Saturday, November 2, 2024

BCL bid-who is fooling who?

Botswana’s choice of preferred bidder for BCL mine has raised eyebrows in the international mining community.

In a curious turn of events, Canadian Premium Nickel Resources Corporation (PNR) a relatively inexperienced and broke junior miner was chosen over well capitalized and experienced competitors.

At the time of going to press, BCL liquidator Trevor Glaum had not responded to Sunday Standard questions on why he turned down bidders who had already completed due diligence and had cash in hand to proceed with the immediate reopening of the mine, in favor of PNR that has not done due diligence, has never sealed a major transaction in international mining and is till to raise money for the due diligence.

On 11 February Trevor Glaum wrote an internal memo to BCL care and maintenance employees informing them that PNR had been selected as the preferred bidder for BCL and would be granted exclusive access to the mine to conduct due diligence over the next six months. An advance team is due to arrive in Botswana within the next few weeks to conduct the due diligence.

NPR has a parent company called North American Nickel (NAN), which owns 11 percent of PNR and a warrant to purchase an additional 15 percent. In its investor presentation, NAN disclosed that PNR is working with CIBC World Markets to raise US$26.5 million from investors, of which US$2.5m will be used to finance the six months’ exclusive due diligence program at BCL. The same was reported by international news company Bloomberg.

However, engineers close to the BCL liquidation exercise revealed to the Sunday Standard that there were more competitive bidders who, apart from being awash with cash to finance the immediate reopening of BCL, had actually completed the exclusive due diligence program that PNR is still to embark on.

They revealed that the other bidders had a history of successfully completing major transactions in the international mining arena. They added that PNR has no such track record to justify it being accorded the responsibility to transact a major asset like BCL.

“Why would the liquidator disqualify a company that has already done due diligence and has cash in hand to proceed with operations in favor of a relatively inexperienced company that has not done due diligence and worse, is still to raise money for that due diligence. We seem to be experimenting with people’s lives here. The liquidator has a duty to demonstrate rational basis for his decision,” they said.

Sunday Standard investigations have revealed that as at September 2020, PNR’s parent company, North American Nickel, had C$873,000 and assets worth around C$40m. Given the parent company’s precarious capital position, pundits have cast aspersions on its capability, together with PNR, to run BCL.

“To properly restart BCL, you need over half a billion USD. Clearly NAN and NPR are punching way above their weight. How can a company worth C$40m execute a project that needs over $500m, ten times its size? The liquidator’s decision is bizarre and this just might turn out to be a grave embarrassment for Botswana,” they said.

As murmurs of concern from the local and international community became more audible, Mmegi reported that BCL liquidator Trevor Glaum had released a statement indicating that PNR had pledged US$400m towards various operational processes at BCL, including a financial contribution to the current care and maintenance activities. Interestingly, the liquidator made no mention of progress that PNR had made in securing the US$2.5m that is urgently needed to finance the exclusive due diligence program.

“Firstly, if PNR is currently trying to raise money for the BCL bid, what was the basis for their selection as the preferred bidder? Secondly, without thorough going due diligence, how did PNR come to the conclusion that BCL would be a profitable venture?” asked engineers close to the liquidation process.

They accused the liquidator of taking unnecessary risks by sidelining more competitive bidders who had completed their due diligence and had cash to immediately start operations, in favor of a cashless and inexperienced PNR.

“What if, after due diligence, PNR decides not to buy BCL? What if they run out of cash, given their precarious position? The fact is that the liquidator is taking major risks, given the serious conditions attached to the PNR offer,” they said.

The BCL saga is gaining momentum on the international media, raising fears that Botswana may lose its international ranking as an attractive mining investment destination.  The ranking is done annually by the Fraser Institute, one of the top 15 think-tanks worldwide, which performs an annual survey of mining companies. The 2020 survey ranks mining jurisdictions based on their geologic attractiveness and policies that encourage or deter exploration and investment. By the time of going to print, BCL liquidator Trevor Glaum had not responded to the Sunday Standard questionnaire.

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