Modern Mining January 2019

COMMENT

Botswana’s troubled mining industry takes another hit

T he mining sector in Botswana has taken yet another knock with the news that the Mowana copper mine, located 120 km north-west of Francistown, has suspended op- erations and that the company that operates it, Leboam Holdings, is now under provisional judicial management. Leboam is 60 %-owned by Cradle Arc, which is listed on AIM (though trading in its shares is now suspended). While Mowana has not necessarily reached the end of the road, its performance last year after being re-opened in March was dismal. It failed to meet its targets and in October 2018 produced just 140 tonnes of contained copper compared to management’s original forecast of 392 tonnes. Mowana is a relatively new mine. I visited it in about 2007 when it was in the final stages of construction by its then owner African Copper and it appeared to be an impressive operation, with a brand new processing plant (designed and built by SENET) nearing completion and a very professional mining operation underway. Problems surfaced soon after the mine was commissioned in 2008 but it nevertheless man- aged to keep operating through to late 2015 when – hopelessly encumbered with debt and with the copper price weakening – it was finally forced to shut down. It was subsequently acquired by the present owners in a deal which was announced in late 2016. The suspension of operations at Mowana is the latest in a string of body blows suffered by Botswana’s mining industry over the past sev- eral years. These have included the closure of the Boseto copper mine of Discovery Metals in early 2015 (after it was opened with much fanfare in 2012), the collapse of nickel/copper producer BCL (and with it the mining and pro- cessing operations at both Selebi-Phikwe and Tati) in 2016, the demise of the Lerala diamond mine in 2017 and – in the same year – the plac- ing of the Ghaghoo underground diamond mine on care and maintenance. BCL was Botswana’s biggest copper pro- ducer but it seems unlikely that it will ever be resuscitated in any meaningful way. Quite apart from anything else, Russia’s Norilsk has a claim on some of the assets it owned (specifically Tati Nickel), which is enough to deter most poten- tial investors, and there is also reportedly a huge environmental liability which any pur- chaser would presumably have to take on. With Mowana now no longer producing (however modestly), Botswana currently has

zero copper production. The good news is that this could change over the next two to three years as there are two substantial copper mines on the near horizon, both in the Kalahari Copperbelt, a ‘corridor’ of copper/silver miner- alisation which stretches south-west from the Maun area to Ghanzi and beyond. As many readers will know, the two projects I’m referring to are the T3 project of Australia’s MOD Resources and the Khoemacau mine of US-based Cupric Canyon. Although no formal decision has been made by MOD on the development of T3, the com- pany is clearly intent on proceeding with the project. A feasibility study is due out in March this year for a 3 Mt/a open-pit mine, with the target production being 30 kt/a of copper. Assuming the study is positive and that fund- ing presents no problems, MOD is hoping to be in production by late 2020. T3 will probably beat Khoemacau – which will be an underground mine – into produc- tion. Cupric tends to maintain a low profile and releases very few updates on Khoemacau but it did advise in the middle of last year – at the Botswana Resource Sector Conference – that construction of a 3,6 Mt/a ‘Starter Project’ at its Zone 5 deposit would start in earnest in Q1 2019. The mine will cost approximately US$391 million to develop and it is envisaged that it will produce its first concentrate by Q1 2021. Annual production will be in the region of 60 kt of copper and 2 Moz of silver. Given the problems encountered by the Boseto mine (whose plant, incidentally, is now owned by Khoemacau Copper Mining and will be integrated into the Zone 5 Starter Project), one might ask why MOD and Cupric think they can succeed where Discovery failed. This is a story in itself and one could write reams on it but suffice it to say that one major difference is that both the T3 and Zone 5 mines should have access to grid power. Boseto, by contrast, had to rely on diesel gensets, with the fuel bill report- edly accounting for 35 % of operating costs. Boseto was the mine that arguably shook the faith of investors in the potential of the Kalahari Copperbelt. T3 and the Zone 5 mine could restore that faith and, in the process, re-estab- lish Botswana as a smallish but nevertheless significant producer of copper. If Mowana – which, incidentally, is not part of the Kalahari Copperbelt – can eventually be brought back on line as well, so much the better. Arthur Tassell

The suspension of operations at Mowana is the latest in a string of body blows suffered by Botswana’s mining industry over the past several years.

January 2019 _ MODERN MINING _ 5