Thursday 21 September 2017

Russian mining company Norilsk Nickel to sue Botswana

Russian mining company Norilsk Nickel to sue Botswana
(Business Day 05/02/17)
Russian mining company Norilsk Nickel to sue Botswana

Russian mining company Norilsk Nickel is to sue the Botswana government to recover more than $277m, excluding damages and costs, because of "reckless trading" of state-owned Botswana Copper (BCL) and the failed sale of the Nkomati nickel mine in SA.

Botswana is African country rated highest in annual mining surveys conducted by Canada’s Fraser Institute.

"The government has displayed a complete disregard for the fair, frank and reasonable dealing with outsiders that BCL’s insolvent circumstances demanded," said Norilsk Nickel Africa CEO Michael Marriott.

"Botswana has a reputation as one of the safest and best places to invest in the whole of Africa and it has earned the strongest credit rating on the continent on that basis.

"The way that the government of Botswana has acted over BCL brings the validity of that reputation into question."

Copper and nickel producer BCL said in October 2014 that it had agreed with the world’s largest nickel producer, Norilsk, to pay $337m for its 50% stake in Nkomati which it shared with JSE-listed African Rainbow Minerals, as well as 85% of Tati Mining that Norilsk owned in Botswana.

The price tag was later reduced at the request of BCL and the Botswana government.

However, by October 2016, BCL said it could no longer afford to pay for the transactions and moved into liquidation after shutting its unprofitable operations in Botswana.

Norilsk, which acquired the Nkomati and Tati assets when it took over LionOre in 2007, had wanted to dispose of these assets to focus on its best mines, while BCL wanted Nkomati’s nickel to supply its processing plants in Botswana.

According to Norilsk’s statement on Friday, it was claiming $271m from the Botswana government for the failed Nkomati sale and $6.4m for the Tati business.

Norilsk served the notice that "it intends to commence legal proceedings in Botswana against the government of Botswana in respect of its involvement in the reckless trading of BCL Limited and BCL Investments Proprietary Limited" on the attorney-general of Botswana, the minister of mineral resources, Green Technology and Energy Security, and the minister of finance.

Norilsk said it had discovered through media reports in October that BCL, which relied on the Botswana government for financial support, "had been placed into provisional liquidation by the government in an apparent attempt to avoid its obligations to Norilsk".

"Since then, Norilsk has tried on numerous occasions, and through numerous channels, to reach a satisfactory and amicable resolution, but none has been forthcoming."

Reuters reported in February that an interested party in the Middle East was possibly interested in buying the suspended BCL operations, which included underground nickel mines that were among the most expensive to run in the world at a time when nickel prices were uncertain.

Norilsk said it would try to block any agreement the Botswana government reached to sell BCL if it did not secure payment for the failed deal.

"In this regard, Norilsk expects its rights to be recognised by the government in its negotiations and in any agreement ultimately reached in relation to BCL, failing which Norilsk reserves its rights including to challenge any such agreement."

ALLAN SECCOMBE

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