Picture: ISTOCK
Picture: ISTOCK

The success of Norilsk Nickel’s $277m claim against Botswana’s BCL miner and refiner, which is in liquidation, will be decided in an SA court that must find on the merits of a mining right awarded to BCL.

In an acrimonious dispute in which Norilsk Nickel, Russia’s largest mining company and a leading source of palladium, has tried to shred the reputation of Botswana as Africa’s most highly regarded mining destination, there has been a standoff between the Russian company and Nigel Warren-Dixon of KPMG Botswana, who is leading the BCL liquidation.

In 2014 Norilsk struck deals with BCL to sell its 85% stake in Tati nickel mine in Botswana and its 50% stake in SA’s Nkomati Nickel to the state-run nickel producer for $337m.

The price was later dropped to $277m.

Norilsk is chaired by Gareth Penny, the former CEO of De Beers, who knows the SA regulatory environment well.

Norilsk suffered a setback when the Botswana High Court ruled that it had overstepped the mark by starting an international arbitration process to recover the $277m it said it was owed by BCL and its funder, the Botswana government.

BCL and the government have not paid Norilsk and the latest battleground is an SA court where Warren-Dixon argues that the director-general of the department of mineral resources had not properly applied his mind in agreeing to the transfer of mining rights to BCL’s wholly owned subsidiary, BCL Investments, from Norilsk because of the Botswana company’s parlous finances.

If Warren-Dixon succeeds in the court case and the transfer of the right is rescinded, Norilsk’s case will all but come to an end, since securing the right was one of the key conditions for the conclusion of the transaction.

BCL Investments has not taken ownership of the right and Norilsk is still African Rainbow Minerals’ (ARM’s) partner at Nkomati, SA’s only primary nickel mine.

In an updated affidavit lodged in August, Warren-Dixon drew on a June 2018 affidavit filed by Dennis Fulling, a director of various Norilsk entities and a former director of BCL, in a Norilsk claim against the Botswana government demanding that the state and various executives of BCL and BCL Investments be held liable for the $277m.

The Fulling affidavit made clear that Norilsk was fully aware that BCL was unprofitable and that it needed billions of pula in cash injections from the Botswana government to keep going and that BCL and BCL Investments would "not be in a position to purchase or finance anything" without government support, Warren-Dixon said.

"The Norilsk entities knew that there was no express government guarantee" for the purchase of the 50% stake in Nkomati and to meet capital demands within the partnership with ARM, he said.

This awareness lies at the heart of Warren-Dixon’s argument that the director-general should not have agreed to a mineral rights transfer to BCL Investments because it was in dire straits financially, something that would under SA mining laws preclude it from successfully acquiring such a right.

He suggested the director-general had not been made aware of BCL Investment’s poor financial status.

The application by Norilsk for the transfer of Nkomati rights to BCL Investments was "fundamentally flawed, misleading, and inchoate and could not justify a lawful, reasonable or rational decision by the director-general…," he said.