Wesbank

Govt to buy stake in Boseto mine

SHARE   |   Sunday, 15 March 2015   |   By Keitebe Kgosikebatho
Mokaila Mokaila

Government will consider buying a stake in the now closed Discovery Metals Limited’s (DML) Boseto mine near the tourist town of Maun when it re-opens under new management.
Speaking to The Patriot on Sunday the Minister of Minerals, Energy and Water Resources Kitso Mokaila said the Minerals Development Company Botswana (MDCB), a special purpose vehicle whose mandate is to manage and maximize Botswana’s business interests in the mining sector, will advise government on whether to buy a stake in the mining establishment. “It is important for government to have a stake in order to have our own people inside,” he said.
Addressing parliament on Friday about recent job losses in the mining sector, Mokaila said government is in agreement that to a larger extent she needs her own people who could give firsthand information on the affairs of privately owned mines. Though he could not say whether government would certainly buy into the copper rich mine in the north-western district of Botswana, Mokaila said government will rely on recommendations from MDCB. He however highlighted that government was optimistic that the mine will soon find a suitable buyer as several investors have already shown interest.
Quizzed on why government did not bail out the ailing Boseto mine when signs that it was experiencing dire financial constraints surfaced, Mokaila said government had wanted to rescue the mine, especially that more than  400 jobs mostly held by Batswana were at stake. According to Mokaila, his Ministry deferred the collection of royalties amounting to P24 million from DML with the hope that the company will recover and only pay when their balance sheet was in order. Mokaila argued that government decided not to provide any financial assistance to the mine as it was too risky. “But we realised that it was too risky because the mine had debt exceeding $110 million,” said Mokaila. In addition, he said the mine’s creditors who were more than one, were now demanding their money back and despite what government was willing to do, it was too much a financial risk.
According to  Mokaila, because one of the contributory factors to the mine’s losses was the high cost of generating electricity, government has decided to  construct a 400 KV electricity line from Maun to Toteng where the mine is located in order to augment their power supply and reduce cost.
BOSETO mine closed after Discovery Metals Limited (DML) was suspended from trading in both the Botswana Stock Exchange and the Australian Securities Exchange following decision by the company’s board of directors to considers the company insolvent. Before its insolvency DML had entered into a US$5 million short-term working capital facility with Cupric Canyon Capital LP.  A condition to the facility agreement granted Cupric a period of exclusivity to allow it to complete due diligence, and to allow time for both Discovery Metals and Cupric to finalise and agree definitive terms of the potential transaction. The deal then fell off and Cupric demanded its money back, which led to the insolvency.
Since commissioning in 2012, DML has been plagued by operational and financial challenges as low copper prices coupled with low ore grade recovery pulled the company finances down.



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