Tuesday, November 24, 2020

Norilsk Nickel wants Botswana to fork out P2,5bn for dishonoured deal

Norilsk Nickel is seeking its “pound of flesh” to the tune of US$270 million (about P2,5 million) from the Botswana government over a botched deal by BCL to buy a 50-percent stake of its Nkomati Mine in South Africa last year.

The Russian mining giant on Thursday served notice to sue on the Minister of Mineral Resources, Green Technology and Energy Security, Sadique Kebonang, and the Minister of Finance and Development Planning Kenneth Matambo and the Attorney General.

Norilsk Nickel announced on its website on Friday that it intends to sue the government of Botswana “in respect of its involvement in the reckless trading of BCL Limited and BCL Investments Proprietary Limited (together “BCL”), with a view of recovering $271 million plus damages and other costs that are owed to Norilsk Nickel in relation to the sale of a 50 percent interest in the Nkomati Mine in South Africa and $6.4 million that are owed to Norilsk Nickel in relation to the sale of the Tati Mine in Botswana. Botswana is the ultimate shareholder of BCL through its corporate vehicle MDCB,” the statement reads.

Norilsk agreed to sell operations including its 50 percent stake in South Africa’s Nkomati Mine to BCL Group for $337m in 2014, later reducing its price to $271m. But BCL filed for liquidation in October last year just before the transaction was due to be completed, with the Botswana government claiming that it was unable to afford the purchase.

Sources close to the lawsuit say Norilsk will argue that despite approval of the Nkomati deal at the highest levels,  the government enclave was aware of BCL’s financial condition and knew that it was unable to complete the deal without state funds.“Why did BCL enter into the transaction knowing it couldn’t afford the purchase price?” one lawyer familiar with the case said.

Norilsk Nickel is a diversified ore mining and smelting company, and the world’s leading nickel and palladium producer. It operates industrial facilities in the Norilsk industrial region and on the Kola Peninsula in Russia, Finland, the United States, Australia, Botswana and South Africa. Norilsk Nickel has its own global network of representative and sales offices in Russia, the UK, China, the U.S. and Switzerland.

A survey by the Fraser Institute, a Canadian think-tank, this year rated Botswana as the top mining investment destination in Africa, and 12th in 104 governments globally for the stability of its policies. The BCL’s messy deal is, however, expected to tarnish the country’s image.

“Botswana has a reputation as one of the safest and best places to invest in the whole of Africa and it has earned the strongest credit rating on the continent on that basis,” said Michael Marriott, the chief executive of Norilsk’s Africa operations. “The way that the government of Botswana has acted over BCL brings the validity of that reputation into question. The negative ramifications could be felt across the economy of the whole country,” he added. 

The Nkomati Mine, the other half of which is owned by South Africa’s African Rainbow Minerals, is Africa’s biggest primary nickel producer.  

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The Telegraph November 25

Digital edition of The Telegraph, November 25, 2020.