Govt buys out Norilsk in BCL Mine
Brian Benza | Tuesday December 10, 2013 15:57
Currently, Norilsk owns a six percent stake in BCL, with the remaining 94% belonging to the government.
Speaking in Parliament last week, Vice President Ponatshego Kedikilwe announced the cancellation of the shareholder agreement between government and Norilsk and the buying out of the Russian company as provided for in the agreement.
According to the restructuring plan recently approved by cabinet, BCL will have to settle a standing P3.3 billion debt to government through a P1 billion cash layout with the remainder being converted into equity.
The shake-up will see the cancellation of a standing tax agreement so that the company can be taxed under the normal tax regime and pay royalties as per the Mines and Minerals Act.
“Government will convert the remaining debt of P2.3 billion as equity in order to ensure or strengthen BCL. This will enable its smelting and possibly refining capacities to provide value addition to copper from the surrounding mines thus facilitating their growth, while enhancing BCL’s sustainability in Selebi-Phikwe,” said Kedikilwe.
It is further envisaged that the shafts at the BCL mine will be deepened to extend the life of the mine to at least 2021 or beyond.
After the completion of the buyout, Kedikilwe said government intends to find a strategic partner to work with BCL on all the restructuring.
“The reconstruction of BCL is to enable us to diversify its operations and investment and form joint ventures as necessary, with local and foreign companies with a Japanese company, for example the sulphuric plant will arrest the sulphur emissions to stop pollution. The plant will be useful for bleaching uranium, once we get to that stage of the operation of the uranium mine,” he said.
It is expected that the current BCL smelter will also be modified to cater for emerging ore, while concurrently conducting feasibility studies with the intention of putting a new smelter and sulphuric acid plant.
The reconstructed BCL is expected to fall into the portfolio of other state-owned mining operations that are crafted into the government’s Mineral Investment Company (MIC).
The MIC will manage government’s shareholdings in several mining companies ensuring enhanced efficiency and returns.
According to Kedikilwe, a Special Purpose Vehicle (SPV) has been formed as a forerunner to the MIC.
Government has varying levels of shareholdings in blue chip mining firms in the country like Botswana Ash, Tati Nickel Mining Company, Debswana and Morupule Colliery.
It is still unclear if government will also choose to buy Norilsk’s 85% stake in Tati Nickel Mine, which was put up for sale recently. Early this year, Norilsk announced plans to sell all its international assets by 2016.
By establishing a mining investment company, Botswana has followed the example of other progressive governments. The trend nowadays is to shift mining business from central government to a specialised unit.
According to Kedikilwe, the SPV has already been tasked with developing valuation skills. This is meant to make Botswana self-reliant in valuation services. With effect from January next year, the MIC is expected to localise valuation services by hiring such staff directly.
By law, government has the option of acquiring up to 15% of any new mining venture and up to 50% of new diamond mining operations, which are treated as nationally strategic resources. The proposed investment company will thus play a major role in mining licence negotiations, with its experts advising on whether government should acquire shareholding and at what quantum. The company is also expected to advise government on increase or disposal of shares in existing ventures.