Wednesday, September 23, 2020

BCL liquidator sues SA Minister

The case in which Russian nickel giant Norilsk Nickel is suing the Botswana Government to recover US$270 million (Approximately P2.7 billion) veered off into a new row as liquidator Nigel Dixon-Warren is now suing South Africa’s Mineral Resources Minister and Department of Mines Acting Director General David Msiza.

The dispute emanates from a 2014 deal in which Norilsk struck two agreements with BCL to sell its 85% stake in Tati nickel mine and its 50% stake in South Africa’s Nkomati Nickel to the state-run nickel producer for $337m. The price was dropped to $277million. The Botswana Government decided to place BCL in final liquidation in 2016 as it was cash strapped due to low commodity prices, particularly copper.

Neither BCL nor the government has paid Norilsk, which has transferred Tati to BCL but still holds on to its 50% stake in Nkomati, which it shares with African Rainbow Minerals.

Currently the South African Mines Minister is Gwede Mantashe and the transfers were approved by former mineral resources Minister Mosebenzi Zwane.

In an updated affidavit before the Pretoria High Court, Warren Dixon states that it is his statutory duty to interrogate the alleged US$ 277 million claim in circumstances where BCL and its subsidiary BCL Investments could never afford such investment and where the very basis of that claim is an arbitrary and unlawful decision by the Director General of Department of Mineral Resources among others.

Msiza is cited as First Respondent, the Department of Mineral Resources (DMR) as Second Respond Respondent and the Minister for Department of Mineral Resources is cited as Third Respondent. Norilsk Nickel Africa (NNA) is the Fourth Respondent.

Warren Dixon demands that the court reviews and set aside Msiza’s decision taken on 18 August 2016 and communicated to BCL (allowing BCL to have a stake in Nkomati).

Key to Warren-Dixon’s argument is that had Msiza been made aware of BCL’s poor financial status he would not have agreed to a mineral rights transfer to BCL Investments from Nkomati. He argued that under South African mining laws, BCL Investments’ dire financial status would have precluded it from acquiring a 50 percent stake in Nkomati.

He further argues that the South African Mines Minister and the Director General of Department of Mineral Resources wrongly approved the transfer of mining rights because BCL‘s financial status did not allow it to take up the mining rights.

According to the South African laws, particularly section 11, the director of Department of Mineral Resources before he or she could agree to a mineral rights transfer should satisfy himself or herself that the company that intends to acquire mineral rights in another entity is not financially unviable.

Warren-Dixon said Norilsk Nickel Africa (NNA), BCL and BCL Investments’ current and correct financial information was critical to the fate of the section 11 application (purportedly submitted by Norilsk Group to the Department of Mineral Resources for transfer of mineral rights to BCL Investments) and was an important, relevant consideration to which Msiza was obliged to have regard in reaching any decision on such application. 

“It is noteworthy that no financial information was provided in respect of BCL investments, which is the entity which was to become the sole shareholder of NNA.  Financial information about BCL Investments would inevitably have been considered by the DG in coming to any rational decision on the section 11 application, regardless of BCL Investments’ actual financial state,” said Warren-Dixon.  

He said the section 11 application misleadingly states that BCL Investment is a newly incorporated c company, implying that no financial information about it was available and it not have any material investments or financial activity.

He added that “This is plainly incorrect and was incorrect at the time of the section 11 application being submitted.”

He said BLC Investments was incorporated on 27 March 2013 adding that by February 2016, the 2014 financial statements had already been audited. Therefore, what the financial records show was that BCL Investments was in no financial position to buy a stake in Nkomati Nickel because of ‘parlous state of BCL Investments’ due to the untenable financial position of its holding company, BCL.

He said February 2016, when the section 11 application was submitted, Norilsk Nickel Mauritius (NNM) and NNA were aware of the fact that the financial position of BCL and BCL Investments had substantially deteriorated over the years and that these entities (BCL and BCL Investments) were not in a position to fulfill their multiple obligations.

None of the relevant information was, however, disclosed to the Director General of Department of Mineral Resources or Department of Mineral Resources in the section 11 application or at any time prior to the August decisions (decision by Msiza to approve BCL mineral rights).

He said the Norilsk entities knew when they submitted the section 11 application in February 2016 that the financial position of BCL was significantly worse than the 2014 financial statements attached to the section 11 application.

He said they knew that the undertakings given by BCL Investments could not be met by BCL Investments and or BCL Independently. Warren Dixon said should part of that information been made available by Norilsk when they made the section 11 application, Msiza would not have…

“Yet, it was either deliberately, negligently or unwittingly omitted from the section application and was otherwise put before the Department of Mineral Resources /Director General  prior to the August decisions,” said Warren-Dixon.

 Mantashe is also accused of having not (from 13 February 2017 to date) responded to a request for any condonation of any late filing of the internal appeal.

 Last year the Botswana government made a $45 million offer for Tati mine and on the understanding that the Nkomati deal would be void, with no penalties or payments due to the Russian company, but it fell through, leaving the parties back where they started. Reports indicate that Warren-Dixon opposed the offer arguing that Norilsk was on shaky legal ground.

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The Telegraph September 23

Digital edition of The Telegraph, September 23, 2020.