Gaborone - Botswana’s economy, heavily reliant on minerals especially diamonds, is likely to feel the pinch this year as Debswana Diamond Company shuts down one of its mines this month.
The giant mining company has announced that it will shut down Damtshaa Mine as a result of the slowdown in the global diamond industry. Damtshaa is part of the Orapa Letlhakane Mines. This shutdown will affect at least 250 miners until 2018. These employees would be redeployed to other Debswana mines. During this period, the mine will go through a maintenance programme.
As a result of a global macro-economic slowdown and the strengthening of the US dollar, Debswana has been experiencing a significant reduction in the state of rough diamonds due to weak demand, which has forced the company to revise its production target for this year to 20 million carats.
It’s not only the Debswana mines that are facing a bleak future. Last month, the Lobatse High Court issued a final liquidation order for Mowana Mine, resulting in the mine releasing 350 employees. Just like the Damtshaa Mine, Mowana, owned by African Copper, was affected by the lowest copper prices in the past six years, which had also forced the suspension of Thakadu Mine. Thakadu is Mowana’s sister operation which was suspended last February.
In November, Minister of Minerals, Energy and Water Kitso Mokaila told Parliament that since the economic downturn in 2009, Mowana had been struggling to keep a positive cash flow. This had prompted the government to defer royalties to sustain the mining operation and avert closure.
“Messina Copper (Botswana) has also been experiencing its own internal operational challenges which included excessive waste-stripping in the low copper grade that affected mining performance at their Tlhakadu Mine.
“Operations at Tlhakadu Mine have been suspended since February 2015 which resulted in limited ore supply to their plant at Mowana and subsequently affected their revenue. This has therefore accumulated cash deficits,” said Mokaila.
He said Mowana Copper Mine had been receiving support from its shareholders through funding and guarantees to help them meet liabilities. The minister also said the mining contractor at the mine, Diesel Power Limited, suspended operations on October 10, citing delayed payments as the reason.
In 2014, Diesel Power was hired in a $113 million hard-rock opencast mining contract to run for more than four years. Mokaila said the mine submitted a payment plan to Diesel Power, however it was rejected and the contractor sought court intervention to liquidate Messina Copper.
“Messina Copper has notified my ministry of their intentions to suspend operations at Mowana Copper Mine in accordance with Section 47 of the Mines and Minerals Act pending the outcome of the court application.”
Mokaila said the world copper price was at a six-year low and the last time the copper price sat below $6 000/ton, or $2.72/pound, was in 2009. The price is currently at $2.30 a pound. During the same period a year ago, the copper price was $3.12 a pound – a reduction of $0.92 a pound, or 29 percent.
Very few marginal mines can survive this downtrend, particularly marginal mines such as the Mowana operation, said the minister.
BCL Mine in Selibe-Phikwe is also going through a bad patch, due to a significant drop in copper and nickel prices. The worldwide decline in commodity prices forced the bosses at the copper-nickel mine to rationalise their operations with particular emphasis on the need to implement cost reduction and cash preservation strategies. In some months, the mine was forced to pay its workers much later than usual.
Meanwhile, retrenchments ensued at Moolmans Avens Mining Company which does excavation work for Tati Nickel Mining. Last month, Moolmans retrenched 230 workers out of 520. One of the reasons is that the scope of work for this year is not within Moolmans’ control and was determined and communicated by Tati Nickel Mine.
The excavation company said there had been a significant reduction in the overall scope of work, which informed the need to re-align the resources accordingly.
Management has reflected on these new developments but has not found viable options to avoid retrenchments.