Monday, May 17, 2021

BCL should be saved ÔÇô whatever it takes!

Up until two months ago, the mining company BCL was a blue chip that was on an upward trajectory ÔÇô buying mines in Botswana and across Southern Africa, planning to diversify away from copper and nickel and receiving kudos from the Government of Botswana for coming up with a master plan that was supposed to save the town of Selibe Phikwe from extinction.

To showcase its muscle, BCL invested in a multi-million Pula steel processing plant.

The steel plant is part of efforts to diversify Selibe Phikwe’s excessive reliance on the mine.

It is possible that may be BCL was punching above its weight, playing in a league in which it did not belong or just biting more than it could chew.

A long overdue shutdown at the mine has gone horribly wrong.

And with that everything seems to be unraveling.

The situation is not helped by lackluster demand for commodity products in China ÔÇô a development that has mercilessly pushed prices to a record low.

While BCL is rich with assets, it is going through a difficult cash flow crunch.

Creditors are unwilling to come to the party ÔÇô and for a reason.

BCL is 100% owned by the Government of Botswana and creditors want the shareholder to provide surety and the much needed guarantees.

Getting such underwriting has neither been easy nor a quick process for BCL.

Two weeks ago BCL management wrote to employees warning them that they might not get their salaries and wages on time. It’s crunch time!

To put the whole thing into context and add a human face to it, when BCL sneezes, the whole of Selibe Phikwe gets flu.

That is how important BCL is to the economy of this small town.

With the smelter effectively not working because it is under repair, BCL is effectively not trading.

To BCL, the smelter is like a cash cow. And its current state, added to already low prices of copper and nickel make for a dangerous mix. The situation is made worse by the fact that BCL does not have cash reserves ÔÇô having passed over a billion to Government recently as part of loan repayments and taxes.

The mine is literally on its knees. And it will not be up until the smelter is up and running.

We go in detail so as to paint an elaborate picture and background of how BCL ended up where it is today.

We want to call on government to provide BCL with the kind of working capital that the mine needs.

This could be in the form of loans or simply guarantees to commercial institutions.

In the meantime BCL management has to look at its internal processes, especially the Finance Department.

Persistent briefings indicate that the Department of Finance slept on the job and took too long to approach the banks for credit when called to do so by the Board.

This could have saved the BCL the crisis it now has to deal with.

BCL cannot be made exist on the edge for much longer.

An existence on the cliff kills moral at both management and employees levels. It also increases risk while dampening the kind of appetite the mining housing needs to continue looking to diversify its portfolio.

It is our hope that the Ministries of Finance and also that of Minerals will look at the intrinsic value that BCL has and act to protect it rather than allow it to diminish through the cash crunch that the mine is going through.

Having said that we want to point out to BCL management that the economy of China which has been fuelling demand and with that commodity prices over the years, is currently looking somewhat grim. And is likely to be like that for a foreseeable future.

BCL thus has to contain their costs and make sure that revisit their strategy.

More importantly, BCL Management has to work steadfastly into bringing fully back on line the entire plant and smelter for that really is how BCL makes money.

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