Liquidator of Botswana nickel miner sounds cash shortage warning
The liquidator of Botswana’s state-owned nickel assets, Nigel Dixon-Warren, is in talks with a number of parties over the sale of the mines and smelter. But he has warned of the need of an urgent cash injection from the government to prevent abandoning the mothballed mines and losing any chance of selling them.
The liquidation process over the past two years has entailed unscrambling years of mismanagement, misreporting and undercapitalisation of BCL Group, one of the key mining assets in Botswana, which has resulted in a bitter legal feud with Norilsk Nickel over the $277m sale of the Russian miner’s SA assets.
The Botswana government, which has billions of pula’s worth of exposure to the BCL Group, had injected a refundable 1-billion pula into the company to assist the preparation of the assets for sale or orderly closure in the first year of liquidation but has notified Dixon-Warren it would not repeat the exercise.
“The consequence of this is that the liquidator has been forced, with effect from 1st December 2018, to severely curtail the care and maintenance operations at both BCL and Tati,” he said, adding the workforce would consequently be reduced by some 220 people to 320.
Botswana’s department of mines has forbidden the flooding of any parts of the mines despite the liquidator wanting to allow a lower-grade, expensive-to-maintain area to be flooded, reducing monthly operating costs.
The government has set up a committee to discuss funding of a care and maintenance programme.
If the assets are abandoned and flooded due to a lack of funding — with parts of the underground mines standing to be underwater within just two days if pumping is stopped — then it would set back all efforts to sell the mines and smelters, Dixon-Warren said in a detailed report this week.
It is estimated it would need an investment of between $150m and $500m to return the mines to an “optimal” state and to refurbish and restart the smelter.
Talks for restarting operations have started with two potential buyers, Dixon-Warren said. “These engagements are very early stage with both parties currently assessing the information available with a view to developing their financial models to determine whether the mines represent a commercial opportunity. Three further parties have also expressed an interest and the liquidator has commenced preliminary discussions with them.”
The liquidator not only wants funds to keep the assets in the best possible condition but to conduct a drilling campaign to define resources that would extend the life of the operations and entice buyers.
Giving a sense of the state of BCL when it was placed in liquidation, Dixon-Warren said: “The extreme distressed state of the assets, the dire financial status of the companies and the appalling state of the records makes it unique in Botswana but also probably further afield.
“Based on the current level of funding, the estate will run out of money to maintain the care and maintenance operations during the course of 2019,” he said.
“The liquidator will reserve sufficient funds to be able to wind up the estates. However, he will not be in a position to carry on with care and maintenance, nor will he be able to properly and appropriately close the mines in accordance with the relevant mining legislation. He will rather be forced to dispose of the assets for scrap,” Dixon-Warren said.
BCL’s creditors, the largest of which is the Botswana government, are owed 2.2-billion pula. The environmental rehabilitation will cost up to 3-billion pula, while the Norilsk claim could add 3-billion pula more.