Ailing mining industry in ICU

Ailing mining industry in ICU

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• Troubles in China’s economy add more woes to shaky sector

 

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Botswana’s mining sector is in Intensive Care Unit (ICU), thanks to depressed commodity prices. Fears of more job losses have heightened as mining companies have continued to operate at a loss. Surviving mining companies and sub-contractors are desperately seeking cash injection to stay afloat.
Motswedi Securities Head Researcher, Garry Juma, says Botswana mining is in trouble and “it’s not looking good”. Juma states that  China’s economy which is in the red continues to negatively affect commodity prices which is not good for the likes of BCL and other commodity producing companies in the country. He also states that China, which is also emerging as a diamond consumer, has slowed down on consumption owing to ailing economy.

 
“There are also fears that any appreciation of the Dollar will have negative impact on commodity prices,” Juma said, explaining that prices are made in Dollars and they fear that if it appreciates commodities would become too expensive.
Meanwhile, BCL, a wholly government-owned company, together with its subsidiary Tati Nickel Mining Company, (TNMC) are under dire financial strain. Fears are that the copper mining and smelting company will fold its operations if government does not inject capital into the project. Should BCL and Tati Nickel fold their operations only one copper mining company, Khoemacau Copper Mining Company, will remain.

 
Tebogo Rapitsenyane, TNMC Public Relations Manager, agrees that the company is feeling the pinch of low commodity prices. “We are currently selling at very low prices which are not good for business,” he said.
Hundreds employees at BCL and Tati Nickel fear for their jobs, taking into account that hundreds of Batswana who were directly and indirectly earning an income from Boseto mine, owned by Discovery Metals and Mowana Mine under African Copper were left stranded as the two mines closed shop. Collectively the two mines directly employed around 750 workers and thousands indirectly through sub contractors.

 

Latest mining figures from Statistics Botswana indicate that production stood at 66.0 percent during the third quarter of 2015, showing a negative year-on-year growth of 37.6 percent.

 
Latest mining figures from Statistics Botswana indicate that production stood at 66.0 percent during the third quarter of 2015, showing a negative year-on-year growth of 37.6 percent. Statistics Botswana says the decline was largely influenced by the year-on-year percentage change of diamonds (33.4 percent) as the mineral constitutes 82.5 percent of the total weight of the index.
“Diamond production declined for the fourth consecutive quarter reflecting a decrease of 33.4 percent in the third quarter of 2015 as compared to the third quarter of 2014. The continued decline is as a result of the weakening demand for diamonds in the global market,” statistics indicate.

 
Silver, Copper in Concentrates, Copper-Nickel-Cobalt Mate also had large year-on-year percentage decreases in production of 100 percent, 84.0 percent and 61.6 percent respectively. Even though these three minerals had huge decreases when compared to that of diamond production, their impact on the year-on-year percentage change of the overall index is minimal as a result of their weight contribution to the overall index weight.
“Even though Soda Ash and Coal production increased by 7.1 percent and 18.6 percent respectively during the third quarter of 2015, this did not have much impact on the overall year-on-year percentage change as these two minerals have a small combined weight of 1.2 percent as compared to 98.8 percent for the other minerals that have decreases in production,” Statistics Botswana says.

 
Debswana, the world’s biggest diamond producer by sales value, cut its 2015 production target to 20 million carats from 23 million carats, leaving employees in its four mines in the country in panic mode. The diamond giant revised its 2015 growth forecast from 4.9 percent to 2.6 percent due to the downturn in the global diamond market. Okavango Diamond Company (ODC) market sales also fell by 20 percent forcing the company to halt its sales until the market normalises.
Despite sacrificing royalties in an attempt to save copper mines, the government of Botswana could only watch as the metal prices slipped further, eventually forcing the mines to fold their operations.

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Majube covers the economy and public finance. He also manages production. He has worked in various publications in the last ten years, Specialising in Business and Features. He has held the position of Desk Editor at the weekly the Echo, and most recently was part of the award winning Business team at Mmegi. In recent times Majube has covered the liquidity challenges of the financial sector as well as the Bank of Botswana’s oversight role in the banking sector.