PRLog (Press Release) – Mar 30, 2011 – New Mining Licences To Boost Botswanan Output
The Botswanan mining industry received several positive pieces of news over the past quarter, with Gem Diamonds being awarded a 25-year mining licence for its Gope diamond project in central Botswana and African Copper receiving an interim mining licence to develop its Thakadu coppersilver deposit. Lucara Diamond Corporation also announced that it would be commencing full production at its AK06 diamond mine by early 2012, with expectations that the mine should produce 400,000 carats of rough diamonds during its first year of operations. Commissioning of the mine is scheduled to start during Q411.
These positive developments follow in the wake of the earlier announcement by Australian copper miner Discovery Metals that it will be commencing construction on its Boseto copper project within the Kalahari copper belt, with the company's bankable feasibility study (BFS) calling for throughput of some 3mn tpa of copper and silver ore over five years.
Last quarter, we made some upwards revisions to our copper production and export forecasts to reflect this new output from Boseto and this quarter we now make an upwards revision to our diamond production and export forecasts to take account of Lucara's higher output from the AK06 mine from 2012 onwards. Once we receive confirmation of Gem's plans for Gope, we would e garbage compactor review xpect diamond output figures to receive a further upwards adjustment.
Indeed, the outlook for the country's key diamond sector is highly positive at present, with news in December 2010 from the Bank of Botswana that diamond exports for the first 10 months of the year stood at BWP17.2bn (US$2.36bn). If we extrapolate this 10-month performance out over the year as a whole, then the country could well be on track for diamond exports to surpass the US$2.83bn mark in 2010. We currently forecast diamond exports to total just under US$2.85bn for 2010, and believe that there could be an upside risk to this forecast, once final figures are released by the authorities.
Botswana Still Favoured By BMI
Botswana remains the highest-rated African country in our Business Environment Rankings for Q211, with a score of 65.3 points out of 100. The country has a stable political situation and a well-developed mining sector, backed up by a sound regulatory framework.
Moreover, tax rates remain relatively low on a regional basis and the country has relatively flexible labour regulations, which should also bolster growth. Our positive view on Botswanan mining is shared by the influential Fraser Institute, which placed Botswana in eighth place in its mid-year Policy Potential Index, published in August 2010.
Country Overview
Exploitation of rich mineral reserves, especially diamonds, has been a significant driver of Botswana's economic growth. Diamonds, along with copper and nickel, are major focus areas in metal and mineral exploration, and earn more than three-quarters of the country's export revenues. More recently, coal and uranium have also emerged as key future revenue generators for the Botswanan mining industry.
The authorities in Gabarone have an impressive track record in garnering the maximum benefit from the production of diamonds, and we expect this trend to continue over the coming decade. Diamon rc helicopter market place ds currently dominate the economy but, with output set to decline over the medium term as reserves dwindle, the government has enacted a number of measures to ensure that revenues are used to aid diversification. For example, a fiscal rule has been adopted which states that mineral revenues must be used to expand the economy's productive base, rather than fund consumption expenditure. Owing to this rule and other initiatives enshrined in successive six-year National Development Plans and the long-term policy Vision 2016, growth in the non-mining sectors is burgeoning.
Industry Forecast
We are positive on the outlook for the Botswanan mining sector over our forecast period to 2015. Diamond output will remain the mainstay of Botswanan mining production, boosted by new projects being planned by both Gem Diamonds and Lucara Diamond Corporation, however, there are also key mining projects being developed in the copper, uranium and coal sub-sectors, such as Discovery Metals' Boseto project and the Mmamabula coal and power station project that was recently bought by India's JSW Energy. We believe that the sector can show an average annual growth rate of 7.7% over the 2011-15 period, with the industry reaching a value of BWP60bn (US$10bn) in 2015.
New Company Profile
This quarter, BMI has begun coverage of Lucara Diamond Corporation, which completed the takeover of its Botswanan JV partner, African Diamonds, at the end of 2010. Lucara is now the sole owner of the AK06 diamond mine, which it expects to see commissioned by year-end. Full production will then commence in 2012, with expectations that the mine should be yielding some 400,000 carats of rough diamonds per annum.
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