The dearth of BCL smelter�s business case
Brian Benza | Friday January 20, 2017 18:00
Former BCL employee, Norman Kelaotswe says for it to maintain its value, the smelter is supposed to be kept running at all times at a holding temperature, and failure to do so would require about a P1-billion in refurbishments costs.
“Restarting after a prolonged shutdown could result in lots of damage to the plant, which any investor will not be able to recoup,” said Kelaotswe who is also the Vice President of the Botswana Mine Workers Union.
“Anyone who buys it will need to refurbish the boiler, the cooling towers as well as the flash furnace and other things at around a billion pula. Given the size of such a capital outlay on top of the purchase price, I don’t see anyone buying the smelter, and this means the creditors will walk away with very little, if anything.”
The smelter is the largest of its kind in Africa and was refurbished last year at a cost of P900 million. Provisional liquidator, Nigel Dixon-Warren said the decision to switch off the smelter was informed by expert opinion, which suggested that it was better off to shut it down and just carry anti-corrosive maintenance.
“There is divided opinion on this matter and we know it’s not ideal to shut down the smelter for a long period, but if the liquidation was going to take a short time such as a couple of months then we could have sacrificed and kept it running. If we are looking at a minimum of 12 months, you can’t justify spending P20 million a month on fuel alone to keep it running. There is also an argument that keeping the smelter at holding temperature for very long time could have been equally damaging because of the diesel emissions that contain water,” Dixon-Warren said.
At the time of the appointment of the provisional liquidator in October last year, the Minister of Minerals, Green Technology and Energy Security, Sadique Kebonang had said government had committed P60 million a month for the care and maintenance of the mine and the smelter.
“We have set aside P60 million a month for care and maintenance. That will not be taken care of by the liquidator. We need to maintain the smelter during this shutdown while we have other environmental obligations such as pumping water from underground,” he said.
While Kebonang still insists there are a few interested buyers for the smelter, the lack of adequate concentrate could also be another major deterrent for any potential investor.
“Besides the switching off of the smelter, anyone who wants to buy the asset will first have to secure toll off-take to sustain the running of the smelter viably. In the whole of southern Africa, apart from Nkomati you can’t get enough material to sustain the smelter’s capacity.
With the mines here closed, the closest place you can get concentrate would be a mine that is set to open in Zambia in the next two years producing a mere 34,000 tonnes per annum of Nickel yet the BCL smelter has a capacity of 550,000 tonnes per annum,” said another analyst, who declined to be named.
With the switching off of the smelter coupled with the lack of enough concentrate in the region, it is looking increasingly unlikely to find a buyer that will buy BCL as a whole.
Addressing the media this week, Dixon-Warren said the operations were “fatally insolvent”, cannot be reopened and will have to be sold separate or whole as early as July.