4,500 Jobs At Stake As Govt Places BCL Mine Under Liquidation

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Reality has finally caught up with decision makers that you cannot continuously throw money at problems as government has decided to place BCL Mine under provisional liquidation in a bid to protect the state-owned company from the wrath of creditors.

BCL Managing Director, Mr. Dan Mahupela

BCL Managing Director, Mr. Dan Mahupela

The copper/ nickel miner has been a loss entity for many years but government took a political not a business decision to keep it running in order to prevent the collapse of the Selebi-Phikwe and its environs. The latest move has put over 4,500 jobs at risk and the town of 60, 000 people on the verge of being a ghost town.

The minister of Mineral Resources, Green Technology and Energy Security, Sadique Kebonang, his predecessor and now minister for Transport and Communications, Kitso Mokaila and the minister of Investment, Trade and Industry, Vincent Seretse delivered the bad news to the mine employees recently. Chairperson of Mineral Development Company Botswana Regina Sikalesele-Vaka also attended the meeting with employees.

“To keep it going, the cost is 8 billion pula, and if you sink that into BCL, you have to shut down the entire economy, meaning no provision of free Anti-retroviral drugs or free education,” Bloomberg quoted Kebonang addressing workers recently.

The minister of Infrastructure and Housing Development and area Member of Parliament, Nonofo Molefhi was also present at the meeting. BCL operates four shafts and a smelter, and cabinet has ordered the closure of the operations with government expected to apply to the High Court to in order place the company under provisional liquidation.

The liquidator will then decide on the best route to undertake; whether to sell the assets and pay off creditors or scale down operations. One of the creditors is Barclays Bank of Botswana, which loaned BCL Mine P1 billion, which was guaranteed by government as 100% shareholder.

The closure of BCL follows complaints by employees over declining safety protocols at the mine following a number reported casualties over a short period of time. President Ian Khama then appointed a cabinet sub-committee to look at problems bedeviling the mine.

BCL has lost 15 employees between 2013 and 2016 as a result of freak accidents. The company’s problems were also made worse by collapsing prices of copper and nickel and the cost of Polaris II. BCL watchers argue that the strategy was generations late saying the company could have long diversified from mining and smelting.

BCL has been affected by the drop in commodity prices with nickel coming down from a 10 year average of 9.2 USD/Ib to 4.0 USD/Ib currently, which represents a “significant” 57% loss in value. BCL realised a growth of 4% compared to 2013 as a result of firmer pricing, weaker Pula (to the greenback) exchange rates and strong cost containment measures executed.

“Although BCL remains a marginal operating mine with considerable financial sensitivity to nickel and copper pricing, the various cost containment, productivity and efficiency projects under execution have begun to bear positive results as evidenced by the improved 2014 financial performance,” the MD Dan Mahupela said.

For BCL to survive the current down turn, the company has to change and operate at USD4/Ib which will be achieved through the business reorganisation project, stated Mahupela.

“Manpower rationalisation is being undertaken in line with business reorganisation project. For the underground mines, the aim is to achieve significant efficiencies through mechanisation from the current 40 tonnes per man to 110 tonnes per man,” said Mahupela.

The infamous smelter shutdown also hit the miner’s balance sheet as the refurbishment exceeded the budgeted amount. According to BCL, the smelter shutdown which was planned for 62 days was completed in 112 days leading to a 50 days loss of production in 2015. The delay was blamed on a number of factors including the contractor work permits and lifting and installation of the mantle sections of the uptake shaft due to inclement weather conditions.

There was also contractor payment delays due to cash flow problems constraints and extra work associated with small bore piping assembly for the smelter furnace cooling systems. The delays led to a loss in revenue of P230 million of BCL metal and P40 million of Nkomati Toll Revenue making a total of P270 million. At the end of this, the smelter refurbishment cost P754 million.  

BCL is experiencing its worst period in history and it is facing difficulties in all fronts in addition to depressed global commodity prices. Last year, the company’s underground operations could not achieve production targets only managing 80% due to difficult underground conditions.

Employees will continue to be paid until the liquidation process is completed.

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