Thursday, October 28, 2021

BCL’s “long journey” to acquire cash injection

The market has its own set of rules, and BCL is not exempt from its dealings. In the case of BCL, the market demanded a guarantee from government, to obtain the backing of its full faith which reduces the risk of default.  

It would later however be established that this is not a straightforward process, as demonstrated by the delays in securing the much needed guarantee. On Wednesday, BCL Managing Director Dan Mahupela painfully admitted to journalists that: “the journey to obtain guarantee has taken a long time.

The guarantee was finally availed this month in the last week of Parliament seating. However during the time that BCL waited for the guarantee the commodity market on the other hand continued to deteriorate, further crippling the mine’s financial health.

At the same time, Afena Capital’s investment analyst Kwabena Antwi in a previous interview told Sunday Standard that “in order to access financing from the market, state owned enterprise (SOEs) would need to provide details to the market of what the funds would be applied to, the returns 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. At the cusp of market volatility of commodity prices, the financially constrained BCL continued to suffer the costs of loss of production waiting for parliament to grant the guarantee. This would render BCL’s responsiveness to the market forces inconsistent with the agility that such a situation demands from a commercially involved company.

Experts in commodity markets maintained this week that although BCL may be a wholly owned government entity, this does not disconnect it from the commercial market place within which it operates. Agility and speed are usually the order of business in commodity markets.

“In the commercial market place delays in responding to market conditions come with a heavy cost.”  

Meanwhile amid the financial crumpling, BCL had an urgent matter to address at its smelter, which had reached a stage where it 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. In the absence of sufficient operational revenue from BCL to undertake the smelter shutdown the exercise was as a result subject to incurring additional costs. It can be concluded that if the exercise to secure funds had been done in a timely manner, subsequent costs could have been avoided.

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).

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