Russians bay for blood over bcl p3bn debt

  • Liquidator already paid P42.3 million
  • Liquidation may take 7 years


The BCL liquidator Nigel Dixon-Warren could walk away with a cool P185 million if the process at the defunct mine drags over seven years as Minister of Mineral Resources, Green Technology and Energy Security, Eric Molale told parliament recently.
According to the minister, the liquidator has received in excess of P42.3 million over a period of 20 months, averaging P2.2 million per month in fees. Molale raised concern that given its magnitude the liquidation process could take up to seven years to conclude.
Almost three years since government took a decision to shut down the copper nickel mines, which included BCL in Selibe-Phikwe and Tati-Nickel Mine, due to its inability to cough up P7.6 billion that was needed to keep the state-owned firm running the costs of the controversial decision keep escalating.
Moreover, Russia’s Norilsk Nickel (Nornickel) says that it is not backing off its protracted dispute with Botswana’s government over the commitment made by state-owned company BCL in 2014 to purchase Norilsk’s African assets.
“The issue is still to be resolved and the message from Nornickel is short, simple and clear-cut: We are not going to back off!” the company said in a statement this week.
Not only has the dispute – which is developing into one of the most unsavoury disagreements over mining assets yet seen in the Southern African region – jeopardised at least 5 000 mineworkers and their families’ future, but it has also negatively impacted business in Selebi Phikwe, which has for all intents and purposes come to a grinding halt, and Francistown, which is rapidly becoming a ghost town.
Norilsk says that the dispute has severely damaged Botswana’s reputation as one of the most investment-friendly countries on the African continent.
The dispute emanates from Nornickel, the world’s largest refined nickel and palladium producer, selling its African assets (Norilsk’s 85%-owned Tati Nickel operation east of Francistown, as well as Nornickel’s 50% share in South Africa’s Nkomati nickel mine in the Barberton area), to BCL in October 2014.
BCL’s motivation for concluding the deal was the clear synergies between its operations centred on the town of Selebi-Phikwe, which include an underground nickel/copper mine and the smelter (neither currently functioning), and Norilsk’s operations at Tati Nickel and Nkomati.
Almost four years later, Nornickel has yet to be paid in terms of its agreement, after BCL was placed under provisional liquidation in 2016. Nornickel maintains that the Botswana government, the ultimate owner of BCL, has deliberately walked away from the 2014 deal. Nornickel this week emphasised that it will continue with the litigation over the Nkomati and Tati facilities to recover a US$277 million debt by BCL, which had failed to make payment under the share purchase agreement and was subsequently put under liquidation by the Botswana Government.
Commenting on the turn of events since the transaction was agreed in 2014, Michael Marriott, CEO of Nornickel Africa, said the deal appeared to be proceeding according to plan until the second half of 2016. “Prior to its being put into liquidation in October 2016, BCL had already taken occupation of the Tati Nickel mine and, at least for a period, continued mining and processing operations as normal. In August 2016, the final approvals necessary for the agreement to become unconditional were received from the Department of Mineral Resources (DMR) in South Africa and we were confident that the sale process had effectively been concluded.”
In September 2016, Nornickel asked for payment from BCL, citing the terms of the Sales and Purchase Agreement (SPA), but it was not forthcoming. The Government of Botswana subsequently applied to the Botswana High Court for the company to be wound up, after which BCL and its subsidiaries were put into provisional liquidation.
BCL’s liquidator has refused to confirm Nornickel’s right to be paid its dues in terms the SPA. In November 2016, Nornickel submitted a Request for Arbitration to the London Court of International Arbitration (LCIA) to determine its claims under the SPA.
Towards the end of 2017, Nornickel also filed an application with the High Court in Botswana seeking permission to commence and prosecute the arbitration in the LCIA in respect of its claim. Nornickel filed a “reckless trading” claim against, inter-alia, the government, seeking to declare government responsible for the liabilities of BCL entities to Norilsk.
The court heard the application in April this year and handed judgment on 21 June 2018. Although the LCIA was the contractually agreed forum for resolving disputes under the SPA, Nornickel was required to seek permission from court to initiate the arbitration proceedings as both Botswana and UK laws prohibit a party from taking legal steps against a company in liquidation.
Marriott says having made the Permission Application in December 2016, it then took the Botswana court over 16 months to consider this very straight-forward matter.
“We are now left with a deeply unsatisfactory judgment which has denied us the ability to resolve this dispute through impartial, international arbitration, despite our right to do so under our contract with BCL. Nornickel is disappointed by the Botswana court’s ruling and dismayed by the Botswana’s authorities’ disdain for investors’ rights.” He said. Marriott believes Nornickel’s application should have been straightforward and uncontroversial. “It is our view that Nornickel has been treated unfairly and contrary to established legal principles. We will therefore not abandon our legal action against the Botswana Government and will use every avenue available to recover the debt.”
Further compounding the saga, former Minister of Mineral Resources, Green Technology and Energy Security of Botswana, Sadique Kebonang, in March 2018 claimed that “Botswana had paid $45-million to Norilsk Nickel” in settlement of the dispute regarding the cancellation of the sale of the Nkomati mine, that belongs to Botswana state company BCL.
Investigations reveal however, that despite the official declaration, no payments by the Botswana government have been received by “Norilsk Nickel” as at the time of writing.
Marriott says the entire saga has been extremely distasteful for Norilsk, which invested in Botswana because it regarded the country as a sound mining jurisdiction. “Botswana has long been regarded as one of Africa’s most desirable mining destinations. “I fear, however, that this reputation, based on Nornickel’s experience over the past few years, is very much at risk. The Botswana government’s actions are bad for the economy, bad for investment and bad for the people of the country,” he said in a statement.
In March, the Ministry of Finance and Economic Development put in an urgent request to get parliament’s approval to settle the matter through an out of court settlement. Finance Minister, Kenneth Matambo, requested parliament to approve the negotiated fee of US$45 million to be paid to Norilsk. The proposed settlement would see the government paying only a fraction of the P3 billion (US$277 million) that Norilsk initially demanded from the Botswana government.
But the Minister of Mineral Resources, Green Technology and Energy Security, Eric Molale, recently informed parliament that BCL liquidator, Nigel Dixon-Warren, dismissed the claims by Norilsk and approached a court in South Africa to defend it.“He then went to court at South Africa and recently lost the case. That is why I’m saying that my hands are tied because this liquidator is a court official. To try and tell him what to do, I will be regarded as interfering in the judicial process. That is the conundrum I am facing,” Molale told parliament.
Molale informed Parliament that he has his own concerns with the liquidation process, as he has been told that the liquidation may take up to seven years. “We cannot prolong this because it is a cost to this nation. Next week I am meeting up with the liquidator. I want him to know my thoughts about what he is doing, and nobody should say that I’m interfering in the judicial process because this matter is a serious problem that has to be dealt with as a matter of urgency,” Molale said.