Details are beginning to emerge showing how the Cabinet sub-committee threw out of the window advice not to close the BCL mine.
A report compiled by BCL management for a cabinet sub-committee assigned by President Ian Khama to look into the challenges of the mine suggests that there was no need to close the mine.
The Cabinet-sub committee comprised of among others ministers Kitso Mokaila, Sadique Kebonang and Chairperson of State owned Minerals Development Company Botswana, Reginah Seikalesele-Vaka.
The document suggests that the Cabinet sub-committee was provided with two options related to the BCL group; reorganisation Plan and Closure Plan. The report from the BCL management was in favour of the restructuring of the mine instead of shutting it down.
States the reports: “BCL has sufficient mineral reserves/resources to last well in the future and these reserves can be mined commercially to end of mine life. The current depressed commodity prices are expected to last into 2017 and it is the two years that BCL will need support of Government of Botswana (2016-2017).”
According to the report, “The current situation is no different to previous periods, the only difference is part of the requested funding entails reconfiguring the business to be better prepared to wealth such eventualities in the future and to provide Government of Botswana (GOB) with a softer landing when there will no longer be sufficient reserves to mine commercially.”
The report also shows that while there was fear that creditors could apply for the liquidation of the mine, BCL had been able to service its loans.
The mine was also able to stop relying on European mine funding called Sismin funding programme.
“BCL last accessed emergency funding from GOB in 2002 of which 100 percent of the principal was paid back. BCL stopped utilising Sismin funding in 2008 for its capital development plan of which 100 percent of the loan amount inclusive of the interest were paid to GOB. From historical funding trends, funding was as a result of the cyclical nature of the commodities it trades in,” reads the report.
On metal or commodity pricing, the report states that BCL had adopted what is called Consensus Economics published pricing guide for planning purposes to remove the guess work in pricing.
“This is an industry accepted forecasting house that is used by various conglomerate mining houses,” reads the report.
The Life of Mining (LOM) financial model pricing of the various metals present in the BCL matte is based on this publication.
The report further states that “The Group will return positive bottom line from 2018 when Selkirk project will be fully implemented and metal prices recovered above US$5.50 /lb.”
The report also notes that “2018 will also be the first year after all current re-organisation initiatives will have been fully implemented.”
The report says the smelter has “stabilised from problems encountered at the beginning of the year and an emergency risk is the building up generation in the flash furnace as the vessel is current sub-optimally due to constrained feed, which is not sustainable for operations.”
Despite recommendations that the BCL mine should continue with its operations, the management acknowledge that there are serious challenges.
“We continue to manage creditors to pre-empt a situation where any one of the creditors can liquidate the business. This is becoming onerous to achieve as each day funding is delayed there is a real and present danger that one of the creditors will apply for the business to be liquidated. It is therefore urgent that we get clarity on the probability of funding and timelines to the business to take appropriate steps and decisions,” reads the report.
It says “the Business continued to be under serious cash flow constraints and cannot meet its obligations fully as they arise. This has led to underperformance of the underground operations as a result of the undercapitalised fixed and mobile assets.”
