Thursday, July 9, 2020

Inside the toxic liquidation of BCL mine

BY KHONANI ONTEBETSE & KABELO SEITSHIRO

A string of angry emails and vitriolic secret letters show how senior government officials and the liquidator as well as the High Court are fighting over millions of Pula spent on the care and maintenance operations of BCL mine.

The documents which form part of court records also suggest that the battle for the control of the liquidated mine by Minister Eric Molale, Permanent Secretary Cornelius Dekop, BCL liquidator Nigel Dixon-Warren as well as the Master of the High Court Michael Motlhabi may have contributed to the mine failing to attract investors.

They also raise questions about whether the government is involved in a concerted scheme to seize control of the mine after it accused Dixon-Warren of “compromising national interest.”

Dekop was the first to draw blood through a letter dated 3 December 2018 addressed to Motlhabi when he raised questions about the conduct of Dixon-Warren.

Reminding Motlhabi that at the time when BCL and Tati Nickel mines were liquidated, the government undertook to fund all liquidation activities including care and maintenance, Dekop said “the Government took this decision as a matter of national interest.”

“We are at a point where the Liquidator clearly compromises this national interest. This Ministry respects the fact that the Liquidator is an appointee of the Court. But the fact that we are Government and financer of the liquidation process must give us the right to point out our interests to the liquidator,” said Dekop.

He noted: “Our interest being that, in the main, the Liquidator has to find, expeditiously, interested parties to acquire those assets that can be put to function and thus create employment.”

Dekop also said Dixon-Warren should undertake to take care and maintenance in a safe manner in accordance with the requisite law.

According to Dekop, “As a Ministry we are agitated that the Liquidator has come short on all these. Our interaction with the Liquidator has not been fruitful on all these matters.”

This, he said, is evidenced by among others the scaling down and retrenchment of staff and care maintenance in the face of the Ministry’s protests under the pretence that the Ministry is not providing funds. Dekop also says the liquidator spites the Ministry by continuing with retrenchment even when the Ministry had promised to provide additional funding, a claim that Dixon-Warren refuted.

Dekop also accused the liquidator of his “lack of regard for the need to preserve the value of the assets under his care as evidenced by among others, flooding shafts with useable and expensive equipment still in the shafts and investigations have revealed disregard and violations under the Mines, Quarries, Works and Machinery Act.”

“It is clear to us that even though the Ministry is funding the liquidation process and is thus accountable for the use of funds in accordance with the Public Finance Management Act, the Liquidator does not want the input of the Ministry in the use of the funds,” he said.

Dekop also stated: “Overall, even with additional funding, this Ministry is not and would be in a position to continue to justify the use of tax payers’ money for the direction the Liquidator is taking ,which direction we do not agree with. Our relationship with the liquidator has broken down.”

Dekop informed Motlhabi that “We have decided to approach your office in line with Section 386 of the Companies Act for a solution.”

The section in question allows the Master of the High Court to inquire into the matter and to take action as he may think expedient. 

On the same date that he received the letter from Dekop, Motlhabi “forwarded to you (Dixon- Warren) a complaint and its supporting documents from Botswana Government, being one of the Creditors and/or Contributories.”

He directed Dixon Warren to “respond to the complaint before Friday 7th December 2018.”

In his detailed response through a letter dated 7 December, Warren-Dixon admitted that his relationship with the Ministry of Minerals Resources, Green Technology and Energy appears to have broken down.

“This is because of ongoing misunderstanding on the part of the Ministry and despite my efforts since the commencement of the winding up to engage the Ministry and other relevant stakeholders in an attempt to ensure they understand the challenges and complexes of winding up BCL Tati and BCL Group. They have been unsuccessful,” said Dixon-Warren. 

According to Dixon-Warren, “One of the reasons for this, in my view, has been the failure by the key parties to share information, read the reports submitted by me (which I appreciate are complex and lengthy), seek necessary specialist advice both in insolvency and mining, and have a coordinated long-term strategy on how to deal with this issue.”

Warren-Dixon also informed Motlhabi that he had “noted that you have not commented on the Complaints and have merely forwarded same to me for response. I assume that you have taken cognisance of my conduct during the course of the winding up of these companies.”

Dixon-Warren revealed for the first time that “…the reality is that BCL and Tati are problematic assets to sell.”

“They are complex, highly distressed assets which require significant operational and capital expenditure to be spent before operations can resume. Moreover, the information relating to the primary asset of each mine, notably the mineral resources, is wholly inadequate for any investor,” he said.

He added that “further, the records of the companies are extremely poor and it has taken considerable time to unravel what BCL and Tati own and put in a framework to try to dispose of the assets. I appreciate this is not the feedback the Government wants but is the reality.”

He said MDCB did conduct its own assessment of the liquidation and the mines in June 2018 and he was advised it was due to report back to the Ministry of its findings.

“I was advised that I would be invited to comment on the findings for accuracy. To date, I have heard nothing.”

Dixon-Warren said the government initially provided funding to BCL in the amount of P1.192 billion. Of the P1,192 billion, it is important to note that an amount of P325 million was used to settle pre-liquidation arrears for essential services, notably electricity and water. Further, P264 million has been used to settle the claims of the employees which were ceded to Government. He said the actual amount advanced by government to fund the Care and Maintenance operations has been approximately P550 million.

While he acknowledged that the Ministry is accountable for the use of funds, however, Dixon-Warren said ‘that does not mean that I, as a liquidator, can simply take instructions from the Ministry.

‘I have one overriding guiding principle-the best interest of the creditors. I have asked for funding for clearly expressed purposes,” said Dixon-Warren.

In a confidential letter dated 28 December, 2018, Motlhabi reminded Dixon-Warren that “my duty as a Master having overall control of these two liquidations and liaising with the Ministry is supervise the function that you are performing in the interest of the body of creditors and shareholders.”

He noted that “it is at this point critical to look closely at the working relationship between yourself and the Government of Botswana, represented by the Honourable Minister in the interest of Liquidation process.”

Motlhabi said “It is further in these circumstances taking a holistic view of the matter and after careful consideration that a platform may have to be created to look into your future role in these liquidations.”

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