Suitors circle as Khoemacau goes on sale
Mbongeni Mguni | Monday May 29, 2023 06:00
“A comprehensive and global process will be conducted to seek a capable and responsible buyer for Khoemacau,” a company representative said in a statement. “If it transpires, this potential change of ownership, is expected to bring significant positive consequences for Botswana and the mine’s stakeholders.”
Khoemacau is majority owned by Cupric Canyon LP, with funds advised by Global Natural Resources Investments (GNRI) and by Resource Capital Fund VII LP. GNRI was formed from a 2015 management buyout of Barclays Plc’s private equity unit and, according to Bloomberg, the investment group has been considering options for Khoemacau for at least a year.
Bloomberg expects that a deal to sell Khoemacau could be worth about $1.5 billion. The mine was built at a cost of $412 million, after the company raised $650 million in project financing.
Khoemacau’s sale comes as copper giants around the world hunt for acquisitions to better position themselves, as demand for the mineral rises due to its central importance in the global energy transition. Global demand for copper is expected to exceed supply in the medium to long term, with leading research consultancy, Wood Mackenzie, projecting significant deficits by the beginning of the next decade.
The forecasts mean highly prospective areas such as the largely undeveloped Kalahari Copperbelt are increasingly catching the eye of major producers. The 1,000-kilometre belt running southwest to northeast in the country’s western half is known to contain millions of tonnes of copper and silver resources, but heavy sands and poor infrastructure have restrained development over the decades.
Advances in technology, the Botswana Power Corporation’s extension of the national grid and rising copper prices, have helped advance projects in the region. Khoemacau is currently the Copperbelt’s sole operating mine, although the adjacent Motheo Mine recently produced its first concentrate.
Khoemacau put out its first concentrate in June 2021 and has now ramped up to full processing capacity of 3.65 million tonnes per annum, which is expected to produce as much as 65,000 tonnes of copper in concentrate this year.
The mine’s directors recently told BusinessWeek that the attainment of nameplate capacity stood the operation in good stead, in terms of its future.
“The financial viability of the business is crucial to be able to sustain ourselves, pay down our debt, as well as monthly costs, and get everyone to see that this business is working and that the mine is making money to grow further for the next stage of expansion,” Khoemacau CEO, Johan Ferreira told BusinessWeek at a briefing in March. “It’s so important that we get our current operations proper, proving that we can sustainably mine, pay all our costs and pay down our debt so that the future investors can see it as a lower risk.”
Khoemacau is finalising plans for a $700 million (P9.2 billion) expansion of its operations, in order to double its production to 130,000 tonnes by 2026. At that level, Botswana would be within the top 30 copper producers in the world.
Botswana Mine Workers Union president, Joseph Tsimako told BusinessWeek that the labour organisation had been briefed on Khoemacau’s planned sale and was keeping tabs on workers’ welfare.
“For us, our interest is in the workers, but we were informed that there will be no impact on them as this is a change in shareholding,” he said. “In fact, due to the planned expansion, employment numbers are expected to rise. 'We will keep monitoring the situation as it progresses.'
He added: “We had a briefing with Khoemacau and they informed us that there is a process underway to sell the mine. “We were informed that because of the cost efficient way they have been mining since they opened, and the potential for copper prices as well as their plans to double production, a number of bidders have come forward who are interested in taking the mine to the next level. “The original investors are asset managers and not miners, so those firms which are miners are interested in taking over and leading the mine to its expansion.”