Botswana court weakens Norilsk’s hand in BCL litigation
Russia’s Norilsk Nickel once again ramped up the war of words against Botswana’s government after a high court ruling in that country that it could not pursue international arbitration to resolve a $277m impasse over a sale and purchase agreement with BCL, a state-funded nickel producer that is now in liquidation.
In 2014, Norilsk struck two agreements with BCL, formerly known as Botswana Copper, to sell its 85% stake in Tati nickel mine and its 50% stake in SA’s Nkomati Nickel to the state-run nickel producer for $337m. The price was dropped to $277m.
But neither BCL nor the government has paid Norilsk, which has transferred Tati to BCL but still holds on to its 50% stake in Nkomati, which it shares with JSE-listed African Rainbow Minerals. A $45m offer made in March by the Botswana government for Tati and an understanding that the Nkomati deal would be void, with no penalties or payments due to the Russian company, fell through, leaving the parties back where they started. It is understood that the transaction, which needed the approval of the BCL liquidator, Nigel Warren-Dixon of KPMG in Botswana, failed to do so, with the argument that Norilsk was on shaky legal ground.
Norilsk was considering whether to appeal against the judgment that blocked it from approaching the London Court of International Arbitration to decide on its claims under the sales and purchase agreement, Norilsk Nickel Africa CEO Michael Marriott said.
He again questioned the perception by the mining community of Botswana as an investor-friendly destination. Marriott conceded there was no written undertaking by the government to fund the BCL’s $277m purchases and that it was implied during sale talks that it would step in if BCL was unable to pay.
Under the Botswana Companies Act, court approval is needed to approach international courts of arbitration.
The judge said Norilsk appeared to "blow hot and cold" in its application to the court, wanting to continue with the arbitration process it had already started while at the same time asking for "leave to commence proceedings".
Meanwhile, the liquidator has approached the South African courts to decide whether the transfer of a portion of Nkomati mineral rights from African Rainbow Minerals to Norilsk in the first of a two-phase process was proper and whether the second phase to agree the transfer of the rights from Norilsk to BCL was in line with the law.
The transfers were approved by then mineral resources minister Mosebenzi Zwane and the liquidator’s lawyers say a strong case can be made that the conditions of the Mineral and Petroleum Resources Development Act were not adequately adhered to in his decision.