Norilsk Nickel launches legal action against BCL in the Botswana courts and London Court of International Arbitration over non-payment for African asset sale
The legal claims come as an effort to recover USD 271.3 million in assets.
Norilsk Nickel Mauritius and Norilsk Nickel Africa Pty Ltd (together “Norilsk) NILSY (NASDAQ), MNOD (LSE), GMKN (MOEX), have filed legal claims against BCL Limited and BCL Investments Proprietary Limited (together “BCL”) to recover the USD 271.3 million (plus damages and other costs) that they are owed in relation to the sale of a 50% interest in the Nkomati JV in South Africa (“the Assets”).
Norilsk agreed in October 2014 to sell their operations in Africa to BCL for total consideration of USD 337 million. The acquisition, announced by BCL as a strategic priority as part of its high-profile "Polaris II" diversification and investment strategy, was designed to guarantee the long-term future of BCL’s operations by securing the supply of concentrate to its smelter in Selebi Phikwe, Botswana.
Late 2015, in view of the situation on global metals markets and following BCL’s request for renegotiation, Norilsk agreed to make a number of price concessions. Since that date, Norilsk have consistently signaled their intent to constructively discuss any further proposals reasonably required to complete the transaction.
The transaction obtained final regulatory approvals, and therefore became unconditional, on 6 September 2016 and the parties were obliged to complete the deal on 13 September 2016. In breach of BCL’s agreement with Norilsk, however, BCL has made no attempts to close the transaction.
In early October 2016, Norilsk learned through the media that BCL had been placed into provisional liquidation.
Norilsk Nickel Africa CEO, Michael Marriott, said: “BCL has failed to honour its obligations under the sale agreement concluded in October 2014. The failure of BCL to abide by its obligations under the sale agreement is unacceptable in any business transaction. This deplorable conduct has resulted in the BCL smelting and mining operations being placed into provisional liquidation.
“The closure of BCL will have a devastating effect on the livelihoods of thousands of people, and a negative impact on the regional economies which rely on the BCL smelter to beneficiate nickel, copper and PGM concentrates. It is disappointing to note that the Government of Botswana recently invested in refurbishing the BCL smelter, at an estimated cost of 700 Million Pula, giving hope to the people of Botswana that BCL had a good future with Nkomati able to supply the bulk of concentrates for beneficiation. Botswana has an excellent reputation internationally as a country with a sound investment climate. These actions by BCL could jeopardise that reputation.
“Throughout the process Norilsk has acted in good faith, and given BCL repeated opportunities and offers of assistance to complete the transaction, including concessions to significantly reduce the sale price.
“Norilsk has done everything possible to support BCL in its endeavours to secure its long-term future, and therefore sees no other option but to defend its interests in courts with jurisdiction over the matter.”
Norilsk's assets comprise a 50% share in the Nkomati Nickel and Chrome Mine (“Nkomati”). Nkomati is a large mine in the Mpumalanga Province in the east of South Africa and Africa’s largest primary nickel producer. Nkomati has since the transaction been the primary supplier of concentrate to BCL’s smelter in Selebi Phikwe, an important mining town in central Botswana and the largest local employer. Without concentrate supplies from Nkomati – which had continued since the transaction was announced – the Selebi Phikwe smelter may become unviable, with the potential loss of more than 5,000 jobs and a negative impact on families and businesses in Selebi Phikwe.
Michael Marriott added, “The fall-out could also be even wider. The Southern Africa Development Community ("SADC") has repeatedly announced their desire to beneficiate minerals within the region and the South African Department of Mineral Resources (DMR) was also highly supportive of the transaction as it meant that Nkomati’s concentrate containing, nickel, copper, platinum and palladium would be beneficiated by BCL in the region thereby benefiting the Southern African regional economy. Instead, if BCL were to be closed, this means that Tati Nickel, and the Selkirk Project will most likely not proceed, severely impacting people and businesses in Francistown as well.”