Tuesday, March 5, 2024

BCL must prove ability to make good on Debt obligations

A few weeks ago, the embattled BCL secured a financial bailout from Barclays bank after struggling to meet its financial obligations. The crisis was triggered by failing to timely act on a board resolution to source funds from financial institutions which resulted in the mining giant digging into funds meant for day to day operations. This ultimately drove the company into bankruptcy.

However prior to this fiasco, BCL failed to prove to the market that they had the financial capacity to make good on its debt obligations. With no other alternatives left, BCL was forced to approach the government for a loan guarantee. BCL Managing Director Dan Mahupela told the media last week Wednesday that “the journey to obtain guarantee has taken a long time.”

In a previous interview, Afena Capital’s investment analyst Kwabena Antwi told SUNDAY STANDARD that “in order to access financing from the market, state owned enterprise (SOEs) would need to provide detail to the market of what the funds will be applied to, the return that the SOEs expect from the application of funds and proof that they have the ability to honour periodic payments as and when they fall due.” BCL in this regard failed to persuade the market and has had to incur costs due to the delay in obtaining government’s guarantee. 
Although BCL is a wholly owned government entity, this does not disconnect it from the commercial market place where agility and speed take precedence. During the time that BCL waited for the guarantee, the commodity market continued to deteriorate, further crippling the mine’s financial health. Amid the financial crumpling, BCL also had to address an urgent issue at its smelter which posed a real threat to the safety of workers as it had been overrun past its optimal condition. “If capital was forthcoming, we could have done it in the normal period,” said BCL Metals Production David Keitshokile.

The absence of sufficient operational revenue made BCL suffer further financial losses. It could be argued that if the exercise to secure funds had been done in a timely manner, subsequent costs could have been averted. 

In response to the depressed commodity prices, Mahupela mentioned that BCL re-prioritised its exploration projects in February 2016 with the view of funding Polaris II key projects which include Maibele Nickel, Maibwe Diamonds, Selkirk Nickel project and the Sulphuric Acid and fertiliser projects. Maibwe Diamonds is expected to fetch a revenue of US$1.9 billion (P21 billion) and Maibele Nickel is valued at US$174 million (P1.9 billion). Moving forward, it is expected that BCL will respond timely to market conditions lest the cash injection be rendered useless.



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