Inside BCL�s last agonising days
Mbongeni Mguni | Friday October 21, 2016 18:02
Every morning, they gather outside Union House in their dozens, chatting loudly and frequently engaging in arguments. The former BCL mine workers have been thronging the Botswana Mineworkers Union (BMWU) headquarters in the north-eastern town since the announcement of BCL mine’s closure.
They wait in line to fill in forms about their tenures at the mine, the number of leave days and other details the union plans to submit as part of the negotiation for exit packages.
BCL mine directly employed 4,287 workers, with 2,959 of these underground in the four shafts. Just over 764 miners were employed in South East Extension, the deepest shaft at 1.5 kilometres of dark, overpowering rock and suffocating heat.
In the queue at Union House and within the headquarters itself, workers paint a bleak picture of the road leading to the closure of the iconic mine, one of the country’s oldest.
Essentially, the journey to the end began with the risky diversion of some capital reserves to fund the diversification strategy known as Polaris II, the crash in base metal prices, a costly and extended shutdown and a frantic fight for survival that included plans to sell the company jet.
A bungled shutdown
According to an April 20 media brief in Gaborone by managing director Dan Mahupela, the Board had authorised the management to seek external funding of the 2015 shutdown of the smelter for major renovations. The project was expected to be costlier than previous shutdowns, running close to P1 billion as new technology was due to be introduced. Mahupela said due to the slide in base metal prices, financiers declined to provide credit and the guarantee sought from government, only arrived in 2016. The former MD said the shutdown was initially expected to last 62 days, but stretched to 112 on various issues such as work permits and inclement weather, leading to a revenue loss of P230 million.
Workers and unionists, many of them intimately involved in the project, tell a different story.
“The Board was aware that there would be a shortage of operational cash after the shutdown and they authorised the management to borrow externally,” said Sonnyboy Kruger, chairperson of the BCL Citizen Senior Staff Union.
“It was known well in advance that this particular shutdown was going to be expensive as it was being called a modernisation.
“BCL management did not look for that loan and when the shutdown came, we used every single thebe we had to fund, including money for operations. We were left with nothing.
“Coming back on line after the shutdown, we had nothing to run operations with,” he said.
Coming out of an extended 112-day shutdown with no cash, BCL had lost P230 million. In the process, according to Mahupela’s figures, it had spent P745 million on the shutdown itself. BCL was in trouble.
During tough times of low commodity prices, the previous MD, Monty Mphathi had a policy of ramping up production and cutting costs. In 2008/09, during the global financial crisis, the strategy, known as ‘Survival 225’ carried BCL through the steepest drop in prices recorded. Mphathi, workers say, pushed for the building of capital reserves during periods of strong prices, to tide the mine during the tough times.
With the reserves tied up in Polaris II and eaten away by a costly, extended shutdown, not all those options were available to Mahupela.
Fight for survival
The MD, according to confidential documents leaked to Mmegi this week, went after the cost structure and drew up plans to chop 1,770 jobs and save P183 million by the end of 2017. Mahupela’s vision saw labour costs per annum sliding from P610.5 million prior to the retrenchments to P411.5 million, with most of the savings coming from the closure of South East Extension shaft, which he deemed too costly to keep mining.
The mine went into liquidation before he began his plans.
When the smelter began firing in November 2015 after the shutdown, the fight for life kicked off but there was no ‘Survival 225’ to help.
According to workers close to the developments, the mine ran out of money for essential maintenance and spares and by January 2016, the available fleet was down 50%. A large portion of rigs, dump trucks and others were out of commission.
“The fuel and spares situation was very serious,” says BMWU national executive committee member, Western Ebepile.
“If a vehicle had a puncture, it could not be fixed. For workers going underground, it was a compromise for them.” Debts mounted and suppliers closed BCL’s accounts and demanded payment. The near 3,000 workers underground were forced to take chances descending, as companies responsible for safety inspections and equipment, either pulled their services or conducted the jobs, held onto reports, demanding payment.
Workers say the mine was guilty of a lackadaisical approach to preventative maintenance during the good years and that laxity worsened the post-shutdown situation in terms of operations.
“Machines reach certain lifespans for refurbishment or replacement and that was not being done properly,” an insider reveals.
“The capital projects budget was being done annually, but at the end of the year, it was being brought back unspent. After the shutdown, it was found that about 80% of the equipment was past lifespan because we failed to focus on preventative maintenance. The newly refurbished smelter also experienced teething problems and questions were being asked of the workmanship, as pumps and other key components failed.
Without maintenance, spares and critical input such as fuel, production could not be ramped up and the smelter troubles, coupled with low nickel and copper prices meant no significant revenue inflows were taking place”.
Trouble down below
BCL mine’s troubles were not restricted to issues on the surface. Down below, besides the spares and maintenance issue that had grounded most of the fleet, miners were increasingly running into brick walls in their operations.
Kruger explains.
“Ore production runs on two fronts, being development and production. The standard internationally says for every mine, you must develop reserves that can be mined and usually, that’s about 12 months of reserves.
“Your development must be 12 months ahead of mining so that if you are asked to stop developing right away, you can mine for 12 months. It’s a cushion mining companies have,” he says.
BCL, because of its fleet problems, began neglecting development and focussing on maximising extraction in order to sell. Those close to the shafts say at some point, mining was a mere two months behind development.
The situation would haunt BCL around the time of its closure, as long-abandoned development of shafts means some that still had good grades were now too costly to mine.
“Prior to the shutdown, the mine stopped development and instead, there was an effort to tap the stockpiles to get more money,” says BMWU’s BCL branch chair, Joseph Molambane.
BMWU vice president, Norman Kelaotswe feels that the neglect of development had far reaching consequences.
“The operations were focussed on copper that is nearby,” he says.
“South East has rich grades, but it has not been developed for the past five years. That’s why it ended up being said that that shaft is not profitable.
“If they try and develop it now, it would be like opening a new mine.
“That’s the cul de sac BCL found itself in.”
Hope crushed, the end approaches
In April 2016, government’s guarantee came through and Barclays Bank Botswana lent BCL Ltd $100 million (more than P1 billion). At least P600 million of this figure went to past-due creditors, while another P200 million went to the upkeep of Tati Nickel, which had stopped operations at its sole mine, Phoenix, in December 2015. The balance was insufficient to adequately boost operations or sustain them very far.
Molambane remembers feeling weird the Friday before the weekend announcement of BCL mine’s closure. “I was transporting some people in the mine and I just had that feeling. We knew that the mine was supposed to call the Union soon. The fora we had management had stopped and they kept deferring them.
“There was no single thing that showed that the mine was going to close the next day, but looking at the way it was operating, we knew that was a possibility.”
Other union officials says a visit by Vice President, Mokgweetsi Masisi on August 15 had injected hope into miners, particularly after he reportedly read potential into BCL mine’s various structures, including a state of the art laboratory. The end came with an announcement by four Cabinet Ministers at a gathering marked by loudspeakers.
Yesterday, most of the 4,300 workers at BCL picked up their termination letters and as all hopes dashed they began pondering the future.