Wednesday, October 20, 2021

Government owed over P150m in royalties

Two copper and nickel mining companies, Messina Copper and Tati Nickel reportedly owe government cumulative royalties amounting to over P150 million.

Base metals mined in Botswana attract a three percent royalty payable on gross market value of mined production. Minister responsible for Minerals, Kitso Mokaila confirmed this week that the cumulative debt came about after government decided to defer collection of royalties from the mining companies, following a downward trend in prices of commodities.

Government took a deliberate decision to defer payments of royalties in 2015 after local copper miners Messina Copper, Tati Nickel, Thakadu and Boseto were hard hit by weak international copper prices as well as low ore recovery rates occasioned by unviable stripping ratios. Market figures show that the world copper price was US$2.06 per pound as at December 2015 compared to US$2.50 US per pound in 2014, which reflected a reduction of US$$0.44 per pound or 17 percent.

Although Mokaila confirmed the P150million owed by Messina Copper and Tati Nickel, he could not state how much other companies owed. However, while addressing the media in May 2015, Mokaila indicated that government had decided to excuse Discovery Metals, which owns Boseto Mine and African Copper, which owns Thakadu mine from paying royalties for up to a year. At the same time, Mokaila could not state whether government will write the Messina-Tati Nickel debt off or not.

“A decision has been taken to defer payment of royalties for these copper mining companies. The decision will be reviewed after a year, when we will decide whether the market has recovered enough for copper mining to become viable again. They will then be expected to pay the owed royalties. Note that this is a deferment, not a write off. It is part of measures being put in place to save jobs in the industry,” Mokaila said in May 2015.

At the same time, following the suspension of its operations at Mowana Mine in October 2015, the mining contractor, Diesel Power Limited then approached the High Court to have Messina Copper (Botswana), a subsidiary of African Copper liquidated. Messina Copper (Botswana) has been experiencing internal operational challenges which included excessive waste stripping in the low copper grade that affected mining performance at their Thakadu Mine. Thakadu Mine has not been operating since February this year which has reportedly resulted in limited ore supply to the Mowana mine plant. In November Mokaila confirmed that Messina Copper (Botswana) has since notified government of its intentions to suspend operations at its Mowana operations in accordance with Section 47 of the Mines and Minerals Act pending outcome of the court application. Fast forward to January 2016, the Lobatse High Court made a final order to place the copper miner under liquidation, following Messina Copper Botswana’s failure to fulfil contractual payment obligations to Diesel Power Mining.

Mining remains the mainstay of the country’s economy and safeguarding jobs has become an issue that has become a topic of discussion.

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