Diamond mining is the economy’s mainstay, but base metal and energy mineral developments are attracting new investment too
A combination of still-untapped resources, low direct tax rates and absence of compulsory minimum local equity requirements has kept Botswana as Sub Saharan Africa’s most attractive mining investment target. In its 2010/11 ‘Annual Survey of Mining Companies’, Canada’s Fraser Institute ranked Botswana 14th out of 79 jurisdictions, as well as 1st in Africa by mining policy potential and 7th in Africa by mineral potential.
These high rankings are unlikely to be significantly affected by the cabinet’s May 2011 decision to establish a mining investment company to manage existing government shareholdings in Debswana Diamond Company (50:50 government/ De Beers), the BCL copper-nickel mine, Botswana Ash and Morupule Colliery. The government is entitled to acquire 15 percent of any new mining venture (50 percent in the case of diamonds), but this provision is currently not enforced.
Debswana is expanding production of rough diamonds from 22 million carats in 2010 to 25 million in 2011 and 30 million in 2012, but the long-term intention is to avoid over-supplying the global market.
Investment is continuing on existing mines at Jwaneng and Orapa, while the small Damtshaa mine is due to reopen in 2012 after a three-year shutdown.
Downstream diamond-related activities – cutting and polishing, jewellery manufacturing, and support services – take place at Gaborone’s new Diamond Technology Park, with 16 polishing firms now operating, although many of them are finding it hard to achieve commercial viability because of squeezed operating margins. During the economic slump, De Beers postponed plans to move, from London to Gaborone, its final sorting process for boxes of uncut diamonds sold to its regular customers and has yet to set a new date for the transfer.
Other new gemstone investors are Australia’s Firestone Diamonds, Canada’s Lucara Diamonds (part of the Lundin group) and Australia’s Gem Diamonds. The latter, which also owns Lesotho’s highly profitable Letseng mine, is investing $85 million in the Central Kalahari Game Reserve for production of 100,000 carats a year.
Compared to diamond output worth $3.2 billion, Botswana’s other minerals did well to reach a value of $770 million in 2010, thanks to higher prices that have stimulated exploration and development of copper, nickel and zinc. Australia’s Discovery Metals is on schedule to start commissioning its Boseto open-cast copper mine in the first half of 2012 and is evaluating a nickel prospect near Selibi-Phikwe.
Higher international coal prices and the need to expand domestic power generation capacity have spurred exploration of Botswana’s estimated 20 billion tonnes of coal resources. However, power shortages are likely to continue until the new 600 MW Morupule B power station is completed at the end of 2012; the existing station has only a 120 MW capacity and South Africa’s Eskom has had to cut back its usual crossborder supplies because of inadequate output at home.
As large-scale imports of coal-fired electricity are ruled out under South Africa’s recently finalised 20-year integrated resource plan for electricity, Canada’s CIC Energy has down-scaled previous plans for a largescale coal-to-power project at Mmamabula. Instead, CIC Energy – which is being taken over by India’s JSW Energy – is prioritising thermal coal exports alongside a much smaller 300 MW power plant for domestic supply only.
Coal development could one day feed a 20 million tonnes-per-year, all-export operation. The Botswana and Namibia governments are jointly backing a feasibility study on a Trans-Kalahari railway line which would become the permanent link to a proposed coal export terminal at Walvis Bay in Namibia.
