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Govt forgoes P160m in copper royalties

BRIAN BENZA
Mowana Mine was closed last December
Last yearĺs decision to defer payment of royalties by struggling copper miners has cost government P160 million in potential minerals revenues.

Answering a question in parliament this week, the Minister of Minerals Energy and Water Resources, Kitso Mokaila said the deferred royalties from copper mines in total amounts to $14.2 million (P160 million) from two companies that were in operation last year.

“Government attempted to save operations of copper mining companies by deferring royalties due in order to assist cash flows and mitigate job losses. Messina Copper which operates as African Copper owes $7.7 million (P86.8 million) while Tati Nickel Mining Company owes $6.5 million (P71.8 million),” he said.

The world copper price is $2.06 per pound as at December 2015 compared to a price of $2.50 in the previous year, representing a reduction of 17 percent.

Base metals mining in Botswana attracts a three percent royalty payable on gross market value of mined production.

Local copper miners have been hard hit by the weak international copper prices as well as low ore recovery rates due to unviable stripping ratios.

Over 800 jobs were lost early 2014 at Discovery’s Boseto Mine when the company was put under provisional liquidation after failing to meet its financial obligations amounting to over $149

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million to various creditors.

Late last year, African Copper axed 350 workers with the mines likely to be auctioned this year after failing to meet creditor obligations. While the decision to defer copper royalties was supposed to be reviewed after a year, Mokaila said government had no immediate plans to lift the suspension of royalty payments. “Very few marginal mines can survive on this downturn as the level of price continues to impact on the mining operations hence it is very difficult to state when the assistance will be lifted,” said Mokaila.

Government is however likely to recoup part of P86.8 million owed in royalties by African Copper when the company is liquidated or sold off.

In December, the High Court issued a final liquidation order for African Copper.

In the event the company is liquidated, at the front of the queue after auction or buyout will be shareholder ZCI Limited, which is reportedly owed more than P1.2 billion in debt pumped in previously to keep the mines operational. The government will also be demanding its dues, which include deferred royalties and possibly training levies.



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