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Russia's Norilsk Nickel sues Botswana for reneging on deal

May 19 2017 17:23
Lameez Omarjee

Johannesburg – Russian nickel mining group, Norilsk Nickel has taken legal action against the Botswana government for reneging on a deal and is seeking payment of $271m (R3.6bn) with damages for additional costs.

This is according to Michael Marriott, chief executive of Norilsk Nickel (Nornickel) Africa, who spoke to Fin24. He explained that the court proceedings, being heard in Botswana, started in April already. Proceedings will also be taking place in the London Court of International Arbitration. 

The action pertains to the sale of Nornickel’s assets to Botswana smelter and mining company BCL Investments Proprietary Limited, in a deal which was finalised in 2014. According to the binding agreement, BCL would have taken over Nornickel’s 50% stake in Nkomati mine in Mpumalanga and its 85% stake in Tati Nickel Mine in Francistown, Botswana. In turn, Nornickel agreed to supply concentrate from the mines to the BCL smelter, Selebi Phikwe.

The initial sale value was $337m (R4.4bn), but was brought down to $271m (R3.6bn) in 2015 due to the declining nickel prices.

However, Marriott said shortly after the deal was concluded, BCL filed for liquidation. Nornickel became aware of this information through the press, and it was not directly communicated to the company by the Botswana government. “That’s part of the problem, we learnt through the press that they were going into liquidation. Up until that time, we had every reason to believe BCL had financing through the Botswana government,” he said.

“The government in Botswana has always supported the BCL and has always backed the BCL’s finances. It remains the ultimate shareholder and remains responsible in our view,” he added.

Marriott is of the view that BCL has filed for liquidation to avoid paying the transaction. This, after a long process where the Botswana government and various ministers had pushed for South Africa’s Department of Mineral resources to approve the sale of Nkomati. Now it appears the government wants the decision to be overturned. “That is not correct. That is bad practice,” he said.

Job losses

Marriott assured that operations at Nkomati mine had not been affected by the developments. “Nkomati mine is continuing operations as normal.” Along with its partner African Rainbow Minerals, there are no intentions to halt operations until business ownership is properly transferred, he said.

However, in Botswana, the closure of Tati mine and the Selebi Phikwe mine and smelter has resulted in 6 000 job losses.

Marriott added that the reneging will also be to the disadvantage of the Southern African region. “The logic of transaction would provide a beneficiation opportunity for Botswana and South Africa for its nickel ores. It’s the objective of most African governments to beneficiate.” With BCL’s liquidation, the opportunity to beneficiate has been lost, he emphasized.

Historically, ore from Nkomati was beneficiated in Europe and China. But with the BCL deal, ores were trucked to Botswana. Following the liquidation, Nornickel has reverted to selling ores to China and Europe.

According to reports, Nornickel said that Middle Eastern investors are looking to buy BCL. Marriott said Nornickel would welcome any investors able to assist the Botswana government.

Marriott explained to Fin24 that the decision by Nornickel to disinvest is part of a strategy to sell off its international businesses, which includes Australia, Botswana and South Africa. This is primarily for the company to “focus its resources” in Russia to optimize its business. 

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russia  |  botswana  |  south africa  |  mining

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