Botswana tarnished in Russian mining deal

BOTSWANA’S status as Africa’s most attractive economy for investment has come under scrutiny as Russia’s Norilsk Nickel Group said it plans to take legal action against the country to recoup $271 million in damages.

The company added that the legal action comes after a state-owned mining company made an about-turn on a deal to acquire a mining operation.

Nornickel, a subsidiary of the Norilsk Group, said it would sue Botswana’s government for the millions due to it after state-owned copper and nickel smelting company BCL Limited reneged on the sale of Nornickel’s 50 percent stake of the Nkomati Mine in Mpumalanga and an 85 percent stake in Tati Nickel Mine, Botswana.

Norilsk Nickel Africa chief executive Michael Marriott said the Botswana government had put BCL into liquidation and backed down on the deal despite the company making several concessions.

“We are hoping that the legal action will result in the court agreeing with us that there was a sale and purchase agreement and we are owed money for the deal,” he said.

Marriott added the outcome will be that the government finds bank guarantees for BCL to fund the transaction.

The latest Africa Investment Index, by Quantum Global’s independent research arm‚ Quantum Global Research Lab‚ names Botswana as the continent’s most attractive economy for investment. Morocco is second‚ followed by Egypt, South Africa and Zambia.

The original deal between Nornickel and BCL was signed in 2014 for a total purchase price of $337 million, but Nornickel later agreed to cut the price to $271 million, taking into consideration the depressed global commodity price environment.

However, BCL filed for liquidation last October before the transaction was completed on the grounds that it could not afford the purchase price.

“We were confident that Botswana was a sound investment (and) that we would get government support for this deal,” Marriott said. “The Botswana government, as shareholders of BCL, was aware of BCL’s financial position, and… (it carries) liability for the deal.”

Marriott added that the Botswana government was aware it would be unable to complete the deal without state funds when it was signed. It would have provided an opportunity for the ore to be beneficiated in Botswana instead of in China.

Since the liquidation process, both the Tati and BCL mines have been closed.

Middle Eastern investors want to buy the company, but Marriott said Nornickel welcomes any investors able to help the Botswana government conclude the transaction.

“This unacceptable conduct has resulted in BCL’s smelting and mining operations being placed into provisional liquidation. The closure of BCL will have a devastating effect on the livelihoods of thousands… and a negative impact on Botswana and regional economies that rely upon the smelter to beneficiate nickel copper, and platinum group concentrates.”