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Gov't pays Russians P522m to settle BCL suit

MBONGENI MGUNI
Government last month paid Russian giant, Norilsk Nickel P521.7 million as an out of court settlement in a P2.7 billion lawsuit brought over an equity deal that collapsed with the closure of BCL Mine.

BusinessWeek can reveal that a presidential directive of January 24, 2018 issued a special warrant under which the payment was made to the Russian nickel giant.

In November 2016, Norilsk Nickel, the world’s largest producer of nickel, filed a lawsuit to recover US$271.3 million and other costs from BCL Ltd, in relation to a failed 2014 deal under which the local Mine was to buy equity from the Russians.

Norilsk Nickel and BCL Ltd entered into a US$337 million binding agreement in October 2014, for the sale of the Russian group’s 50% stake in South Africa’s Nkomati Mine and its 85% stake in Tati Nickel.

BCL began smelting concentrate from both mines, earning revenues of P466 million per annum. 

However, a drop in nickel prices, a P754 million smelter refurbishment and steep cash crunch, saw BCL Ltd battling for survival, with government applying for provisional liquidation in October 2016. Government is the BCL Ltd’s sole shareholder. 

Norilsk Nickel not only sued government, but also certain BCL directors and the Minerals Development Company Botswana (MDCB) for “reckless trading”. The lawsuits were filed in various courts from South Africa to the United Kingdom. 

According to documents made available to BusinessWeek, the settlement came after MDCB brokered talks with Norilsk Nickel last year “in order to find a permanent solution to settle all disputes and claims”. 

The decision to settle, according to the documents, was motivated in part by the high costs government was incurring in defending the suits across the world, while the risk of losing and having to pay P2.7 billion was another inducement.

Within the P521.7 million, about

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P450 million (US$45 million) was secured via retrospective request for supplementary funding by the Minerals, Green Technology and Energy Security ministry, through the Finance Ministry.

Finance Minister, Kenneth Matambo is scheduled to present the retroactive funding request in Parliament soon. “Cabinet, by way of presidential directive dated October 18, 2017, approved the settlement amount of US$45 million on the basis that there is value in avoiding a potentially protracted and uncertain litigation process across multiple jurisdictions and a settlement of these disputes at this stage will allow for the liquidation in respect of the BCL group to progress in a more expedient manner, as well as reduce the ongoing cost to the government of funding the litigation in Botswana, South Africa and the United Kingdom.

“Government funds the liquidator’s costs in litigating these matters,” reads an explanatory note to the supplementary funding request.  “As part of the negotiation of a comprehensive settlement agreement, the government’s appointed lawyers negotiated a stay of the proceedings until February 11, 2018 during which time the settlement agreement could be finalised and payment made,” reads the note. 

While the settlement restores a level of attractiveness to BCL by removing a key liability, the Mine is already undergoing sale of its assets, with the liquidator having all but given up on securing a single buyer for the Mine.  The P2.7 billion lawsuit had led to acrimonious court filings between Botswana and the Russians, with the latter have secured the freezing of BCL’s assets, which in turn meant the liquidation process could not proceed or be funded.



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