The just-ended Resource Conference provided a big warning to Government – mining will no more be as lucrative as it used to be. In fact, Botswana has to fast tract identifying alternative income sources or face tough times. KABELO ADAMSON reports
The Botswana Resource Sector Conference (BRSC) held this week in Gaborone gave hope that while the minerals resources that sustained the economy since independence might be on decline, they will continue to so for the foreseeable future, albeit on reduced basis. The conference came on the backdrop of challenges facing the mining industry which led to closure of some mines as prices collapsed and therefore created a platform to dissect the sector’s challenges, threats and opportunities. It was, however, evident from the conference that opportunities in the sector still outweigh challenges, an assertion confirmed by mining experts from government, the private sector and economists. The mining sector remains the largest contributor to the economy despite the sector suffering contraction in output in 2016 mainly due to a decline in diamond output as producers scaled down production. According to experts, Botswana is endowed with huge mineral deposits from precious stones to base metals including diamonds, copper, gold and coal, with the latter remaining largely untapped.
The Minister of Mineral Resources, Green Technology and Energy Security, Advocate Sadique Kebonang said when officiating at the event that the economy will continue to rely on mining, in particular diamonds for export earnings. According to Kebonang, government continues to come up with accommodative policies to create a conducive environment for mining. The minister said Government was in the process of reviewing legislations and policies on mining. Regardless of challenges that the mining industry has faced in the past as prices collapsed, resulting in revenue earnings declining, opportunities in mining still exist in Botswana. Experts said a lot is required to make the sector sustainable such as investing heavily on infrastructure development as well as financing. Mineral revenue has fallen more than 10 percent in the last decade, from 48 percent during 2006/2007 to 37 percent during 2016/2017. Revenues from minerals are expected to be overtaken by SACU revenues in the upcoming 2017/2018 financial year but the latter is also likely to fall in the long term.
Economist Keith Jefferis of Econsult warned that while opportunities still exist, it will be erroneous to think that mining will be a cash cow like in the past. With several explorations taking place across several mineral resources, experts say this should serve as a motivation that it is not all doom and gloom for the mining industry. Jefferis, who is also former Deputy Governor of BoB, said the industry has a long-term potential with short-term difficulties such the closure of BCL mine. Other requirements that are said to be needed to sustain the industry is financing as well as sourcing of markets. Financing itself has been cited as a big impediment facing the industry as some funding institutions have reportedly discontinued lending to the mining the sector.
Diamonds, which have been the mainstay of the economy since their discovery, have in the last few years seen a decline as Debswana reduced its output as a way of responding to the market dynamics. Diamonds account for 68 percent of mining output and 66 percent of export revenue and expected to continue to do so for the estimative future and remain government large export earner. Companies like Botswana Diamonds (BOD), a Botswana Stock Exchange (BSE) and AIM listed diamond exploration company which also gave an update on its progress, are coming into the picture and believe that lack of new discoveries in the last decade means future price growth. BOD together with its joint venture partner Alrosa holds prospecting licenses in the Orapa Kimberlite and Central Kalahari Game Reserve (CKGR) and most of its focus is currently on the CKGR one. However, progress is said to have stalled since one its partners in the CKGR project, BCL was put under provisional liquidation in October last year. The project which is known as Maibwe joint venture has so far seen the company drill verification holes and is in the process of analysing the samples. Stability in cutting centres is said to have returned and therefore stable volumes are expected as this year goes by. Jefferis believes diamonds will continue to dominate the mining sector but cautioned that they will no longer provide economic growth, adding that fiscal contribution by diamonds will diminish.
Copper and Nickel
This year’s output in copper is expected to be lower than the previous year as the mineral’s key producer, BCL, has fallen. The BCL and Tati Nickel Mine closures are expected to affect the output of copper and nickel going forward. Last year the copper accounted for 18 percent of total mining output after suffering a knock following closure of copper producing mines in the latter stages of 2015. Some of the mines that were closed during that period included Mowana and Thakadu Copper Mines. It is mixed fortunes for copper and nickel as when some mines close others are re-opening under new operators. Mowana mine has recently been acquired by Alecto Minerals and production has started again giving more hope to copper mining. One of the companies currently preparing to start operations is the Khoemacau Copper Mining which took over Boseto copper mine previously owned by Discovery Metals. Khoemacau has recently secured a $50 million loan facility to develop the underground mine which is located in the North West of Botswana. The mine, which is located in the Kalahari Copperbelt, is expected to produce 50, 000 tonnes of copper and 1.4 million of ounces of silver a year in its 25-year life span with future expansion expected to increase yearly copper output to 120, 000; more than two fold of the current expectation. The company expects to ship its first consignment to the markets in 2019.
Coal’s share of mining output is currently very low due the fact that currently there is only one operational coal mine in the country, Morupule Coal Mine. Coal from the mine used to feed into Morupule Power Station for purposes of energy production. Its output nonetheless still decreased by 6.1 percent in 2016 as Morupule B Power Station operated below full capacity in the first half the year. Botswana is endowed with large coal deposits worth more than 200 billion tonnes but the industry remains largely untapped. Several coal companies have coal projects in the pipeline but to this end there has not been much of progress on the ground. Companies such as African Energy and Shumba Energy are the few that have been doing work here with the hope of monetising coal resource. The latest to arrive is Minergy which listed on BSE a few weeks ago and made its intentions clear that it would like to fast track coal production in Botswana. It has been feared that coal will no longer be sustainable as it has been classified as a dirty mineral. However, it is said coal has far more benefits than just energy production such as coal-to-liquids, coal-to-gas, fertilizers, cement, export to international markets and domestic use, all of which are contained in the Coal Roadmap commissioned by government. Moreover it has been said that coal will support government’s strategy to be a net exporter of energy by 2018. The challenge coal mining is facing is said to be funding as institutions are discontinuing to fund its operations.
Coal replaces diamonds
With huge coal deposits that exist underground, coal has been touted to replace diamonds once they get diminished as the largest export revenue earner. But Jefferis does not believe this will ever happen. He said contrary to these expectations, coal alone cannot replace diamonds, especially with respect to exports and government revenues. On the other hand, domestic coal for power generation is inconsistent with Botswana’s COP21 commitments. He said other ways of monetising coal, besides bulk exports are compliant with environmental commitments.