Are foreign investments in Botswana's mining sector still safe?
Brandenburg, August 14, 2023 - Botswana is one of the most stable and transparent countries in Africa. The government of Botswana is committed to diversifying its economy and securing more foreign direct investment. The country's strengths lie in its low corruption (the lowest in Africa), good economic governance, its liberal tax system, and its stable democracy.
However, an interview in TheVoiceBW with the managing director of Gchwihaba Resources, a subsidiary of listed Tsodilo Resources Ltd. (ISIN CA8985301008), in which he explains the licensing dispute with the government, now casts considerable doubt on the safety of investing in Botswana's mining sector, but read it for yourself:
The Rule of Law prevailed in Namibia, will the same be true in Botswana?
MEN AT WORK: Workers at the exploration site
"Nothing could be more important to an exploration or mining company than the sanctity of its license tenure and the rule of law in the jurisdiction it operates in" - James M. Bruchs, Managing Director of Gcwihaba Resources
Deep-South Resources Inc. ("Deep-South”) exploration programme was interrupted when the Ministry of Mines and Energy of Namibia denied the renewal of its Haib Copper licence EPL 3140 in June 2021. In July 2021, Deep-South and its subsidiary, Haib Minerals (Pty) Ltd (“Haib”), filed an application on behalf of Haib with the High Court of Namibia for an order reviewing the decision of the Minister of Mines and Energy (“Minister”) refusing the renewal of Haib’s licence EPL 3140 (“Licence”) covering the Haib Copper project in Namibia.
After almost two years of pleadings and hearings on the matter, the High Court of Namibia, rendered its judgment in March of 2023 and set aside the decision of the Minister not to renew the Haib Copper licence EPL 3140. The effect of the order is that the Minister must resume the licence renewal application procedure and arrive at a new decision. The court also ordered the Ministry to pay the legal costs of Deep-South’ subsidiary Haib Minerals. License EPL 3140 has been officially renewed by the Ministry of Mines and Energy of Namibia on Friday July 7, 2023.
Interview with James M. Bruchs, Managing Director of Gcwihaba Resources (Pty) Ltd (Gcwihaba) and CEO of its parent company, Tsodilo Resources Limited.
Thank you, Mr. Bruchs, for making yourself available.
The circumstances surrounding Deep-South in Namibia seem eerily like the issues that Gcwihaba is facing with our Ministry of Mines and Energy (MME).
Well, based on what I know, the facts behind the Deep-South saga are a bit more diabolical than ours, as it was reported in the newspapers that there was a concerted effort by third parties to steal Deep-South's licenses and sell the project to foreign parties and current and / or former ministry employees may have been involved in the affair. I am not aware that the denial of our license is as the result of similar facts but what is similar to us both, is the sanctity of one's license tenure and the rule of law.
What do you mean by the sanctity of a license tenure and rule of law?
First every mining or exploration company wants to be in a jurisdiction as in the case of Botswana, where the Mines and Minerals Act (Act) is clear and concise as to the scheme of obtaining a prospecting license or a mining license and secondly, that those tasked with carrying out the regulatory scheme do so in compliance with the Act itself. In the case of public companies such as ours, investors trust us with their money and assume that we are doing our homework to reduce the risks associated with their investment. We must then make judgments about where to employ this capital based on several factors of which the sanctity of the license tenure and the rule of law are at the top. This only stands to reason, as who would risk their exploration funds in jurisdictions that failed to follow their rules and regulations or where you couldn't get redress in a court of law in the event they weren't.
Are you saying that the procedures in the Mines and Minerals Act were not adhered to?
That is exactly what we are saying, and further to this, there has never been a legitimate issue with respect to our licenses regarding the legality of them being where they are. We have held them in one form or another since 2008, before and after any designation of the Okavango World Heritage Property, otherwise known as the core zone, or the area established around the core zone by the State Party, known as the buffer zone. The buffer zone established in 2014 encroached on our already existing licenses and our established resource.
If one reads the record, you will find that in 2013 and 2014, the State Party explicitly tells UNESCO in their application documents that mining and exploration are not prohibited in the buffer zone - plain and simple, end of story. We merely had to submit the government's own documents to the court to prove our point.
What is the core zone and the buffer zone?
The core zone is the area designated as the Okavango World Heritage Property. Activities in the core zone are strictly limited and in 2018, after a period of negotiation, we reached an agreement with MME, to relinquish our licenses on the eastern side of the panhandle that existed in the core zone.
The buffer zone is an area established by the State Party (Government of Botswana) to provide an additional layer of protection to the core zone, where activities could take place and monitored to evaluate their impact if any on the core zone. In our case, the buffer zone encroached on our license by a couple hundred meters in width and in total covered about seven (7) square kilometres or an area equal to 0.018% of the land area taken up by the buffer and core zone. The area is indeed small, but it contains 169Mt of high-grade iron with a current net present value of $87M USD.
For those of your readers who have been to the panhandle, our project extends no further east than the hospital, the landing strip extension, and the shopping mall expansion all of which were built or expanded in the buffer zone after 2014 and of course the Mohembo bridge in the core zone itself. Our project will never impact the integrity of the Okavango World Heritage Property and there has been no showing that it ever would.
If this is so clear cut, why are you in court with MME?
That is a good question and to be honest, it has never been clear to me how we got to this point. I have been a practicing attorney for over 40 years and have never seen a case where there were no issues as to either the law or the facts. This is not a he said / she said case, it is about Gcwihaba being deprived its rights as per the Act and Botswana law. Again, if one would read the record, you will find that we agree with the State Party's statements in 2013 and 2014 to UNESCO and that they (State Party) clearly agreed with our activities as our licenses have been renewed or regranted since 2008 to the present time, before and after any World Heritage Property designation. Further, we and our stakeholders have spent over $26M USD in exploration costs in the area and we have established a 441Mt iron resource compliant resource published in a NI 43-101 report. We have also indicated that the entire exploration target is between 5-7 billion tonnes with an approximate 30% recovery rate, and if all is borne out, it is one of the largest magnetite projects in the world and second largest in Africa with a mine life of 70 -100 years.
Maybe that is the problem – it has attracted unwanted attention?
I would hate to think that, but you never know. I have worked in Botswana for 21 years and never witnessed such activity, so I hope it has not started with us. We will never really find out why the license was not granted. However, what I do know is that in 2014, the government stated that they wanted to develop this project with us and that in 2018, we approached MDCB about doing so. I do not want to say any more about that as we are still bound by a confidentiality agreement with MDCB but if one reviews the record on the landing page, they will learn more than I can say here.
So Mineral Development Company Botswana ("MDCB") was going to partner with you?
Good try - read the entire record https://tsodiloresources.com/s/MMGE.asp.html and watch the video clip at https://player.vimeo.com/video/574156067 and draw your own conclusions.
What was Minister Lefoko Maxwell Moagi position in all of this?
You would have to ask him. What I can say is that if you look at his BTV interviews and his emails, texts, and WhatsApp messages on the landing page, he is probably one of the project's biggest supporters. The Minster recognized, like those ministers who preceded him, that this project was a "game changer" for the country and its development was needed. So, it would appear that he is a huge fan of the project as are other government officials.
Where do things go from here?
After we submitted a voluminous record on the matter, we had a hearing on April 18, 2023, and I expect the judge's decision sometime in August. From my view, there is no dispute as to the facts or the law and as you can see from the filings, it was the Department of Mines (DOM) decision to not award us the license and deny us our rights under the Act and justify it because "whatever inconvenience the applicant may suffer (by MME taking their license) is of a financial nature and pales into insignificance compared to the economy of the country since the economy of Botswana is amongst others, tourism driven". Statements such as this should concern every prospecting or mining company in the country as the government is effectively saying through DOM, that some rights or want to be rights, are more important than established legal rights no matter what the law or the Act says. Also, if this was a matter of who had the most revenue, most jobs, most taxes paid in the next one hundred (100) years, the Gcwihaba Xaudum Iron Formation (XIF) project has the potential to dwarf that received from tourism.
At the end of the day, I do not believe that the judge will be swayed by the government's rationale for its actions in denying us the license as that would effectively say that the rule of law does not exist in Botswana, and I do not think that is what Botswana stands for. I do believe that the judge will grant us the remedy we sought and order the license to be issued and that it is aligned in time with the four other licenses that make up the entire XIF project as per Sections 17 and 19 of the Act and to reset the clock to make up the time we have lost in this ordeal. We would not have brought the case unless we thought we would prevail on the merits.
This has been quite an ordeal.
This is all unfortunate as it has resulted in a lot of lost time and productivity. The then Director of DOM said in a BTV interview 2 years ago https://player.vimeo.com/video/557203643 that she expected us to file our mining license within two years which we would have submitted by now and we would be in our Stage 1 production of ferrosilicon by the end of this year creating jobs, jobs and more jobs. What could be wrong with that? We have hit a road bump in the development of the XIF project, but I am confident that it will all work out. It is an important project for us as well as for Botswana.
I recently read excerpts from the statement made by the Bank of Botswana Governor, Moses Pelaelo, at the Annual Economic review briefing, and I believe our (Tsodilo's) goal of becoming a major supplier of an ultra-high grade +67% Fe product to the industry and doing what we can to reduce greenhouse gas emissions (GHG) by becoming part of the "green steel" movement, fits nicely in the country's Vision 2036 goal of doubling GDP by 2036.
ILLUSTRATION: Coordinates of the exploration site
Thank you very much for your time and the insight into your project. Botswana needs your project to go forward and of course the jobs that go with it.
Thank you for your interest.
The German translation of the original article is published with the kind permission of TheVoiceBW (https://thevoicebw.com/mining-giants-decry-sabotage).
About shareribs.com
shareribs.com is one of the leading providers of stock market information on commodities and a whole range of other topics.
Contact:
shareribs.com
c/o SC media
Claudius Strehlau
Neuendorfer Str. 90a
14770 Brandenburg
Germany
Email: [email protected]
Disclaimer:
All information published on shareribs.com is based on careful research. None of the information constitutes an offer to sell the stock(s) discussed or a solicitation to buy or sell securities. The information is based on sources that the publisher considers to be trustworthy. Nevertheless, no liability can be assumed for the accuracy of the content. Smallcaps and pennystocks, as well as all listed securities, are subject to considerable fluctuations and risks. Therefore, liability for financial losses that may result from the use of the information for one's own investment decision is categorically excluded.
The complete disclaimer can be found at https://www.shareribs.com/sonstige-inhalte/risikohinweis.html
