BCL liquidation could damage Botswana reputation in Africa – Norilsk

Says the liquidation, caused by years of chaotic mismanagement has far reaching consequences for the whole economy 


Norilsk Nickel Mauritius and Norilsk Nickel Africa Propriety Limited have sent a warning to the government of Botswana over the “convenient” liquidation of BCL which they say could cause significant damage to country’s reputation as one of Africa’s most mining and investment friendly countries.
“BCL was brought down by not a single project but rather by years of chaotic mismanagement. BCL has used a proven, straightforward and reliable processing technology – concentration followed by smelting – and it could have worked just fine if it weren’t for the poor management. Activox wouldn’t make any difference,” Norilsk spokesperson Stuart Leasor told The Botswana Gazette.
A statement from Norilsk explains that the company agreed in October 2014 to sell their operations in Africa to BCL for total consideration of USD 337 million. The acquisition, reportedly, announced by BCL as a strategic priority as part of its high-profile “Polaris II” diversification and investment strategy, was designed to guarantee the long-term future of BCL’s operations by securing the supply of concentrate to its smelter in Selebi Phikwe.
Norilsk’s position is that in late 2015, in view of the situation on global metals markets and following BCL’s request for renegotiation, they agreed to make a number of price concessions. “Since that date, Norilsk have consistently signaled their intent to constructively discuss any further proposals reasonably required to complete the transaction,” they stated, maintaining that the transaction obtained final regulatory approvals, therefore becoming unconditional on 6th September 2016 where the parties were obliged to complete the deal on 13th September. “In breach of BCL’s agreement with Norilsk, however, BCL has made no attempts to close the transaction,” the statement reads in part, adding that early October, Norilsk learned through the media that BCL had been put into provisional liquidation.
To that end, the company has instigated legal action against BCL. According to court documents filed in the London Court of International Arbitration and in Botswana, the Applicants, Norilsk Nickel Mauritius and Norilsk Nickel Africa Proprietary Limited wants court order granting them leave to commerce arbitration proceedings in the London Court   against BCL Limited and BCL Investments.   The applicants also want the court to determine whether or not the share sale agreement has been rendered unconditional and if so, to determine the relief to which the Applicants are entitled and in the event, it is determined or the Respondents concedes that the share sale agreement in unconditional and elects to abandon the agreement, that it be determined the amount of damaged the Applicants are entitled to.
“The Arbitration will therefore serve to determine the nature of the Applicant’s claims against BCLI and BCL under the Share Sale Agreement for the purpose of in a final winding up) (a) proving the claims against the estates of BCL and BCLI, (b) nominating and voting for a liquidator is respect of BCL and BCLI, and (c) issues pertaining in the realization of the business or assets of BCL and BCLI,” the court documents read in part. Furthermore, the applicants point out that it be noted that there are two other creditors in the Norilsk group, Global Mining Resources Inc. and Lexan Trading Inc. (Global and Lexan) which also have significant claims against BCL and BCLI amounting to US$6 400 000.00 but which are contingent on the status of the share sale agreement.
“The Arbitration will therefore be in the interest of all creditors of BCL and BCLI in order that the status of the Applicant’ claims (and those of Global Lexan) may be resolved promptly, and allow any liquidation of both companies to progress in an orderly manner,” the documents read.
The applicants also seek directions for interim relief, pending the resolution of the arbitration, given   the significant size of their claims. To that end, the applicants seek directions that, until their claims are determined pursuant to the arbitration; “ No decisions as regards to the appointment of a subsequent provisional liquidator or liquidator  be taken without the approval of the Applicants, ”  adding, “The Respondents and any subsequent liquidator be interdicted from disposing of the whole or any part of the business of BCL or BCLI, or any material asset of BCL …”
In his founding affidavit, Nickel Africa Chief Executive Officer Michael Marriot said “It appeared  from public sources that BCL and BCLI and /or Government of Botswana may have filed the Petition specifically  with a view to avoiding or delaying  the Applicants’ claims and in an attempt to control the liquidation in manner which deprives the Applicants of their rights as creditors (an obvious example being appointment of the Respondent , who was proposed to this Honorable Court for appointment by BCL and BCLI in the Petition, and is not an appointment by BCL and BCLI by the creditors.”
Norilsk further reveals in the letter that as the seller, on 14th September they exercised their right to extend the completion date until 12 October 2016. “The seller therefore suggest, again, to the purchaser that the venue for completion be the offices of Herbert Smith Freehills LLP in Johannesburg and invites the purchaser to confirm by reply if it agrees with the change of venue,” the company says.
However, on 19th September the BCL Group responded also with a letter, denying that they have committed a material breach of the SPA as set out by Norilsk. “As has been notified to your clients, the purchaser is not in agreement that the condition of the SPA has been fulfilled and accordingly, the purchaser is not in agreement with the stance your clients have adopted that all conditions under the SPA were satisfied and or were applicable, jointly waived. Accordingly, there was no obligation on the purchaser to attend any completion meeting nor to give effect to the requirements of the SPA,” it argued.
Government of Botswana announced its decision to cease operations at BCL on the 8th October 2016, and on the 9th of October 2016 a petition by BCL Limited, BCL Investments Limited and Tati Nickel Company (Proprietary) Limited was received in the High Court of Botswana where they sought that they be placed under provisional liquidation as a matter of urgency. “There is no prospect of any further funds becoming available to your petitioners to pay their creditors, including employees, as no income will be forthcoming. This situation deteriorates on a daily basis,” the petition reads.
It further says that, “As if the financial problems of the BCL group were not enough in and of themselves, the first petitioner (BCL Limited) and second petitioner (BCL Investments Limited) entered into a share purchase agreement with Norilsk Nickel Mauritius and Norilsk Nickel International Holdings Limited, pursuant to which inter alia the second petitioner was to acquire all of Norilsk’s interest in the share capital of the entity for certain consideration.”
The government of Botswana had in 2014 entered into a deal with Norilsk Africa to buy 50% stake in South Africa’s Nkomati Nickel Mine pending the approval of South African Government which reportedly was only granted in August 2016. But Botswana has since pulled out of the deal without involving Norilsk, citing poor copper prices that even lead to the mine making losses. According to the petition, the Norilsk SPA has been rendered unconditional and that as a result thereof the purchase consideration is now due and payable…the second petitioner denies that the Norilsk SPA is enforceable and the matter will likely proceed to litigation. “Accordingly, the first and second petitioner are faced with claims that they cannot meet. Claims arising from the Norilsk SPA are contingent.”
It has also surfaced that before the decision to liquidate, both Norilsk and BCL group had an exchange concerning the completion of the deal but never reached an agreement. “the seller refers to the share sale and purchase agreement entered into on the 17th October 2014 between Norilsk Nickel Mauritius, BCL Investments Proprietary Limited, Norilsk Nickel International Holdings Limited(the SPA). The seller notes that completion under the SPA was to take place on the date of 13th September 2016 but that the purchaser, in material breach of its obligations to the SPA failed to perform,” it read.