Roughly a year ago we wrote in this space, “Lender’s lenience on Discovery Metal Limited is leniency on Botswana”. The commentary was motivated by the then good gesture shown to Discovery Metal Limited (DML) by its respective cash lenders and financers.
The Australian junior miner, which owns Boseto copper mine, located 60 kilometres from Maun is or was in financial woes. What was good news then though was the fact that the troubled miner continued to get financial lifeline as its lenders granted waiver after waiver and allowed a change in its repayment schedule. The leniency by the respective lenders as stated then was giving hope that indeed the company will be saved and thus succeed in keeping its local project alive while making attempts to bring its balance sheet back to normalcy.
But as we may all be aware, DML was last week declared insolvent. The company prepared its 31 December 2013 financial report on a going concern basis and until recently it continued to seek a change of control or recapitalisation transaction. On Friday its country Manager, Mokwena Morulane issued what maybe was supposed to be a comforting statement to the effect that the company had appointed voluntary consultants to weigh available options. The ordinary shareholders are also likely to be the biggest losers should the company be dissolved.
Despite numerous waivers from the past, there is no certainty that the group will have access to available financial resources sufficient to fund its obligations and operations going forward. Since commissioning in 2012, the mine has been weighed down by operational and financial challenges as low copper prices coupled with low ore grade recovery pulled its finances into the red. Three attempts to recapitalise the company in the past two years have also fallen through, throwing the junior miner further into debt.
It is quite evident that, for DML’s troubles worsened when it failed to secure finances to fund operations and defaulted on its payment to financiers. These created uncertainties on future prospects of Boseto and most importantly the future of its 800 employees, ninety six percent of which are Batswana. The sad reality is that 800 jobs are on the line. What is more worrisome though is the fact that our government is too quiet on the matter despite previous claims of ‘worrying’ about unemployment. We all know what buried Boseto or rather DML.
But if by any chance anyone does not know, the company’s balance sheet has been battered by various costs key amongst them those associated with generating electricity with diesel powered engines. Unlike other miners such as Tati Nickel in Francistown and BCL in Selebi Phikwe, DML generated its own energy at this flagship project. If indeed government is worried by high rates of unemployment in this country, currently pegged at around 20 percent, it should be having sleepless nights as a result of the unfortunate developments at Boseto.
In as much as it was pleasing to read DML’s statement on Friday reiterating the company’s commitment to the local economy, it would be even more comforting to those who lost their jobs to hear our government saying something. It could be a rescue package or buying of shares and ultimately taking over the operations. Why is the government so quiet when close to 1000 of its people are on the verge, or have actually lost their reliable income? Why can’t the government at least help DML to connect to the national electricity grid in a bid to trim operational costs?
However the #Bottomline is that the closure of Boseto Mine will certainly put a major strain on unemployment numbers which in our view are already at a crisis level.