Gov't places P700m bet on Minergy

Lewanika Timothy | Monday April 28, 2025 11:43

Troubled: Minergy’s Masama Mine has experienced operating challenges in recent times PIC: PHATSIMO KAPENG

Government has chosen to put skin in the troubled game, opting to convert its debt to Minergy into an equity stake that would make government a shareholder through its mining investment agency, the Minerals Development Company Botswana (MDCB).

Currently, Minergy owes government a total of P716 million held through convertible quasi debt instruments between two parastatals being MDCB and the Botswana Development Corporation (BDC). Both interests are the result of loan advances over time to Minergy Coal for operations.

MDCB to date has lent Minergy P636 million and BDC P80 million. These investments were in a form of quasi debt instruments and were both convertible to equity at the choosing of MDCB and BDC.

Legislators this month were told by Ministry of Minerals and Energy officials through a response to a parliamentary question that MDCB had plans to convert its debt instruments into equity in order to rebase the business and improve its solvency.

The answer which was read out by Environment and Tourism minister, Wynter Mmolotsi in Parliament, revealed that government was interested in cleaning up Minergy’s balance sheet since a debt to equity conversion would improve its debt to equity ratios and make it more appealing for fund raising and investments.

Despite government’s interests in Minergy, for the six-month period ended December 2024, Minergy’s total loss for the year stood at P162 million, with the financial situation so dire that cost of sales exceeded sales by P108 million, meaning that it cost the company more to mine the coal than it sold it for.

Part of the reason for the high cost of sales was the expenses related to kick-starting mining operations following a suspension of operations occasioned by disputes with the previous mining contractor.

Pertaining to the status of the loans, Mmolotsi revealed that since 2019, Minergy Coal had made payments of P8.5 million towards the BDC facility over the period, whilst there were no payments that had been made on the MDCB facilities but interest was accruing on the facility.

Minergy’s doldrums have been compounded by the fact that global coal prices have been on a decline and the South African inland market is flooded by products that would otherwise have been exported if that country did not have rail challenges.

“This has maintained a glut in the targeted inland market, therefore depressing regional sales. “Excessive production of duff and fine products in the Botswana coal production scene led to a significant suppression of performance by this core product in the market,” executives said in a financial statement released to the Botswana Stock Exchange.

In Minergy’s largest market, South Africa, a mixed bag presents itself, with the duff market currently in oversupply from coal miners in South Africa and Botswana. This has created pricing pressure on this product, resulting in a buyer’s market.