BCL buys Pula Steel, Nkomati mine

SHARE   |   Sunday, 06 July 2014   |   By Phillimon Mmeso
Mahupela Mahupela

BCL has completed the acquisition of   Pula Steel and Casting Manufacturers (Pty) Ltd that deals with recycling of scrap metals to produce steel products. The plant is able to process between 100 to 3000 tonnes of steel a day. BCL is the major shareholder in the company after acquiring 50.5% shares. Pula Steel was established in 2009 as a steel manufacturing company based in Selebi-Phikwe and its market share in the manufacturing of finished steel products in Botswana is anticipated to be 100%, as is currently   the only  manufacturer of  finished steel products in Botswana.
Thuso Mogotsi, a mining engineer at BCL mine, has already been appointed General Manager of Pula Steel. This is part of BCL’s grand strategy, known as Polaris II strategy, to improve the mining company’s fortunes.

Last week cabinet approved the request by BCL to acquire Tati Nickel Mine from Norilsk Nickel and their 50% shareholding at Nkomati mine in South Africa. The copper mining company owed government P3.3 billion which P2.3 billion has been converted into equity shares while BCL paid P1 billion. According to a source at the government enclave, cabinet decision takes two weeks to mature and BCL mine and government are expected to announce the deals next week.

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It has also bought out the Russian Norilsk Nickel international shares at Tati Nickel Mining Company in Francistown and at African Rainbow Mine known as Nkomati mine in South Africa. According to authoritative sources, BCL Mine which wants to be a regional mining force has bought all the shares of Norilsk Nickel making them 100% shareholders. MMC Norilsk Nickel (Norilsk) owned 85% shares at TNMC and Botswana government owned the remaining 15% which are all now in the hands of BCL mine.

Last year Norilsk Nickel took a decision to withdraw its foreign assets especially in Latin America and Africa. The global mining giants wanted to concentrate on their tier 1 assets which are mostly based in the polar region. One of the reasons for the Russian mining company to sell TNMC is the depleting copper ore at the mine which stood by 28 percent in the third quarter of 2013 (Q3 2013).

The mine came up with a turnaround strategy which they named ABC whose aim was to prolong the mine’s lifespan to 2015 by increasing production, cutting down production costs and improving commercial terms of concentrate sales and treatment. This seemed to be bearing desired results as evidenced by the 2012 and 2013 financial year reports that showed that the mine recorded stable sales. Its nickel sales came to 7000 t and its copper sales were 5000t. Copper production rose by 3.4%.

After their threats to close down the mine last year which was going to have some economic implications in Botswana’s second city of Francistown and to over 800 employees, the government of Botswana decided to fund BCL who were interested in buying the mine. Since last year BCL, Norilsk Nickel and government through Ministry of Minerals, Energy and Water Resources were in negotiating about the possibility of taking over the mine.

TNMC General Manager’s contract not renewed. The contract of the General Manager of TNMC Serggey Steshenko contract which expired at the end of last month has not been renewed. Steshenko was appointed General Manager after Norilsk Nickel recalled the then GM Bogdan Kuzhel under some controversies. Steshenko was previously the commercial manager at TNMC. He came up with a strategy called ABC which was to keep the mine afloat until 2015 as the Russian mining company wanted to pull out of the mine.

Nkomati Mine
BCL is now the new partners to South African billionaire Patrice Motsepe’s African Rainbow Mines as they each own 50% shares at Nkomati mine in South Africa. Since last year, Norilsk Nickel had stated their intention to sell their stake in the Nkomati Mine which produces nickel, chrome and about 100,000oz of platinum group metals a year. In their 2013 financial year report Norilsk’s associate operations made a profit of $43 million, a turnaround from a loss of $97 million in 2012 FY. The unstable labour market, especially in the mining industry which leads to heavy operational losses, is said to be one of the reasons that led to the Russians to sell their stake to BCL.

The mine is situated in the north-east of South Africa near Machadodorp in Mpumalanga and has one of the largest nickel reserves in South Africa having estimated reserves of 408.6 million tonnes of ore grading 0.33% nickel. Last year the giant Russian mining company wanted to sell their shares to their partners ARM at both TNMC and Nkomati mine but they turned them down citing weak markets.

Polaris II Strategy
After making losses, BCL Mine management came up with A re Chencheng strategy in 2007 whose aim was to change the way the mine have been operating after costs were rising in US/ pound terms while production was going down. The strategy proved to be a success as the once debt ridden copper mine was making profit and able to pay government who bailed it on several occasions.

In 2012 the copper-nickel producer came up with POLARIS II strategy whose aim was to transform the mine into an internationally recognised mining company. It also aimed at becoming an enterprise that will diversify its product offering. The idea was also to see BCL owning its own refinery, chasing acquisitions and exploration in copper belts. The decision by Norilsk Nickel to sell its African assets offered BCL an opportunity to expand their operations not only nationally but also regionally.

History of BCL Mine
Botswana’s first copper mining town came into existence after the then Bangwato regent kgosi Tshekedi Khama signed a concession with John Buchunan, Chairman of Minerals Separation Limited and Sir Ronald Prain, Chairman of Roan Selection Trust (RST) in June 1959. Exploration for the minerals started earnestly and in 1963 the first ore body was discovered at Lebala area which is now known as Selibe. In 1966 an ore body which was believed to be rich in copper nickel than the Selibe one was discovered at Boswelakgomo area. 1967 saw a new agreement being signed between RST and the newly elected government of Botswana in which the former owned 85% while the latter 15%. To construct the mine BCL got a loan of R51 million from the West German government and R 13.5 million from the South African Industrial Corporation. In its first full year of operation, the copper nickel mine produced 0.83 million tonnes of copper nickel.

In the late 1980s and early 1990, the prices of copper started to take a knock throwing the BCL mine into debt and were fears that it might close down leaving Selibe Phikwe as ghost town.
The original shareholders who started the mine wanted to close it down and leave but government came to the rescue by bailing it out ending up owning 93.6% shares. Initially government held 35% Norilsk 25% while Botswana RST Ltd held 40 percent. By 199 it is said that government has spent P7 billion on BCL to save it from collapsing under huge debt. In 2002 Botswana government through its treasury department injected P400 million into BCL and by 2007 the interest for the loan ballooned to P900 million.

The arrival of Mphathi as GM
In 2003 government as the major shareholder appointed Montwedi Mphathi as the first Motswana general manager of BCL Mine. His arrival was received with mixed reactions after his salary was increase to  P100,000.00.  He took unpopular decisions and one of them was when he asked BCL employees to choose between politics and their jobs at the mine. He was always at loggerheads with Botswana Mine Workers Union leaders and at one point in August of the same year, suspended 13 of them for disclosing information about the earnings of the management team.
Politicians branded him as the “Iron handed” leader across the political divide.

Under his leadership the mine started to repay the government as it performed well especially in 2007 because of high commodity prices and growing demand of copper nickel in Asia.
In 2007 there was a growing demand of copper and nickel in Asia. BCL managed to make some profits which they used to clear some of their loans. BCL managed to pay the government P11 billion loan and clear some of their debts especially to Industrial Development Corporation [IDC] and KFW of Germany. In 2009 he introduced a new strategy called “A re chencheng” which was aimed at changing the way the mine has been doing things and to maximize profits by reducing waste at the mine. Mphathi who holds an MSc (Industrial and Administration Sciences) from City University from London shocked many in 2011 when he left the mine under a cloud of controversy to join Botash Mine in Sowa Town.

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He was replaced by his friend and best man at his wedding Dan Mahupela. After ascending to the executive position of BCL mine, Mahupela came up with another strategy POLARIS II which was to transform the mine into an enterprise. The ambitious strategy is currently bearing fruit though he is currently facing challenge from Mine Workers Union members who accuse him of neglecting the welfare of the workers.
A holder of BSc Mining Engineering, Mahupela has been credited for continuing on the good work that his predecessor has done.



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