Liquidated copper mine blights investment credentials

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 Mpho Tebele

 Gaborone – The Botswana government is caught between a rock and a hard place, as it facing a lawsuit over its liquidated BCL copper mine in an investment deal gone wrong. Botswana is also struggling to find potential investors for the mine amid reports that maintenance of the mine is bleeding national coffers.

This week, Russian nickel producer giant, Norilsk Nickel, made its legal claims against the Botswana government known when it announced that it intends to litigate against the Southern African nation over  the Nkomati and Tati facilities to recover around US$277-million (P3 billion) it is owed by state-owned BCL.

 In a statement, Norilsk Nickel Africa CEO, Michael Marriott, explained that BCL failed to make a payment under an October 2014 share purchase agreement and was, subsequently, forced by the government into liquidation.

The Botswana government owns 100% of BCL shares, and BCL’s wholly owned subsidiary, BCL Investments Pty Ltd, holds an 85% stake in Tati. The remainder of the shares in Tati is directly held by the Botswana government.

Norilsk and BCL signed the share purchase agreement, which provided for the transfer of the ownership of the Nkomati and Tati facilities to BCL in October 2014; in September 2016 the agreement became unconditional. BCL subsequently failed to meet its end of the deal and refused to pay for the shares. As a result, Norilsk served a material breach notice on BCL, demanding payment of the circa US$277 million purchase price.

On 9 October 2016, the government of Botswana applied to the High Court of Botswana and BCL entities were put under liquidation and eight months later, in June 2017, BCL entered the final stage of liquidation.

“We applied to the Botswana courts for permission to defend our rights in London in 2016. It took the court over 16 months to consider this very straightforward matter.   We are now left with a deeply unsatisfactory judgment, which has denied us the ability to get on and resolve this dispute through impartial, international arbitration, despite our right to do so under our contract with BCL,” he said.

Norilsk Nickel has filed a reckless trading claim against the Botswana government, seeking to declare it responsible for the liabilities of BCL and its entities.

This follows after the government, in October 2016, applied to the High Court of Botswana to have BCL and its entities put into liquidation.

In the following months, Norilsk Nickel submitted a Request for Arbitration to the London Court of International Arbitration (LCIA) to determine its claims and filed an application with the Botswana court seeking permission to begin and prosecute arbitration in the LCIA in respect of its claim.

Marriott added that “Norilsk l is disappointed by the Botswanan court's ruling and remains dismayed by Botswana's authorities' disdain for investors' rights.  We are going to use every opportunity to ensure that the Botswanan Government is held responsible for all of the BCL liabilities, including the liabilities to Norilsk Nickel in respect of the Nkomati and Tati transactions for the aggregate amount of circa US$277million.”

In March, the Ministry of Finance and Economic Development put in an urgent request to get parliament’s approval to settle the matter through an out court settlement. Finance Minister, Kenneth Matambo, requested parliament to approve the negotiated fee of US$45 million to be paid to Norilsk as an out of court settlement. The proposed fee would see the government only paying a fraction of the P3 billion (US$277 million) that Norilsk initially demanded from the Botswana government. 

But the Minister of Mineral Resources, Green Technology and Energy Security, Eric Molale, recently informed parliament that BCL liquidator, Nigel Dixon-Warren, dismissed the claims by Norilsk and approached a court in South Africa to defend it.

“He then went to court at South Africa and recently lost the case. That is why I’m saying that my hands are tied because this liquidator is a court official. To try and tell him what to do, I will be regarded as interfering in the judicial process. That is the conundrum I am facing,” Molale told parliament.

Molale said he does not know how much the liquidator spent on the legal costs of taking the case to court in South Africa, revealing that he had just received the judgement from someone else instead of the liquidator.

Molale told Parliament that he has his own serious problems with the whole liquidation process as he has been told that the liquidation may take up to seven years.

“We cannot prolong this because it is a cost to this nation. Next week I am meeting up with the liquidator. I want him to know my thoughts about what he is doing and nobody should say that I’m interfering in the judicial process because this matter is a serious problem that has to be dealt with as a matter of urgency,” Molale said.

According to the minister, the liquidator has so far pocketed over P42.3 million in over 20 months, averaging P2.2 million monthly in fees. 

 

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