Tuesday, March 5, 2024

Molale’s last ditch to turn Botswana into a multi-resource global mining player

Botswana’s mining industry is still in with a bump.

According to Eric Molale, Botswana’s mining sector has not seen its best days yet.

Those are still to come.

For him everywhere he looks he sees a mining sector that is on the verge of an upward swing trajectory.  There are new opportunities from all sides, he says; prospecting is an all time high, there is possibility of another Jwaneng or another Orapa; there is possibility of Botswana becoming a global supplier of rare earth minerals like cobalt, copper, lithium, uranium or manganese; there is a high possibility that soon Botswana will be a true world diamond centre in the mould of Antwerp, Belgium ÔÇô polishing, cutting and even trading rough goods including from a diverse clutch of countries that includes Zimbabwe and Namibia, among others.

The minister responsible for minerals is even more upbeat when he talks about the soon to start negotiations of a new Sales Agreement between Botswana Government and De Beers.

Under the current agreement just over 81 percent of profits flow to Botswana in one form or another ÔÇô with De beers taking home the remaining 19 percent.

Hinting that Botswana government might still push to extract more concessions from De Beers, Molale is sanguine that De Beers would still make profits even if Botswana’s share of take home was to significantly increase under a new set up.

“Mark Cutifani is one of the happiest men on earth,” Molale said recently.

Cutifani is the Chief Executive of Anglo American ÔÇô a highly diversified global multi-resource mining major that owns 85 percent of De Beers.

The remaining 15 percent of De Beers is owned by Botswana Government.

Molale was talking from a podium at a recent mining event in Cape Town. Mining Indaba ÔÇô Africa’s premier and by the largest mining conference brings together mining executives, investors, financiers, government, Environmental, Social and Governance groups as well as policy makers.

He said when it comes to the mining sector Botswana’s formidable track-record does not lend the country open being second guessed.

Based on that track-record the Botswana he sees has a bright future in mining.

He believes that Botswana has an established and internationally respected governance framework that will for a long time to come ensure the country’s long term future in mining. He made it clear that for Botswana beneficiation remains a bedrock of the overall mining policy.

Almost like a professor lecturing to undergraduates, he advised other African mining countries to pursue beneficiation for the sake of it.

“Beneficiation has to be done on a case by case. And it has to be clear what the policy objectives are. Most importantly a proper due diligence has to be done to determine beneficiation readiness,” said Molale.

He gave as an example African countries that have tried to pursue beneficiation that required a lot of energy when such countries already had severe electricity deficits.

“The results have been a disaster. All because they did not do proper beneficiation readiness assessment,” said Molale.

Having dominated the world’s diamond production for the last half a century, said Molale Botswana is now shifting its sight towards rare earth minerals. The country is on a hunt. And so far the early findings it is encouraging, was his message.

By and of itself a mere mention of rare earth minerals as Botswana’s future highlights a seismic shift in the country’s mining policy dynamics.

It is a new and totally unchartered chapter.

For a long time diamonds have been and remain Botswana’s crown jewel and by far the country’s economic mainstay.

The new strategy, said Molale is to diversify the mining sector beyond diamonds.

This is a brave strategy given that diamonds have made Botswana what it is ÔÇô literally. And also that diamonds are intricately intertwined with Botswana’s rags to riches story.

Close to 80 percent of the country’s export earnings come from diamonds, with as much as over a third of GDP made from the same.

Rare earth diamonds are used in high-tech inventions like mobile phone hand-sets and also in electric car batteries.

Rare earth minerals have proved a boon in a few countries where they are mined. And are expected to exponentially grow in prices as electric car manufacturing catches levels projected to amount to a global revolution.

While demand is expected to outstrip supply soon, so far over two thirds of the world’s production comes from the Democratic Republic of the Congo.

For Botswana there are many obstacles to overcome. And there is no hiding that there are two sides to the story: While findings in Otse, Kanye and Kgalagadi are encouraging, exploration for rare earth minerals remains at preliminary stages.

A host of mines, especially the minors have had a difficult few years leading to many of them closing down.  The BCL copper and nickel mine in Selibe Phikwe, for long one of the country’s flagships has effectively died. And it would take a miracle to bring it back to life. New investments in mining have all but dried down. And Debswana operated mines, while still healthy are feeling pinch on account of depths.

Molale readily acknowledges the fact that coal of which Botswana has in astonishing abundance has lost its luster ÔÇô in both profitability but also as a result of difficult environmental questions its mining raises.

Botswana’s excitement over coal that was so unmistakable only a few years ago when government officials took turns to tell the world of the millions in metric tons of untapped resource has dissipated.

That excitement has instead been replaced by a morass of unveiled thereby lending credence to strong suspicions that any significant new investments in coal are for now fast getting off limits.

Based on its ever growing cost of capital, coal, says Molale has become a pariah, adding that any efforts to try and raise finance for new projects nowadays always invariably runs into difficulties of unwilling financiers, or at best expensive finance.

Based on the attitude of investors to coal, Botswana’s estimated 200 billion tons of coal reserves are likely to remain underground ÔÇô at least for the foreseeable future.

Rare earth minerals, according to Molale are for now and the future the hottest commodities in the mining industry.

Botswana has not as yet started extracting from the ground any rare earth mineral ÔÇô at least not in any sizeable economic quantities. Yet the minister already speaks about this subset of minerals with astounding authority and confidence.

“Rare earth minerals are the future. They are highly profitable, do not involve a lot of earth moving, do not involve use of too much water and have little material waste. And they do not need to be mined in large quantities,” he says.

A part of Botswana’s policy that will not change is that all minerals are vest with the state.

And with that Botswana Government is guaranteed by law of at least 15 percent shareholding of any mine that opens inside the country.

“But as a practice we have consistently been flexible enough not to exercise that right due to us as a Government, especially on minors. All we want is a fair share of taxes and royalties due to us as a government,” he said.


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