Modern Mining

Although it attracted an excellent turnout of delegates, the recent Botswana Resource Sector Conference (BRSC) held in Gaborone on 12 and 13 June took place at a bleak time for the country’s mining industry. Several mines in the country have shut down over the past three or so years, with the biggest blow to the mining sector being the collapse of BCL last year, which has resulted not only in the closure of BCL’s operations in Selebi-Phikwe but also the closure of Tati Nickel (which it was in the process of buying).

Botswanas mining industry on the back foot

While Botswana’s diamond mining industry has been experiencing difficult times, the Karowe diamond mine of Lucara in the Orapa Kimberlite Field (which is  of mining in the country (photo: Lucara).

One of the speakers at the conference, Charles Siwawa, CEO of the Botswana Chamber of Mines, said the country’s mining sector was “not looking very good” and pointed out that mine closures had resulted in major job losses, with the closure of BCL and Tati Nickel, as well as the Boseto copper mine, having left around 10 000 people out of work – a substantial number in a country where less than 2 000 new job opportunities are created in a typical year. He also noted that four diamond mines – Damtshaa, Ghaghoo, Firestone (BK11) and Lerala – were all on care and maintenance, adding to the woes of the industry. Daamtsha and BK11 have been closed for some time but the suspension of operations at Ghaghoo and Lerala is much more recent.

Siwawa did, however, point out that negotiations were currently on-going to find a suitor for BCL’s assets – which include an underground nickel-copper mine and recently-refurbished smelter in Selebi Phikwe – and said the closure of the four diamond mines was possibly temporary as they were producers of mainly small stones, for which demand was currently weak.

Certainly one can see both Ghaghoo and Damtshaa being revived under more favourable market conditions while there is interest in the BK11 mine, with Firestone Diamonds having announced recently that Amulet – a group of private investors led by Gareth Penny and Diacore Diamond Group – has taken an option on acquiring its Botswana operations, including BK11 (see page 49). Lerala is more problematic. Its owner Kimberley Diamonds suspended operations on 1 June this year after months of problems. This represents the third time Lerala has had to close over its short – roughly nine-year – life and one wonders whether it can ever be a viable operation, given that three different owners have now failed to run it profitably.

Looking at the future for Botswana’s base metals mines, Siwawa said most of them were in the upper part of the cost curve and that efforts were needed to bring down costs to make them viable. He added that reserves were available to sustain long-term mining plans and that there was wide scope for refined base metals production in the long term.

Also giving an overview – as he does every year – of Botswana’s mining industry was Keith Jefferis of Econsult Botswana who said Botswana’s economy was now increasingly services driven, with mining more “a detractor from growth not a driver” due to the country’s lower diamond output and the problems with copper and nickel. He noted that whereas mining had once accounted for over half of Botswana’s GDP, it was now responsible for only 22 %. Minerals were still the largest contributor to government revenues but their share was declining – from 48 % in 2006/07 to 37 % currently.

Jefferis argued that diamonds – which accounted for 74 % of exports in 2016 – would continue to dominate the country’s mining sector but would not provide economic growth as a production plateau had been reached. He also said that coal, contrary to some expectations, would not be able to replace diamonds, particularly with respect to exports and government revenues.

Coal was in fact the subject of several presentations at the conference, with speakers including Alan Clegg of Shumba Resources (see also page 44 of this issue), Dr Frazer Tabeart of African Energy Resources, who updated delegates on the Sese project, and Gabaake Gabaake of Tlou Energy, which is developing the Lesedi coal bed methane (CBM) project.

African Energy, which is listed on the ASX and has a portfolio comprising over 8,5 billion tonnes of thermal coal in Botswana, has been soldiering on for years with the Sese project, which is located 60 km south-west of Francistown. A breakthrough occurred in 2014 when the company announced a JV with copper producer First Quantum to develop the project in order to supply power to Zambia and, in particular, to First Quantum’s operations which are among the biggest consumers of electricity in the country, with the new Sentinel mine and the Kansanshi mine and smelter currently drawing up to 320 MW. First Quantum is progressively increasing its interest in Sese and now holds 55 % after having invested A$13 million.

Tabeart told delegates that the project – comprising a power station complex with its own captive coal mine – was now well advanced, with most of the permitting in place. The mining licence was granted earlier this year and the area it covers contains enough low-cost, low-risk coal to support multiple 300 to 450 MW projects for more than 35 years.

Turning to Tlou Energy, this is an AIM- and ASX-listed company focused on delivering power through the development of CBM gas. Its most advanced CBM project – and reportedly the most advanced gas project in Botswana – is Lesedi, located to the west of Morupule. As Gabaake explained to delegates, the Government of Botswana is keen to develop the country’s CBM resources and has invited proposals for the development of up to 100 MW of CBM power, with Tlou being one of the companies invited to participate in the initiative.

Since the Gaborone conference, there have been two important developments with respect to the project. On 20 June this year, Tlou reported that it had generated its first power from CBM following the installation of a gas generator at Selemo within the Lesedi project area to replace one of the diesel generators on site. The Cummins G8.3 generator can supply up to 60 kVA of power and has been customised to run on a small portion of the gas currently being produced at Selemo from the pilot wells. While the amount of power produced is small, the installation is seen as a ‘proof of concept’ and the power generated is the first in Botswana to be generated from CBM.

Tlou followed up on this development earlier this month when it announced it had lodged a mining licence application for the Lesedi CBM project with Botswana’s Department of Mines in the Ministry of Mineral Resources, Green Technology and Energy Security. The application is the first of its kind to be lodged in Botswana.

While there was much optimism expressed at the conference about the development of Botswana’s coal resources, a note of caution was sounded by Jonathan Berman, MD of Fieldstone Africa, who looked at the energy scene in Southern Africa. He said the region was suffering a power deficit, with peak demand sitting at 52 524 MW against an operating (as opposed to installed) capacity of just under 47 000 MW. He questioned, however, whether developing Botswana’s coal resources to underpin IPP initiatives was the best course forward for the country. As he pointed out, it is becoming increasingly difficult to fund coal projects through debt.

As an example of the way opinion was turning against coal, he quoted the following statement from Deutsche Bank, issued in January this year: “Deutsche Bank and its subsidiaries will not grant new financing for greenfield thermal coal mining and new coal-fired power plant construction. Moreover, the bank will gradually reduce its existing exposure to the thermal coal mining sector.”

Berman – who stressed that Fieldstone as a company had no animus towards coal and was involved in advising on coal projects such as Thabametsi in South Africa – expressed the view that solar energy was beginning to challenge coal as the cheapest form of electricity generation. He noted that Botswana had excellent solar resources and said it had the potential be a regional price leader in solar power.

Coal apart, copper probably offers the best bet for Botswana to diversify its mining industry from diamonds, with the Kalahari Copperbelt extending from Maun down to Ghanzi starting to emerge as a significant copper district. Making all the running in this area are just two companies – Australia’s MOD Resources, working through its Botswanan subsidiary, Tshukudu Metals Botswana, and US-based Cupric Canyon, whose operating subsidiary in the country is known as Khoemacau Copper Mining. MOD’s flagship is the T3 deposit (covered on page 40 of this issue), which it hopes to develop as an open-pit mine, while Cupric is intent on developing its Zone 5 deposit as an underground mine.

Presenting on behalf of Cupric in Gaborone was Johan Ferreira, whose appointment as Head of Cupric’s Africa Operations and MD of Khoemacau Copper Mining was announced just a few days before the start of the conference. He replaces Sam Rasmussen, whose three-year contract ended in December 2016. Charged with leading the development of the Khoemacau project, Ferreira has enjoyed a distinguished career in mining, having served most recently as Regional Senior VP – Africa Region for Newmont Mining in Ghana. Prior to joining Newmont in 2014, he was Senior VP South Africa Operations for AngloGold Ashanti.

As explained by Ferreira, Cupric is planning a starter project based on the Zone 5 deposit – which has a resource of 100 Mt at 2 % Cu and 20 g/t Ag – at a production level of 50 000 t/a of copper in concentrate and 1,4 Moz/a of silver. The starter project – on which construction could start towards the end of this year with first production in 2019/20 – makes use of the existing Boseto concentrator plant, built by the now defunct Discovery Metals. The plant, along with other Discovery assets, was acquired by Cupric in 2015 and is to be upgraded to a capacity of 3,65 Mt/a. Ferreira said the starter project would pave the way for further expansion at the Zone 5 site and in the broader area of its tenements, which could see copper production progressively increasing to as much as 150 kt/a.

Ferreira told delegates that the Zone 5 mine, which would be equipped with three 1,2 Mt/a capacity declines, would see 45 m deep boxcuts having to be developed through the Kalahari sand, with each boxcut involving 870 m3 of excavation. He said the mine would be a world-class mechanised operation involving 45 km of initial development, with 200 m3/s of ventilation per decline being required initially (with the cooling requirement being 20 MW after year 5).

Finally, what of diamonds, the bedrock of Botswana’s prosperity? At previous conferences, the diamond mining industry always featured prominently. At this year’s event, the big names in Botswanan diamond mining were absent, with neither Debswana, which accounts for the lion’s share of the country’s diamond production, nor Lucara, which owns and operates the Karowe mine and is the only other active producer in Botswana, presenting.

Although there was some discussion of Botswana’s downstream diamond sector, it was left to James Campbell, MD of junior explorer Botswana Diamonds, to carry the flag for the diamond mining and exploration sector. He gave an excellent presentation on the activities of Botswana Diamonds, which are covered in detail on page 22 of this issue.

Overall, the medium-term outlook for diamond mining in Botswana looks reasonably positive notwithstanding the closure of Ghaghoo and Lerala, with prices now in a recovery phase. Current production is in the region of 20 Mct per annum but could be increased assuming better demand. Projects on the horizon include Cut 9 at Jwaneng, which would extend its life beyond 2024, and a possible move underground at Karowe, although this is still some years away. Looking further into the future, diamond production will inevitably decline as both Orapa and Jwaneng approach the end of their lives. But this eventuality lies far ahead and, for at least the next couple of decades, as Jefferis pointed out, the diamond mining industry will almost certainly retain its position as one of the main drivers of economic activity in the country.

Report by Arthur Tassell

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Title: Editor
Name: Arthur Tassell
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