Cuprum curse breaks Boseto�s back
Mbongeni Mguni | Thursday April 30, 2015 16:12
For investors, a sign that a resource curse has struck a mining operation is when the casual check shirts, khaki trousers and safety helmets of geologists are replaced by the trim charcoal suits and deadpan expressions of accountants.
Far from the sands of Ngamiland, the once hopeful investors in Boseto Copper Mine will on June 12, meet in the corporate offices of Deloitte in Gaborone, to consider a last-gasp offer for any form of return on their investment. Creditors have been tiered from preferential to unsecured, which will determine the level of return they receive on their investments.
Below this payment tier, however, are 422 workers, who reportedly received a rude awakening on February 27 at 2am, when they were roused from their sleep, ordered to pack their belongings and bussed to Maun.
“We are told that it started with the night shift whereby the supervisor asked employees to stop work and assemble for a special announcement,” says Botswana Mine Workers Union president, Jack Tlhagale.
“Employees assembled in disbelief and wonderment thinking that maybe a fatality had occurred on the mine.
“The supervisor told the workers that he received a telephone call to stop all operations and remove all equipment from the mine to surface and that workers would be briefed at 630am by the Chief Executive Officer of the Company who was supposed to give details.
“The workers followed instructions, stopped all operations including plant and moved all movable equipment to surface.”
Tlhagale says Botswana Police Service and other security agents occupied the mine premises and surrounding bushes in the wee hours of February 27.
The veteran unionist says a manager on site told workers that Discovery Metals Limited, the sole proprietor of Boseto, had missed a final letter of demand for 103 million Australian Dollars (P810.6 million) from lenders.
“The manager said the lenders had said they would not accept any further proposal from alternative potential investors,” says Tlhagale.
“The manager further claimed that the Board had frozen the assets of the company and management had no authority but was only allowed to use buses to get employees out of the mine premises.
“Lastly, he said, employees must leave the mine site immediately and he could not take questions from the workers on important things like availability of any written communication, accommodation and so on.” Unionists claim that their efforts to seek audience with management and greater clarity on the closure were frustrated by police and the referral of enquiries to Australia.
As workers seethe, pondering an uncertain future, investors in the Mine are also counting the losses of the cuprum curse, an oft-repeated occurrence in mining.
Copper is a base metal used widely in industrial, technological and household applications such as in electricity conduction, electric motors, construction and others.
By virtue of this, its price is inescapably linked to the cycles of the world economy. Where global growth abounds, such as in the years preceding the 2008 recession, copper prices rise on the demand by industry and where it is depressed such as in the years after 2009, prices decline.
For Discovery Metals, the planning for Boseto took place at a time when copper prices were soaring, with the base metal first breaking through the US$4.00 per pound barrier in 2006, before collapsing dramatically to US$1.4 per pound in December 2008 as the US household credit crunch spread into the global recession.
Prices did firm between 2009 and 2010 running counter to the global economy – due partly to world governments’ efforts to prop up their economies – with the brown metal reaching an all time high of US$4.41 per ounce in December 2011.
Boseto’s woes come from the fact that copper prices began weakening from that period forward, creating havoc with the Bankable Feasibility Study capital expenditure and revenue projections, and pressuring the contingency allowances provided for price fluctuations in the study.
Investors, bankers and other funders who had pumped millions of Pula to the Boseto dream, could no longer ignore the slide in the share price as well as the louder knocking on the door by takeover bidders armed with the capital to ride out the price fluctuations.
Following commissioning in the last quarter of 2012, Discovery Metals kept up the fundraising for Boseto, courageously pushing towards target production, despite challenges involving grades and operating costs.
A snapshot into Discovery Metals’ problems during that period shows that by the time President Ian Khama officially launched the Mine in September 2012, the company’s shares in Australia were valued at 1.66 Australian Dollars, its market capitalisation was 807 million Australian Dollars (P6.4 billion) and its cash holdings were US$86 million.
By the time of the half year financials in 2013 – the first year of full production – Discovery’s share price had fallen to 74 Australian cents, its market capitalisation was 360 million Australian Dollars (P2.83 billion) and its cash holdings were US$37 million.
The last report the company filed before closing Boseto shows cash holdings of US$3.1 million while the share price of 15 Australian cents is from February 27 when a trading halt was effected ahead of the suspension of operations.
On June 12, as creditors listen to the last possible route for relief, thoughts will return to the cuprum curse, a mineral phenomenon that turned a once rosy venture into a nightmare for investors and workers alike.