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[ Print Now ] WEBSITE: www.mmegi.bw DATE: Friday, 02 March 2012 (Vol. 29, No. 33) [ Close Window ]

Copper and nickel refining - Botswana's dilemma

*ROMAN GRYNBERG

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For years many analysts and policy makers have argued that Botswana's development could not possibly be sustainable if it did not make full use of the limited resources it has.

These so-called resource nationalists argued that the old model of African growth which has basically remained unchanged since the 19th century cannot work. This model is based on the country exporting

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unprocessed raw materials - from ivory to diamonds to gold, all being sent down to the coast and exported to Asia and Europe where they are further processed. In this model, the jobs and much of the value added disappeared and while Botswana got government revenue and temporary growth and prosperity, it did not get a fundamental transformation of its economy. The problem has always been that economics and trade law stacked up against those who try to give investors a reason to process those resources here in Botswana. It took nearly 20 years of pushing for De Beers to finally shift its policy and become an advocate of diamond beneficiation in Botswana. For years people like former cabinet minister David Magang and Permanent Secretary Dr Akolang Tombale fought hard and paid a heavy price professionally in order to create a diamond beneficiation industry in Botswana. Botswana owes them a huge debt of gratitude for what they and others like them have done for the country. Now there are some 3,000 Batswana working in the diamond cutting and polishing industry that would otherwise be without work. There are now important backward linkages being created by Botswana Diamond Hub between the diamond cutting and polishing industry and new enterprises being established that will service the expanding diamond industry. But what next? Right now there is a new sector emerging here that could start to provide some of the jobs, linkages and economic diversification that Botswana needs. There are a number of base metal mines that will open in the coming years and the government will need to think very carefully about how these will be developed. Three new deposits have been found in the west of the country.The largest is the Hana Mining with a potentially huge copper/silver deposit stretching from Ghanzi to Maun. Along with that are lead/ zinc mines on the Namibian border and the Bosetu copper mine. The centre of gravity of base metal mining is shifting from the east around Francistown and Selebi-Phikwe to the west. The question remaining for the Botswana government is what will be exported?

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BCL has operated a copper/nickel mine at Selebi Phikwe for over 30 years and has never moved beyond exporting copper matte (70 percent copper) to exporting final refined copper cathode or anything beyond that like copper wire and tubing. For a while, Botswana did have a mini-refinery for nickel in Matsiloje, but this was shut down when Norilsk took it over several years ago.At Hana Mining's Ghanzi project, the company's web site states that it will be exporting copper concentrate (27 percent - 40 percent copper) which needs to be further smelted and refined to produce copper cathode. No-one wants to transport waste, but copper concentrate is still largely waste and Hana has chosen the lowest level of beneficiation in Botswana because there is no domestic refinery. So why doesnt Botswana refine the copper and nickel here? Two reasons - we never were sure Botswana had sufficient copper to have a refinery of minimum scale and second because we never had the electricity. With the opening of Moroplule B and a further 600mw planned in the area the electricity issue should be resolved. The amount of copper in the country that is known with some scientific certainty is about 100,000 tonnes per annum for some 30 years. This is tiny in comparison to the huge deposits in Zambia but this, according to recent studies, is almost certainly enough for Botswana to establish its first, albeit small, copper and nickel refinery. We may have much, much more copper if the "Botswana copper belt" proves, as many hope and believe, to be as rich as that of its more famous Zambian namesake. At present, base metal miners such as BCL and Tati Nickel have agreements with the government that in the event that a refinery is started in Botswana, their market agreements for matte will cease. Similar provisions in all the agreements with the new base metal miners in the country are vital, otherwise the nation may well lose the opportunity to process its copper/nickel and lead/zinc. Botswana faces a classic policy dilemma. The mines, in order to get bank loans to start mining have to show their bankers that they have an off-take or marketing agreements with a refiner, in other words that there is someone who will buy the base metal.No buyer, no bank loan. However, these off-take agreements are often for the life of the mine. Equally if a refiner wants to set up operations in the country then he or she has to show their banker that they have the volume of concentrate or matte to make the refinery profitable. No matte, no concentrate, no bank loan. Botswana, given the discoveries in the Kalahari, almost certainly has enough minerals for a copper refinery. However, without government policy, the mining companies will tie up all of Botswanas base metals in foreign supply contracts and the country will never develop a copper/nickel refinery. Copper and base metal refining will not, in one step solve Botswanas employment or diversification problems. A small refinery of 50,000 tonnes of copper and 32,000 tonnes of nickel per annum would cost in the vicinity of P4 billion to construct. Refining is a very capital and energy intensive process but will only create a few hundred jobs at first but it is the first step into deepening the economys integration by creating a greater domestic demand for our electricity and using Botswana's base metal and Botswana's workers. Without the first step there will never be a second and third step to producing wire and pipe and Botswana will continue to "carry ivory to the coast" for others to process. * These are the views of Professor Roman Grynberg and not necessarily those of the Botswana Institute for Development Policy Analysis where he is employed.

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