Botswana is known the world over for its diamond mining, and since the early 1980s, the country has been the world's largest producer of gem diamonds. In addition, it has significant reserves of copper, nickel, gold, soda ash, coal, and salt; and exploration for these and other minerals is very active. In fact, when asked what he sees as the greatest opportunity for Chinese investors, Hon. Baledzi Gaolathe, Minister of Finance and Development Planning, answered with the mining sector, observing that Chinese investments in Botswana's mining sector, including coal production for power, were most welcome.
"We have changed our laws in the setting up of power stations to allow the private sector to participate and there is no reason why the Chinese cannot participate either in partnership with the companies that are already mounting projects or by starting their own. Some companies have already been making inquires."
This openness to investment is seen across Botswana from the Ministry of Mines, Energy, and Water Resources and Botswana's private sector banks to active mining corporations looking for technical and financial partnerships. South African, Australian, Russian, and Canadian firms are taking advantage of Botswana's enormous wealth of natural resources; it may be time for Chinese firms to begin to do so as well.
Coal and Energy
Coal and energy projects, along with the related equipment and capital needed for their completion, may well be one of the top opportunities for Chinese investors in Botswana, which has an estimated 213 billion tons of coal reserves. Since 2003, when Botswana began exporting coal to the Southern African Development Community (SADC) region, export volume has risen from 14 thousand tons annually to nearly 77 thousand tons. A coal washing plant, which will improve the calorific value of the coal, was constructed and commissioned in January this year and is expected to boost exports.
One of the largest opportunities for profitable investment lies in developing the country's untapped coal resources since the SADC region suffers from a shortage of power as a result of increased mining activity and economic development. Two expansion projects are presently underway to meet this challenge and to take advantage of these conditions. First, two Chinese contractors were recently awarded construction tenders for expansion of the Morupule Power Plant with the construction of a new 600 MW gross-capacity coal-fired plant. According to Ponatshego Kedikilwe, Minister of Mines, Energy, and Water Resources, plans are in place to fast-track the project, including incentives to the contractors to complete the first 300-MW phase of the expansion as quickly as possible.
With the second major project, the Mmamabula Energy Project, tariff negotiations are ongoing between the project's sponsors, CIC Energy Corporation and International Power PLC, and its off-takers, Botswana Power Corporation and South Africa's Eskom. At present Botswana imports approximately 75% of its energy needs from Eskom; upon completion of Mmamabula, Botswana will become a net exporter of power for the first time in its history. Eskom is expected to take 75% of the surplus capacity, and the remaining 25% of output will go to the Botswana Power Corporation.
In addition, the government has embarked on a major program of electrification of villages (130 more are planned) and the extension of electrical availability in 20 villages. All these projects will require increased coal mining in the country, a huge investment opportunity.
Diamonds, Copper, Nickel, Gold, Soda Ash
In 2007 Botswana mined 33,639,000 carats, or approximately 22% of the world's output of gem diamonds by value. The market is heavily dominated by Debswana, a unique 50/50 joint-venture between De Beers Centenary AG and the government of Botswana. Debswana is the world's leading diamond producer, again by value, and has played a significant role in the transformation of Botswana's economy. However, Debswana does not have a monopoly on Botswana's diamond industry. Diamonds are still being discovered, old open pits are being mined underground, and new international participants are entering Botswana as Chinese and Indian demand drives global gem prices.
For example, Canada's Diamondex is scheduled to start diamond production this year at Lerala. The British diamond exploration company African Diamonds reported discoveries at its AK6 project near Orapa, and it has submitted an application for a mining license to the government of Botswana. Mining is scheduled for the last quarter of 2009 and is expected to be in full production by 2012. The AK6 mines will produce up to one million carats a year of gem-quality diamonds.
Early in 2008 the largest and most advanced diamond sorting facility in the world was opened in the capital of Gaborone. The development and construction of the building was funded by De Beers and will house the Diamond Trading Company Botswana (DTC Botswana), another 50/50 joint-venture between the government and De Beers. The diamond sorting facility is another move on the part of the Botswana government to keep industry in country and provide jobs for its citizens.
The most important mineral product after diamonds in Botswana is copper- nickel matte. According to the Department of Mines, total matte production (BCL Limited and Tati-Nickel Mining Company) reached 64,368 tons in 2007. Copper, nickel, and cobalt production stood at 19,996, 22,844, and 241,962 tons, respectively.
Discovery Metals has also reported more copper deposits at its Maun and Dikoloti projects, increasing Botswana's total copper resources by 46% to 46.1 million tons. Other recent entrants to Botswana include Russian mining giant Norilsk Nickel through its acquisition of Canada-based LionOre for US＄6.3 billion and African Copper, developing Mowana Mine (previously Dukwe), which is expected to produce its first concentrate in the second quarter of 2008. The company also announced positive results for its Thakadu-Makala exploration properties.
Soda ash (a key ingredient in glass) and salt production in 2007 stood at 279,625 and 165,710 tons respectively. In the same year, Botswana showed a significant capacity for gold, with Joren (Pty) Ltd and Mupane Gold Mining producing a total of 3,020 kg of bullion.
Today, Botswana's mining policies welcome international investments. In order to foster private-sector investment in mineral production, the Botswana government continues to carry out geophysical data collection by air.
Other Potential Natural Endowments
Both solar and wind energy have huge potential in Botswana; the country has undertaken a wind mapping program in an effort toward its realization. Natural gas, contained in coal-bearing sedimentary rocks of the Kalahari Karoo Basins, is another major potential energy source. An initial study has concluded that these rocks house a significant volume of gas-in-place resources.
Botswana has no proven hydrocarbon resources, but oil and gas exploration of the Nossop-Ncojane sedimentary basin and an assessment of the hydrocarbon potential of the Ngamiland region in the northwest are planned.
There is also potential for platinum and uranium reserves in Botswana, but again, this waits further prospecting.
Government Objectives in the Minerals and Energy Sector
The Botswana government's main overall objective for the minerals sector is to maximize economic benefits for the nation while enabling private investors to earn competitive returns. Botswana's mineral policy adjustments as set forth by the Ministry of Mines, Energy and Water Resources have been well received by international investors.
Key policy changes included:
· The abolition of the government's right to a 15% free equity participation on all new mining projects, replaced by an option to acquire up to a 15% shareholding on mutually agreed commercial terms.
· A downward revision of royalty rates payable on the production/export value of all minerals from 5% to 3%, with the exception of precious stones (including diamonds) and precious metals, which remain at 10% and 15%, respectively.
· The introduction of new variable rate income tax formulae, directly negotiated between the government and the operator.
· The simplification of grant, renewal, and transfer of mineral licenses with a provision for 100% capital expenditure write-off in the year that the investment is made with unlimited carry forward of any losses.
· The liberalization of restrictions on transfer of mineral concessions.
· The introduction of a new type of mineral concessions, the retention license (RL), allowing an investor that has completed an exploration program and confirmed the discovery of a mineral deposit to retain rights over it for renewable periods, should prevailing market conditions make immediate exploitation of the deposit uneconomical.
Department of Mines
www.mines.gov.bw
Phone: +267 3657000
Botswana Ranks 11th in World: Fraser Mining Survey
This year Botswana was ranked 11th in the world for mining policy, environment, and investment by the authoritative Annual Survey of Mining Companies conducted by the Fraser Institute of Canada.
The survey represents the opinions of 372 mining executives and managers internationally on the policy and mineral endowment of 68 jurisdictions on all continents except Antarctica. The survey provides an analysis of 13 policy-related factors that contribute to the ability of jurisdictions to attract exploration investment and on two overall questions on the attractiveness of a jurisdiction under current and under best practices policies.
Botswana's overall score was the highest ever for an African nation.
Hon. Baledzi Gaolathe
Minister of Finance and Development Planning
Jwaneng Mine pit above: This year Botswana was ranked 11th in the world for mining policy, environment and investment by the authoritative Annual Survey of Mining Companies, conducted by the Fraser Institute. Botswana's overall score was the highest ever for an African nation.
