s always been an open secret that one day, the mine would close as it has always been producing low grade ore since its establishment. The mining of low grade ore became a costly exercise when the hole got deeper over the years. The sad reality became evidently clear when one of the shareholders and a mining company of repute - Anglo American- which has invested in and exploited many African countries, opted out early in 2000 stating that BCL would never be profitable. This led to government inheriting a debt of over P8 billion from Anglo.

However, insiders say it was government’s decision to introduce Mining Development Company Botswana (MDCB) whose mandate is to manage government’s interest in the mining Industry as well as the appointment of South African, Paul Smith as Chief Executive Officer, that influenced the current situation. Government’s sudden decision to close the mine’s gates was allegedly based on the advice of MDCB.

The resignations
Sources say it has always been clear that Smith is a man on a mission. He is reported to have clashed with the old BCL Board members that he found upon arrival. At one stage he allegedly walked out of a board meeting after allegedly failing to answer questions. The establishment of MDCB which came with its own board is said to have automatically rendered the BCL board dormant. The move led to the resignation of board Chairman Dr Akolang Tombale and his deputy, Dora Moremi mid this year.

Mokaila redeployment
Sources attribute the recent cabinet reshuffle in which one of the best performing ministers, and President Ian Khama’s confidante, Kitso Mokaila was redeployed from a ministry where he was performing well to the Ministry of Transport and Communications, to the establishment of MDCB and appointment of Smith.
It is said that even though Mokaila had appointed Smith, of late they were not in good terms. Apparently the bone of contention was Mokaila’s attempt to bring Smith to order for bypassing him in many of his decisions.

The unending debt
The story of the BCL mine and its unending debts date back to the establismentof the mine through government funding as well as a grant from the European Union (EU). The EU grant was conditional. The key condition was that BCL must put a certain percentage of interest accrued into a local bank account to use it to devise programmes to sustain the mine at the end of its lifespan, which was projected to be 40 years. It is said the money was used and continues to be used to finance the establishment of Selibe Phikwe Economic Diversification Unit (SPEDU) with an initial capital injection of P13m.

Anglo bolts out
 In 2000 government forked out P700 million to bail out BCL, which decision led to one of the shareholders, Anglo American company, opting out in 2003 citing non-profitability of the mine. Anglo had apparently realised that the money was unrecoverable and there is no future in BCL mine. At the time when Anglo opted out, the mining area was already deep and the costs of mining were extremely high. At the time, Anglo were owed P8bn. They transferred their debt to government. And this marked the beginning of an endless spending exercise by government in order to keep the mine afloat. Experts say that before inheriting the debt, government asked Anglo to give them another strategic partner, whereupon LionOre was brought on-board and took over their share of the Tati Nickel mine which Anglo owned 85 percent. This is when the government became majority owner of BCL and there was no longer pressure from anyone to pull the plug at BCL.

Save BCL strategy
In order to save BCL from going down the drain, the then Ministry of Minerals Energy and Water Resources engaged the RSK Consultants, an engineering company to review the operations and suggested what ought to be done. RSK’s strategy review recommendations led to many unprofitable projects being cancelled or shelved, which helped to improve BCL debt burden. Among the restructuring recommendations was that government enter into negotiations with a German company called KFW who owned and had funded the construction of the houses accommodating all BCL employees.

The government successfully negotiated for the release of debt owed to private companies and KFW agreed to release the houses after government had paid a small portion. This opened many gates as another financing company, IDC of South Africa who were owed, asked for a small portion of payment and called off the debt.

BCL ore low grade
Realising that they have endless debts and their ore which is expensive to mine is of a very low grade BCL management came up with an investment strategy named Polaris I which was to explore the ore around the BCL mine. BCL management was advised to look elsewhere for mineral deposit, using similar model like those used by former partners, Anglo. It was at this stage that they came up with Polaris II. At that time LionOre also opted out and sold Tati Nickel Mine to Norilsk International of Russia. In 2014, Norilsk who at one stage were the biggest mine owners in the world decided to sell their mines.

The Nkomati deal
Being in the BCL board, Norilsk were amongst the first to know. BCL seized the moment and approached Norilsk with offers to buy Nkomati mine in South Africa. Unlike BCL mine, Nkomati produced high quality ore.
The agreement was it would be transferred to the Phikwe Smelter for processing. Nkomati purchase was going to be funded through loans obtained by BCL. Government conceded because the proceeds from the Nkomati deal were going to be good enough to pay the loans.
However, there was delay in the transaction. Speaking on condition of anonymity, authorities say the delay was a result of a South African mining company called Rainbow Mine South Africa who are partners of Norislk in Nkomati wanting clarification on how their interests will be served. When that happened metal prices around the world went down, a matter that forced BCL to go back to Norilsk to renegotiate the payment of the purchase price. It is said
there was goodwill with both sides willing to work together.

Introduction of MDCB
But before the deal could be completed, MDCB was established with Paul Smith as CEO early this year. Subsequent to his arrival, Smith indicated that he wants or will transfer the government shares in all the mining companies to the MDCB. His plan was to start with BCL copper and nickel mines as well as the Morupule Colliery mine. At the time when Paul Smith’s regime was ushered in the process of negotiating the purchasing agreement was being carried out, but the funds had not yet been disbursed. The move led to the collapse of the Nkomati purchase process since Smith and his regime were, without BCL, an unknown entity.

Lawsuit
Botswana Guardian has reliably learnt that it will only be a matter of time before BCL or Botswana government is served with a lawsuit by Norilsk for time delayed and failure to honour the agreement that is if the much preferred MDCB does not go ahead with the Nkomati purchase.

Last modified on Tuesday, 18 October 2016 12:12

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