Wednesday, October 27, 2021

Norilsk seeks damages from Botswana over failed Nkomati Mine deal

Norilsk Nickel, the Russian miner, has served notice that it intends to commence legal proceedings against the Botswana government in respect of its involvement in the “reckless” trading of BCL Limited and BCL Investments Proprietary Limited. 

The notice has been served under Section 4 of the State Proceedings (Civil Actions by or against Government or Public Officers) Act and was served on the Attorney General of Botswana, the Minister of Mineral Resources, Green Technology and Energy Security, and the Minister of Finance.

Through the lawsuit, Norilsk says it is trying to recoup $271 million-plus damages it says it is owed from the aborted sale of a 50 percent stake in the Nkomati Mine in South Africa. 

In October 2014, BCL Limited and Norilsk Nickel announced that they had entered into definitive transaction agreements to sell Norilsk operations in Africa to BCL, including a 50-percent participation interest in the Nkomati Nickel and Chrome Mine, South Africa, and its 85 percent stake in Tati Nickel Mining Company in Botswana. 

The Nkomati deal, announced by BCL a few years ago as a strategic priority as part of its high-profile “Polaris II” diversification and investment strategy, was designed to guarantee the long-term future of BCL’s operations by securing the supply of concentrate to its smelter in Selebi Phikwe.  The government was involved in or approved all material decisions relating to this transaction.

Norilsk says it learned through the media in October 2016 that BCL had been placed into provisional liquidation by the government in an apparent attempt to avoid its obligations.  

Norilsk says since October 2016, it has tried on numerous occasions, and through numerous channels, to reach a satisfactory and amicable resolution, but none has been forthcoming.

“Norilsk has therefore been left with little option but to pursue a resolution through legal channels.  In its claim against the government, Norilsk asserts that the business of BCL has been carried about recklessly and that the government was party to that recklessness through the actions of individual Cabinet Ministers, MDCB and the government-appointed directors on BCL’s board,” noted Norilsk late Friday. 

Norilsk Nickel Africa CEO, Michael Marriott, said: “The government has displayed a complete disregard for the fair, frank and reasonable dealing with outsiders which BCL’s insolvent circumstances demanded.  It has failed to honour the obligations under the sale agreement concluded with Norilsk in October 2014.

 “Throughout the process Norilsk has acted in good faith, and given the government and BCL repeated opportunities and offers of assistance to complete the transaction, including concessions to significantly reduce the sale price.

“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.  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.

The Nkomati Mine, located 300km east of Johannesburg in Mpumalanga Province, is the only primary nickel producer in South Africa. The deposit is represented by disseminated sulphide copper-nickel ore and located within Bushveld complex. 

Other by-product metals include copper, PGMs and chrome. In 2013, Nkomati produced 23.8 thousand tonnes of nickel contained in nickel concentrate. As of  December 31, 2013, proved and probable ore reserves of the deposit exceeded 113 million tonnes, average nickel content of 0.32 percent and copper content of 0.13 percent. Measured and indicated mineral resources amount 241 million tonnes with an average nickel content of 0.35 percent and copper content of 0.14 percent.

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