Will Tsodilo Resources save Ngamiland?
Roman Grynberg | Friday April 4, 2014 14:23
There are known and established copper/nickel and silver mines in the south of Ngamiland en route to Ghanzi which are being developed by Discovery Metals (Boseto). The deposits held by Cupric Canyon, a private equity firm with close connections to Barclays Bank, through its Natural Resource Investment are also significant.
Cupric Canyon is currently attempting to bring the former Hanna mining deposits to the point of development. Given that it has considerably deeper pockets than the previous owner it is hoped that a feasibility study should be completed by September this year and then it will move to either a public flotation or a sale directly to a major.
Equally important is the development of the zinc, lead silver deposit at prospecting area PL69/2003 at Kihabe and Nxuu which is estimated to contain resources of 25 million tons @3% of zinc/lead with a further 3.3 million ozs of silver. This deposit is virtually on the Namibian border and forms part of an expanding network of base metal deposits in the west of the country. However, given its extremely remote location and relatively small size it will take considerable work before it is proven to the point of being a profitable mine.
Controversially, the deposit was taken away from the Australian junior miner Mount Burgess by the government of Botswana in 2013, on the grounds that the company had not fulfilled the terms of its mining lease and had not spent the amount required on exploration. The company strongly contests the allegation and the termination of its mining lease and the matter is currently before the courts.
Nature’s little tricks
Nature puts mineral deposits in the oddest of places, without the remotest consideration of how the minerals can be moved, where there are complementary resources or whether a profit can be made from their extraction and certainly least interest in the aspirations of explorers. One of the more interesting cases is that of the discovery of the increasingly interesting deposit of magnetite iron ore at Shakawe on the Okavango.
The company Tsodilo Resources Lmited (“Tsodilo”), a Canadian junior miner was originally searching for diamonds and to this day remains hopeful that it will find the next Jwaneng or Orapa. But what Tsodilo actually discovered was not diamonds but a substantial deposit of what appeared initially to be copper with magnetite iron ore. Subsequently it has formed a joint venture with First Quantum minerals, a copper miner operating some large mines in Zambia, to drive the exploration for copper and nickel while Tsodilo continuous to prove up the iron ore deposit.
Now finding an iron ore deposit in Shakawe, which runs south of the Caprivi strip and stretches for at least 35km southwards from Shakawe, from a commercial standpoint akin to finding iron ore on the moon. Nice idea, but how do you get it out to someone who wants to buy the iron ore at a commercial price. The nice thing about the Tsodilo deposit is it appears to be very high grade and will require little processing but the size of the deposit, is on current estimates, likely to give rise to proven resources of somewhere between 5-7 billion tonnes of iron ore. This may yet increase. Shakawe is 560 km by road and 450 km as the crow flies from the nearest railhead at Tsumeb in Namibia and at the upper end of the reserves, it might be possible to get the iron ore out.
But Tsodilo Resources was obviously elated, and issued a press release to that effect, when the governments of Botswana and Namibia signed an MoU two weeks ago to develop the Transkalahari railroad that would extract Botswana’s coal resources. Of course it is a long commercial journey between calling for tenders for what is understood to be a narrow Cape gauge US $10 billion (P87 billion) railroad and proving its financial viability to highly sceptical bankers and investors. Moreover, as much as Tsodilo and other base metal miners would like the railroad to pass next door to their deposits, if it is ever built it will almost certainly pass through Ghanzi on its way to Walvis Bay in Namibia. This would put a railhead closer to Shakawe (470 km by road, 365 km as the crow flies) than Tsumeb but not by very much.
... But will it pollute the Okavango?
The iron ore deposits at Shakawe have another problem. The deposits begin right on the edge of the town of Shakawe and that puts it on the edge of the Okavango panhandle. Tsodilo will have to work very hard to prove to government and highly sceptical tourism developers downstream that they are able to develop a very large open cast mine in such an environmentally sensitive area without causing damage to the fragile Okavango pan-handle and the delta.
Given the very large commercial interests in the tourism sector in Ngamiland (although minimal on the western side of the panhandle) the development will need to meet the highest standards and it will be highly scrutinised, especially given the delta’s designation as a Ramsar Wetland of International Importance site. Tsodilo’s licenses, as do all licenses in the delta area, lie outside the Ramsar core zone of interest Botswana also has a request for World Heritage listing for the Okavango
Will it be Shakawe or Selebi Pikwe or Shanghai?
The beauty of the magnetite iron unlike the hematite deposits found in other places is that it is now possible to produce low quality pig iron using thermal rather than expensive coking coal in a roasting furnace. Coking coal is extremely high quality, expensive and generally not found it Botswana. Most of Botswana’s coal, to be polite, is not of high quality and best using for generating electricity. This development of using thermal coal to make scrap pig iron is being pioneered by a South African company IMBS at Palaborwa where the company is currently converting magnetite into scrap iron which could previously not be produced but had to come from used or scrap steel and iron.
The only problem is of course is that each tonne of scrap iron requires 500 kg of coal which is wonderful for the coal miners but nature plays its tricks. Of course all of Botswana’s coal is in the east of the country so if this is to work you either ship what will be billions of tonnes of coal to Shakawe or billions of tonnes of iron ore to the east, pretty obviously to Selebi-Pikwe. Either way Botswana will have to build a railroad. And if that is not viable then the best option will be to smelt Botswana’s iron ore in Shanghai and just do as we have always done dig holes in the ground to export raw materials for other to process.
Clusters or Enclaves?
A potentially new minerals cluster is emerging in Ngamiland in the west of the country and the economic centre of gravity of Botswana will shift in the coming decades from the east to the North West as exploration continues and demand for natural resources in Asia only grows. For low value base bulk metals like iron ore transport infrastructure costs is central to their viability and hence beneficiation is in their interests because it decreases the distance it has to transport its product to market. But for most of the copper and other high value base metal (ie zinc and nickel) producers want to hear nothing of base metal beneficiation in Botswana as the best prices are for concentrate and matte are found in China and they can transport relatively high value base metals like copper, nickel and zinc by truck to Durban.
Whether what emerges in Ngamiland will be a genuine economic cluster of connected enterprises with the minerals used in Botswana to create linkages or just another series of export enclaves will depend on what the policy will be of government. If we continue the old policies of the past towards mining which allowed the former owners of BCL (Anglo American and AMAX) and the current owners of Tati Nickel (Norilsk) simply to export unprocessed matte (high quality concentrate) then we shall end up with disjointed enclaves in Ngamiland and holes in the ground afterwards just as we have in Pikwe and near Francistown. The future remains in Botswana’s hands.
*These are the views of Professor Roman Grynberg and not necessarily of the Botswana Institute for Development Policy where he is employed.