Thursday, February 25, 2021

BCL buyer looking at a P4 billion investments to open the mine

More details are starting to emerge about the potential sale of the mothballed BCL mines, with the preferred bidder Premium Nickel Resources Corporation already raising capital and has agreed to shoulder some costs associated with the care and maintenance of the mines for the next six months as it assesses the viability of reopening the closed mines. 

Last week the BCL liquidator, Trevor Glaum,  announced that the Canadian miner Premium Nickel Resources Corporation has been identified as the preferred bidder, granting them exclusive access to the BCL and Tati mines to conduct a comprehensive due diligence exercise until August 2021. 

Glaum this week revealed further details that if an agreement is reached after the due diligence, Premium Nickel will make a substantial capital investment in the mines,  which is envisaged to exceed $400 million in preparations to open the mines. In addition, the liquidator disclosed that the company has undertaken to make significant contribution to the care and maintenance costs associated with mines during the six months due diligence.

Faced with the dwindling commodity prices, and rising operating costs, the government overnight abruptly closed the BCL Group, made of BCL limited and Tati Nickel Mining Company, in a provisional liquidation by order of the High Court of Botswana on 9 October 2016. The government owns 100 percent of shares in BCL, and BCL’s wholly owned subsidiary, BCL Investments Pty Ltd, holds an 85 percent stake in Tati. The remainder of the shares in Tati are directly held by the Botswana government.

In November 2020, Lefoko Moagi, minister of Mineral Resources, Green Technology and Energy Security, told parliament that  government spent P1.2 billion on the closed mines between 2016 and 2018, and in 2019 injected another P292 million, with the bulk of funds geared towards the maintenance and care of the mines. He disclosed then that three indicative offers have been received from potential buyers, with the process of selecting the winning bid to conclude before end of 2020, and failure to do so would result in closure of the mines.

When December came, government said it had identified a buyer but could not divulge the name. It appears that Premium Nickel Resources Corporation knew it was the preferred bidder as far as January. The Canadian company shared in a market update report released last month that they have submitted an indicative offer for the acquisition and re-development of the defunct nickel-copper-cobalt mines.

Premium Nickel Resources Corporation disclosed that it has been conducting due diligence on the proposed transaction since December 2019 with a highly experienced management team supported by independent technical consultants and completed an independent fatal flaw study in March 2020. Furthermore, the company said it with was in talks with CIBC World Markets to solicit interest from qualified investors for a total of approximately P288 million in a three-stage equity funding strategy. 

“The Proposed Transaction represents a rare and attractive opportunity to participate in a nickel-copper-cobalt sulphide mine restart in an attractive mining jurisdiction,” said the company in a call for potential investors. 

The liquidation of BCL has been marred in controversy, with government criticised for its abrupt decision to close the mines, and yet continuing to pump millions in a liquidation process that does not seem to have an end in sight. The process of disposing the mines faced complications along the way, with the glaring one being the  fallout between former minerals minister Eric Molale and Nigel Dixon-Warren, the court appointed liquidator in 2017. 

Relations were strained in early 2018 when both parties clashed on the duration of the liquidation process the government piling pressure on Dixon-Warren to come up with a definite date on the winding up of BCL assets. However, the liquidator said it was a complicated process that could take up to seven years to conclude. Furthermore, relations between Molale and Dixon-Warren deteriorated following a series of disagreements, in particular, the decision by the liquidator to axe half of the care and maintenance staff that were retained during the liquidation process. This happened after Molale had told parliament that he had spoken to Dixon-Warren and pressed upon him that he should not retrench any staff.

In December 2018, Molale told parliament that relations between him and the liquidator have irretrievably broken down. Molale revealed that he had kick-started the process to have BCL removed from liquidation and put under judicial management to give the government more leeway in what to do with BCL rather than deferring to the liquidator, who under the liquidation process, can only be removed by Registrar and Master of High Court in terms of the Companies Act.

Dixon-Warren resigned as BCL’s liquidator in July 2019. The registrar of the High Court later appointed Trevor Glaum of the South African based Sanek Trust Services as BCL’s new liquidator after local companies shunned the expression of interest to offer liquidation services.

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