�No hard feelings�
Mbongeni Mguni | Friday June 24, 2016 16:17
“We had to sell our house, our home. We sold it at a heavy discount just to keep Mount Burgess alive and lost money in the sale. We had to raise money.”
Nigel Forrester and his wife Jan are speaking from their booth at the resource sector conference held in Gaborone. The Forresters, the founders and principal shareholders of Mount Burgess, have not been to the conference in years, perhaps since 2011.
Times have been troubled and while they can force smiles today, at its height, the situation was so bleak that Forrester – who boasts more than three decades in mining – was forced to initiate some of the toughest decisions of his life to keep the company afloat.
In 2013, five out of the eight-member exploration team in Botswana had to be laid off, while other key staff were retained on half-pay. Other senior staff and directors, including the Forresters, forewent their salaries as the company fought for its survival.
Mount Burgess’ troubles began on May 13, 2013 when minerals minister, Kitso Mokaila rejected the company’s application for a renewal of its prospecting licence over the Ngamiland property.
The prospecting licence in question, PL69/2003, had been the subject of 10 years of strenuous exploration during which the Australian junior miner spent a total of $15.7 million (P128.1 million) on various studies eventually estimating that at least 25 million tonnes of mineralisation existed beyond the Ngamiland sands.
Mokaila, using his statutorily granted discretion, declined to grant Mount Burgess a further renewal of the licence, citing the non-completion of a feasibility study, which had been part of an agreed prospecting programme.
Forrester countered that Mount Burgess could not produce the feasibility study as no power was available at its sites.
Under an Australian Securities Exchange mandatory mineral development code, a feasibility study cannot be said to have been conducted if the availability of electricity cannot be demonstrated.
Mokaila was unmoved and the battle began, with Mount Burgess first appealing to the then vice president, Ponatshego Kedikilwe, before proceeding to the High Court and the Court of Appeal, which dismissed the Australian company’s challenge last July.
At one point or another in its three-decade history, the Australian company had projects in Australia and Namibia, but by 2015, the zinc and silver below the Ngamiland sands was its only asset.
During the three years between the rejection of the renewal and the re-award of the rights, matters were bleak at Mount Burgess.
Investors, who had pumped into the project, participating in rights issues and other fundraising activities, generally kept their faith in Forrester during the legal troubles, but times were dark.
The company felt unfairly persecuted and the political hues in the matter did not go unnoticed, particularly with the unsuccessful appeal to the former vice president.
The war was being fought and lost, on legal, diplomatic, political and financial fronts.
“It’s been very difficult. Even without the drama, many companies have been struggling to raise money these past few years. Without a project, it has been worse.
“We raised a little from the shareholders, but Jan and I, as well as (the late) Fred Stirling had to find money,” Forrester says.
“We had to loan the company money.”
The bitterest pill to swallow for Forrester and his shareholders, was that in all their struggles, no one had fully heard the merits of their case. The High Court and Court of Appeal losses were on points of law, and arguments previously made to regulatory authorities had rolled off their backs.
“When we said we would conduct a feasibility study, we completed a checklist from the ministry, which said in some section that when you are doing such a study, you must comply with an international code so far as reserves are concerned.
“Our code was the Joint Ore Reserves Committee or JORC code, which was adopted by the United Nations in 1999 and on which nearly all other mineral codes in the world were based.
“JORC code states that you cannot upgrade your resources to reserves unless at that time, you can show that those reserves can be mined and traded as required on an economic basis.
“In order to be able to upgrade those resources to reserves, the required infrastructure to enable start of operations must be available and that required infrastructure includes economic power supply.
“The code also states that a competent person cannot compile or sign off on a feasibility study unless dealing with reserves. That’s the main principle.”
In July last year, even the most faithful of Forrester’s shareholders must have given in to doubt. Court of Appeal Judge President, Ian Kirby ruled against Mt Burgess’ appeal, and even though he left a sliver of hope by allowing for late review proceedings, the Ngamiland expedition seemed over for Mt Burgess.
However, behind the scenes, the company’s fortunes were taking a turn for the better. While it is unclear what the trigger was, the cogs within government began moving in favour of Mt Burgess about the third quarter of 2015.
Perhaps it was government seeking to retain its coveted position as a top mining investment destination globally or perhaps it was the olive branch interventions of the Botswana Chamber of Mines, but Forrester began receiving positive signs.
On November 6, the ministry wrote to say Mt Burgess was at liberty to submit a new application for a prospecting licence over the area and after due submission, a brand new prospecting licence was issued to the company on January 26, 2016.
The new licence covers the whole area of the original 2003 prospecting licence, meaning it includes land that Mt Burgess statutorily gave up from the original licence as part of the Mines and Minerals Act.
Even as Forrester and his revitalised team look forward to renewed activities, he wonders about the troubles of the last three years and their root.
“I don’t know who was advising because everyone knows we had to comply with JORC. To me, everyone knew what the checklist and JORC code required.
“We are not BHP, Rio Tinto or anyone else.
We are Mount Burgess and the money that we put into the project, we raised through share placements and rights issues. “This was hard-earned money from personal investors in the United Kingdom, Australia, South Africa and elsewhere,” says Forrester.
He pauses, seems to ponder something and then continues: “When something like this happens, it can cause damage to the country because the international investment community is very small and word gets around very quickly.
“The good thing is that we have our licence back and this also tells people that there’s room for reasonable consideration in Botswana. Had we not, it’s likely that Botswana’s reputation as an investment destination would be worse off.
“At this conference, at least six people have come up to me to say we are all pleased that you hung in there because they were also worried.
“There has been reconciliation and I don’t want to upset the boat by getting stuck into talking about what’s happened.”Even with the peace pipe smouldering, the impact of the regulatory wrangle has not fully dissipated. According to Forrester, some investors are wondering: “If it’s happened to you once, maybe it will happen again”.
Mt Burgess, he says, has a slight stigma around it, which could put off future fund raising activities meant to drive the project forward.
In addition, the central issue that first tripped up the project is still unclear. The Botswana Power Corporation (BPC) is yet to provide power to the area where the licence is located and its transmission plans for the area point to power in 2020.
Mt Burgess, however, has been helped in its absence by the emergence of other mining projects in the general region, during its years of hiatus. Projects such as Khoemacau’s planned Qhoree Mine and the mothballed Boseto Mine, have spurred the BPC into fast-tracking its plans to support mines in the north west.
However, as Forrester notes, even with the transmission lines in place, the central issue is to ensure power actually flows through them by rectifying Morupule B and commissioning the various planned generation projects.
For now, the mining veteran is leaning towards solar and gas. Mt Burgess has been given a ‘preview’ of a possible solar plant producing 40MW from a 48-hectare parcel of land.
The idea has particularly excited Forrester. “Can you imagine the rainwater you can collect over 48 hectares of solar panels? That could collect more than 50% of the total water requirement for this project, thus serving two purposes.
“That area enjoys quite a lot of rainfall in the year.”
Hatchets buried, Forrester is focusing on unlocking the value of the licence through a drilling programme, particularly over new sites identified in the area.
One of them is the 5.2 kilometre long ‘Target 52’, which he says could double the project’s estimated mineral resources, while raising the grades.
In addition, Mt Burgess’ geologists have uncovered the potential for minerals such as Germanium and Vanadium in the area, with grades of up to 12.1 grammes per tonne for the former. Germanium is presently trading at $2.35 per gramme, representing promise for the project.
Forrester is eager to move on.
“There are no hard feelings. I would say it was disappointing, but there are no hard feelings. These things happen and you can ask why they are happening to you, but they do happen.
“It’s as simple as that. Let’s get on with life.”