Saturday, December 4, 2021

Botswana pays Russian mining giant – Norilsk

The Botswana government and Russian mining giant Norilsk Nickel (Nornickel) have settled their three – year running battle, deciding to settle outside court for an undisclosed amount.

On Thursday, it was announced that the government and the mining company have settled their dispute over the botched sale of the BCL mines. In the settlement, Nornickel has walked away with an undisclosed amount of cash.

The settlement puts an end to a lawsuit over share purchase agreement between Nornickel and BCL which provided for the transfer of the ownership of the Nkomati and Tati facilities to BCL, in October 2014. In September 2016 the agreement became unconditional. BCL subsequently failed to perform its deal completion obligations and refused to make a payment for the shares. As a result, Norilsk served a material breach notice on BCL, demanding payment of the circa $277 million purchase price.

A month later after the Botswana government voided its contractual obligations, it applied to the High Court of Botswana and BCL entities were put into liquidation; eight months later, in June 2017, BCL entered the final stage of liquidation. The Botswana government had on several occasions denied that it placed BCL Group under liquidation as a pre-emptive move to Nornickel’s lawsuit.

BCL Group, made of BCL limited and Tati Nickel Mining Company, were placed in provisional liquidation by order of the High Court of Botswana on 9 October 2016. The Botswana 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 the following months, Nornickel submitted a ‘Request for Arbitration’ to the London Court of International Arbitration (LCIA) to determine its claims and filed an application with the Botswana court seeking permission to commence and prosecute an arbitration in the LCIA in respect of its claim. By March 2018 it appeared that the Botswana government had reached a settlement deal with Nornickel to settle the matter in court.

The then Finance and Economic Development minister Kenneth Mathambo rallied members of parliament to buy in his proposal to approve the negotiated fee of $45 million to be paid to Norilsk as an out of court settlement. The proposed fee would have seen the government only paying a fraction of what was initially demanded by Norilsk. Faced with the prospect of paying $277 million should the deal fall through, the members of parliament were unanimous in approving the negotiated $45 million which represented 14 percent of what Nornickel was suing for.

Four months later after the supposed out of court settlement, Eric Molale, then minister of Mineral Resources, Green Technology and Energy Security, made a startling revelation in July 2018 that the BCL liquidator made objections to paying Nornickel, starting that the company has no legitimate claim to the $45 million.

“He then went to court at South Africa and recently lost the case. That is why I’m saying that my hands are tied because this liquidator is a court official,” said Molale. “To try and tell him what to do, i will be regarded as interfering in the judicial process. That is the conundrum I am facing,” said Molale at the time.

While Nornickel, the world’s largest refined nickel and palladium producer, was supposed to be chaffed by the South African court’s judgement that was in their favour, it was the Botswana court which dampened their spirits as it delivered the judgment precluding Nornickel from taking the case to LCIA was handed down.

With the out of court settlement deal seemingly off the table, Nornickel went back to its initial demand of $277 million, putting pressure on the government that has been of recent trying to starve off repercussions of the BCL Group liquidation. Moreover, Nornickel filed a reckless trading claim against, inter alia, the Government of Botswana, seeking to declare it responsible for the liabilities of BCL entities.

But with the recent settlement announced this week, Nornickel has withdrawn its claim against BCL in the London Court of Arbitration and further dropped court proceedings in Botswana against the government.

The settlement coincides with the Botswana government’s September decision to sell the defunct BCL mines Canada’s Premium Nickel Resources, with the view of reopening the mines that employed thousands of workers. The BCL mine is expected to be back in production within three years.

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