Norilsk demands Botswana firm honours asset deal
Government-owned mining and smelting company BCL accused of reneging after agreeing to pay $271m for South African and Botswana assets of Russian concern
Resources Norilsk Nickel will not back down on its demand that BCL Ltd, the Botswana government-owned nickel mining and smelting company in provisional liquidation, pay it $271m to honour a deal struck to buy Botswana and South African assets belonging to the Russian company.
In what has become an increasingly unpleasant and complicated transaction, Norilsk Nickel Africa CEO Michael Marriott said while there were hopes that the matter could be resolved through channels outside the courts, including possible government-to-government engagement, the world’s largest nickel and palladium miner would not retreat from its demand that BCL and its backer, the Botswana government honour the terms of the $337m deal struck in October 2014.
The purchase price for Norilsk’s 85% stake in Tati Nickel in Botswana and its 50% stake in Nkomati Nickel mine in SA was reduced by $60m a year later because of weak nickel prices.
Norilsk has launched legal action in Botswana and has opened a case against BCL and the government in the London Court for International Arbitration, a matter that is suspended until the postponed court process in the Botswana High Court is concluded.
Norilsk welcomed news reports that a Middle East company called Emirates Investment House had been in contact with the Botswana government about buying BCL, with Marriott saying if this was the government’s preferred method to find the money to pay Norilsk then the Russian company had no complaints. He said there had been high-level talks between Norilsk and EIH but he was not privy to what had been discussed.
On the Emirates House Group website, which shows Emirates Investment House as a "major project", the description of the company in talks with the Botswana government says that it does "afford business promises in various services, tax and counseling assignments to real estate shareholders, developers, funders, and house constructors. Our strength and wideness of knowledge allows us to employ strongly with clients to discover resolution to production problems and accomplish their industry goal.(sic)"
Concerns have been raised in various quarters about the credentials of EIH to operate an aged nickel mining operation and a smelting plant that was recently upgraded at a cost of 700m pula before BC was suddenly placed in provisional liquidation.
Norilsk had yet to see any details of the EIH offer and proposals, Marriott said.
There is also the cost of rehabilitation for BCL’s nickel operations, which industry sources put at billions of rands.
Marriott said the "frustrating" delays from the Botswana government and BCL, which has already taken ownership of Tati but not paid for it, could lead to additional damages claims against the parties.
A transaction is a transaction. If you give the assurances, certainly the understanding that you’re going to buy something, but when all the papers are signed and the deal is concluded you then renege on payment
BCL had already taken ownership of Tati, with an understanding it would make deferred payments linked to a formula that included the nickel price. Norilsk Nickel Africa has not taken the asset back despite BCL not paying fully for it yet despite taking management control 18 months ago, Marriott said.
Asked whether Norilsk Nickel’s scathing comments about the government’s conduct in the BCL matter, attacking its integrity which has placed it as the top-ranked African mining investment destination, in such a public manner was intended to shame the government and force it to pay, Marriott defended the company’s comments.
"If after a long period of time of interactions, negotiations and discussions, you fail to conclude a transaction, which as far as Norilsk is concerned has been concluded, if you renege on that then yes, your integrity is brought into question," he said.
"A transaction is a transaction. If you give the assurances, certainly the understanding that you’re going to buy something, but when all the papers are signed and the deal is concluded you then renege on payment. You haven’t done your homework properly… irrespective if you realise suddenly you can’t pay for it then why did you upfront lead everyone to believe you could," he said.
Norilsk Nickel Africa management had a seat on the BCL board and would have been fully aware the state-owned company could not possibly afford to pay for a deal of this magnitude.
"It was always backed by the Botswana government. It is well known that BCL has always received government backing in the bad times and during the good times when the nickel price was buoyant they made considerable money out of BCL," he said.
Asked whether the government had signed the documents and would implicitly help fund the transaction, Marriott declined to give a direct answer.
"It was certainly implied the Botswana government was either able to fund the business or receive funding, which it would in return guarantee for the transaction. You are asking me to get into an area that has legal consequences so I will stay away from what was actually written into the contract because the terms are still pretty much legally confidential."