Botswana is the highest-ranked jurisdiction in Africa in respect of mineral policy as well as mineral potential.
The extraction and processing of diamonds has been the driving force in Botswana’s economy for the past half-century. During this time, the country’s rich mineral resources have provided the means for it to graduate from one of the poorest nations in the world to achieve middle- income status.
Although mining showed promise in the 19th century, when gold was discovered on the Tati reefs near present-day Francistown, it was not until the unearthing of diamonds at Orapa in 1971, followed by copper-nickel at Selebi- Phikwe in 1973, that the industry really started to become a substantial foreign exchange earner. At its peak, the minerals sector made up more than half of Botswana’s real Gross Domestic Product (GDP). While the relative contribution of mining to GDP has dropped in the past two decades to the present 18 percent, the country continues to be heavily dependent on the sector, which brings in some 35 percent of total Government revenue.
Botswana is a stable, low-risk mining destination, which receives ample Government support and boasts excellent mining laws and policies. Mining attracts the bulk of Foreign Direct Investment (FDI) in Botswana. Europe (mainly the United Kingdom) is the major source of direct investment in mining. In addition to diamonds, other notable minerals include copper, nickel, coal, uranium, gold, soda ash and salt, and rare earth metals.
Government is presently making efforts to promote and catalyse domestic cement production, with the Botswana GeoScience Institute involved in a project to identify the necessary raw materials. The preliminary findings indicate that the Letlhakeng calcrete deposit in Kweneng West has the potential to sustain a cement plant.
According to the Bank of Botswana’s 2019 Annual Report, growth in mining output decelerated from 3.2 percent to 2.1 percent in the year to September 2019. This may be attributed to the weaker performance of the diamond industry in the period under review, largely due to the decline in production at Orapa mine following a planned plant shutdown in April 2019, as well as a decrease in production at Jwaneng mine in the third quarter of 2019.
Similarly, diamond production from Karowe mine grew by 22.9 percent in the 12 months to September 2019, compared with faster growth of 30.3 percent in the corresponding period in 2018. Furthermore, overall global demand for rough diamonds was adversely affected by the trade tension between the United States and China, as well as social unrest in Hong Kong in 2019.
Growth in soda ash output also decelerated over this period, from 19.9 percent to 6.6 percent, while copper and coal production was lower in 2019 than 2018. Copper output fell by 90.5 percent following cessation of production at the Mowana mine in November 2018. Coal output decreased due to lower demand at Morupule B power station, which continued to operate below capacity as a result of one of the units being placed under care and maintenance for part of the year. Regarding the other mining subsectors, growth in production fell, from 7.3 percent to 1.6 percent, while prospecting declined from 2.3 percent to 2 percent.
Mining output declined substantially in 2020, by 21.9 percent in the year to September 2020 compared with growth of 1.4 percent in the corresponding period in 2019. This was prompted by a 23 percent contraction in diamond production against expansion of 2.1 percent recorded in the previous year, with global demand and sales for rough diamonds adversely affected by Covid-19 international travel restrictions. Coal output contracted further due to lower demand at Morupule B power station, which was already operating below capacity. There was no contribution from the copper subsector during this period. According to the 2021 Budget Strategy Paper, mineral revenues for the 2020 fiscal year ending in March 2021 were expected to halve to US $917.70 million.
Going forward, improved diamond revenue is expected to strengthen the mining sector and help narrow Botswana’s budget deficit in 2021. This follows an increase in demand for rough diamonds in the third and fourth quarters of 2020, amid easing of Covid-19 restrictions and ahead of the holiday season. Global firm De Beers, which gets about 70 percent of its supply from Botswana, reported a 57 percent jump in sales to US $467 million at its September sight.
With the US, China and Europe having started to show signs of recovery, it is anticipated that mining growth will rebound in 2021 to 14.4 percent. Against the backdrop of improving global diamond markets, Government granted short term permits (valid until the end of December 2020) to local diamond companies to conduct sales outside the country as a means of stimulating diamond sales. Furthermore, the mining industry is continuing with some of its strategic projects, such as Jwaneng Cut- 9, Morupule open-cast mine, Khoemacau mine development, and Karowe underground diamond mine.
Ministry of Mineral Resources, Green Technology and Energy Security
The Ministry of Mineral Resources, Green Technology and Energy Security (MMGE) will be a global leader in the provision of services in the mineral and energy sectors for national prosperity
MINING FRAMEWORK
The state body responsible for developing and implementing the framework for mineral exploration and exploitation is the Ministry of Mineral Resources, Green Technology and Energy Security. Exploration is administered through the Botswana Geoscience Institute (BGI), which has replaced the Department of Geological Survey, while mining and related activities are managed by the Department of Mines. Prospecting and mining activities are carried out by private companies. Government is a significant shareholder in all the large mines.
As part of Government’s commitment to promote mineral exploration, and in response to the increasing demand for technology metals, in June 2020 BGI began a consultancy project called Assessment of Mafic, Ultramafic and Granitic Complexes. The project’s primary objective is to identify mineral potential that includes platinum group metals, base metals and precious metals, as well as rare earth metals and battery metals, which are currently being explored in the Semarule area around Molepolole and Shoshong in Central District. The project will be completed in February 2023.
The Minerals Development Company Botswana (MDCB) was established in 2015 in order to manage Government investments in mining and diamond valuation services. This includes state assets in Morupule Coal Mine (MCM), Bamangwato Concessions Limited (BCL), Debswana Investment SA, Diamond Trading Company Botswana (DTCB), Debswana Diamond Company and Botswana Ash.
According to the Fraser Institute’s 2020 Survey of Mining Companies, Botswana is the most attractive mining jurisdiction in Africa when considering both policy and mineral potential, and ranks 11th out of 77 jurisdictions worldwide in overall investment attractiveness.
DIAMONDS
Starting with the 1967 discovery of the three kimberlite pipes that now make up the Orapa and Letlhakane mines, Botswana has grown to become the world’s largest producer of diamonds by value. Production began at the Orapa pipe, about 250 kilometres west of Francistown, in 1971, while the two pipes at Letlhakane were opened in 1975. Jwaneng mine started operating in 1982 after diamond-bearing kimberlite pipes were discovered in the Naledi River valley near the village of Jwana in the early 1970s.
Over the past five decades, Botswana has produced and continues to deliver some of the world’s most impressive and valuable gems, which have generated the revenues on which this modern and progressive African nation has been built. Botswana was a founding member of the Kimberley Process Certification Scheme (KPCS), meaning that its diamonds have always been conflict- free. The emphasis on transparency, good governance and ethical sourcing has created enormous trust in the country’s diamond sector.
Established in 1968, Debswana Diamond Company is a 50/50 joint venture between the Botswana Government and De Beers, with the latter now 85 percent owned by global mining house Anglo American. Debswana operates the Orapa, Letlhakane, Jwaneng and Damtshaa mines, and is one of the world’s leading diamond producers by value and volume, contributing one-fifth of Botswana’s GDP and two-thirds of its foreign exchange earnings. It is also one of the largest job creators in the private sector, with more than 5 200 employees.
Diamond production at Debswana’s mines reached a high of 34 million carats in 2007. Some 24.1 million carats were produced in 2018 in response to strong demand from consumer markets in the US, China and India. However, output dropped slightly in 2019 to 23.3 million carats as a result of a 12 percent decline at Orapa mine following an infrastructure project delay.
Debswana cut production by 29 percent to 16.6 million carats in 2020 as the Covid-19 pandemic hurt demand and global travel restrictions affected trading. However, the company aims to increase output by 38 percent in 2021 to pre-pandemic levels of 23 million carats, premised on the further recovery of the global diamond market with the easing of travel restrictions and reopening of jewellers.
Jwaneng is Debswana’s flagship mine, and is responsible for almost half of its total diamond recovery and 70 percent of its overall revenue. It is also the richest diamond mine in the world by value, with a recoverable ore grade of some 141 carats per hundred tonnes. Its status as a high-value, low-cost asset is particularly valuable in view of the often volatile diamond mining environment. 12.5 million carats were produced in 2019.
Completed at the beginning of 2017, the US $3 billion Cut- 8 expansion project increased the mine’s depth from 400 metres to 650 metres, transforming it into one of the world’s few super-pit mines and ensuring continuous production up until 2024. The US $2 billion Cut-9 project will extend the life of Jwaneng until at least 2035 while retaining its status as Debswana’s largest revenue generator. Cut-9 is expected to yield 52 million carats of diamonds once it begins production, providing job security for 2 000 employees as well as creating an additional 1 000 jobs during construction.
It was reported in November 2020 that the Cut-9 project was progressing well, with employment standing at 501 workers – 97 percent of whom are citizens. The company is targeting the development of citizen suppliers in key areas of the value chain, and is setting up an artisan training centre and component rebuild facility.
Covering 118 hectares, Orapa is one of the world’s largest kimberlite pipes, second only to Jwaneng in terms of production values. Located in eastern Botswana, 240 kilometres west of Francistown, Orapa is Debswana’s oldest operating mine and the biggest open-pit diamond mine in the world. A detailed design study is underway to extend the lifespan of the Orapa mine by an additional
35 years through the ambitious Cut-3 project, which is presently at pre-feasibility stage. The current open pit (Cut-
2) extends to 2030. Mining presently takes place at a depth of 250 metres and is expected to reach 450 metres by 2026. Output rose to 12.2 million carats in 2018. However, production in 2019 dropped following a planned shutdown.
Originally discovered in May 2018 at the Orapa mine as a 41.11-carat rough stone, the remarkable ‘Okavango Blue’ is the biggest blue diamond ever unearthed in Botswana. The Gemological Institute of America has graded the polished stone as Oval Brilliant Cut, ‘Fancy Deep Blue’, VVS2 clarity; and at 20.46 carats it sits in the highest bracket of all-time historical blue diamond finds.
It was announced in November 2020 that the aged Orapa Plant 1, which started operating in 1972, would be closed indefinitely. The decision, while hastened by the global economic recession induced by Covid-19, was nonetheless part of Debswana’s pre-existing strategy and had been in the pipeline for some time due to the plant’s low profitability, structural deterioration and related high operating costs. The focus has thus shifted to the existing Plant 2.
Situated 50 kilometres from Orapa, Letlhakane has historically been the deepest of Debswana’s open-pit mines. As planned, open-pit operations at Letlhakane ceased in 2017 when the mine reached the end of its lifespan. Debswana has subsequently begun mining the operation’s 83-million-tonne tailings dump. There are expectations that the new P2.1 billion tailings plant, which was commissioned in the third quarter of 2017 and has a capacity of up to 800 000 carats per annum, will extend the life of the operation by 20 years.
Damtshaa mine comprises four small diamond pipes (B/K1, B/K9, B/K12 and B/K15), which were discovered between 1967 and 1972 in an area 20 kilometres east of the Orapa kimberlite pipe. It has an average annual output of 500 000 carats, representing 2.5 percent of Debswana’s total production. As Damtshaa is presently a marginal operation, it has been placed under care and maintenance for a period of three years, beginning in 2021.
The Karowe diamond mine in the Orapa/Letlhakane district is owned by Canadian company Lucara Diamond Corporation through its subsidiary Boteti Mining. Production began at the mine in July 2012, and today it is one of the world’s foremost producers of large, high-value diamonds. Karowe’s high value diamonds have historically accounted for approximately 60 to 70 percent of Lucara’s annual revenues.
For the year ended 31 December 2019, a total of 433 060 carats were recovered at Karowe, including 29 990 carats from previously milled material, and comparing favorably with the 366 086 carats recovered in 2018. However, output at the mine fell in 2020, when from 2.7 million tonnes of ore processed some 381 706 carats were recovered, achieving a grade of 14.3 carats per hundred tonnes. The decrease in production was caused by the lower recovery of smaller-sized diamonds and the absence of re-processing of tailings during 2020.
Discovered in April 2019 at Karowe mine, the aptly-named Sewelô (‘rare find’ in Setswana) is the largest diamond recovered in Botswana’s history and the second largest diamond ever found. At 1 758 carats, this near gem quality diamond is second only to the famed Cullinan diamond in size. Karowe has yielded other exceptional stones, such as the 1 109-carat Lesedi La Rona diamond in November 2015 (which sold for US $53 million), and the 813-carat Constellation which sold for a record US $63 million.
In 2020, the Karowe mining licence was extended for a period of 25 years to 2046, marking a critical step in the advancement of its underground expansion project.
It was announced in September 2020 that following the completion of a feasibility study for Karowe Mine underground project, operational mining is expected to begin as early as 2025. The project should increase the life of the mine to 2041, doubling the mine life from the original 2010 feasibility study. Resource work completed since November 2017 identified a much larger economic opportunity at depth, on the basis of new drilling and open pit recoveries, and it is anticipated that the underground mine will deliver an additional US $4 billion in net revenue. Due to Covid-19, the underground expansion programme has been re-scoped and reduced from the previous budget of US $53 million.
A favourable ten-year marketing agreement between the Government of Botswana and De Beers with regard to the marketing of Debswana’s diamond output was concluded in 2011. As such, the majority of Debswana’s diamonds are now marketed through the Diamond Trading Company Botswana (DTCB), with a share of Debswana’s run-of-mine production made available for independent marketing outside the DTCB.
The successful migration of the De Beers global sight- holder sales from London to Gaborone has established Botswana as a global ‘mines to market’ hub. Gaborone is now the centre for marketing and sales of all De Beers’ production, from its own mines as well as joint venture mines in Canada, South Africa and Namibia, with diamond traders descending on the capital ten times a year to buy wholesale stones.
The Okavango Diamond Company (ODC) was set up in 2012 to conduct rough diamond sales on behalf of Government. The company has access to 15 percent of Debswana’s run-of-mine production and supplies its market with sales in the region of US $500 million per annum.
The diamond cutting and polishing industry has face challenges in recent years. In order to facilitate local participation in the downstream diamond industry, Government has developed a beneficiation strategy to facilitate citizen participation. As such, the local diamond cutting and polishing industry was supplied with approximately P1.5 billion worth of rough diamonds in the first half of 2020
COAL
Botswana has abundant coal resources estimated at over 212 billion tonnes, of which 7.1 billion tonnes are measured reserves. Mining takes place at Morupule, and there are also substantial deposits at Mmamabula and Mmamantswe as well as several other coalfields.
Situated between Serowe and Palapye, Morupule Coal Mine (MCM) is a wholly owned subsidiary of Debswana. The resource contains good quality low sulphur sub- bituminous coal. Gross in situ tonnage (full seam thickness) in the measured resource category is in excess of 159 million tonnes, while a further 500 million tonnes and
1 600 million tonnes have been classified in the indicated and inferred categories, respectively.
MCM’s product is fed directly into the Botswana Power Corporation’s coal-fired power plants adjacent to the mine. Washed coal products (clean coal) are consumed by various local customers (hospitals, schools, breweries, abattoirs, clay brick manufacturers), with the bulk being sold to regional markets in South Africa, Zimbabwe, Namibia and Zambia.
In addition to the adjacent Morupule A and B power stations, MCM’s clients include Botswana Ash, Kgalagadi Breweries Limited, Makoro Bricks and Tiles and Botswana Meat Commission. Regional customers comprise PPC Slurry Plant near Zeerust (South Africa), the poultry, brick and tobacco sectors, and Nampower’s Van Eck Power Plant (Windhoek).
MCM is to boost annual output by 35 percent to 3.8 million tonnes a year once the new open-pit and processing plant has been completed. Development of the open-cast operation commenced in September 2019 and the project is expected to be commissioned towards end of 2021. The new expansion will produce an additional one million tonnes of washed coal to be sold locally and exported into the region. MCM currently employs 376 people. At full operation, the expanded operation is expected to create about 400 permanent jobs.
Being developed by Minergy Coal in south-western Botswana, approximately 50 kilometres north of Gaborone, the open-cast Masama Coal Mine contains 390 million tonnes of export-quality thermal coal.
The estimated life of the mine is 100 years, and it has the potential to produce 1.2 million tonnes of coal per annum. Minergy acquired the project from Shell Coal Botswana and carried out extensive exploration and drilling on the property between 2012 and 2017.
Production at Masama began in August 2019, and sales volumes gradually increased in line with the ramp-up in operations between October 2019 and March 2020. However, Covid-19 restrictions, which limited sales to ‘essential supply’ customers, resulted in severe constraints to production and sales. Despite border restrictions between South Africa and Botswana, Minergy managed to sell some 198 000 tonnes for the financial year ending June 2020.
Sales volumes have subsequently picked up, and further operational ramp-ups and mine development should see output reach 110 000 tonnes of coal per month. Minergy announced the export of Botswana’s first coal by rail to South Africa on 17 July 2020. The miner is hoping to win a contract to supply coal to South Africa’s power utility, Eskom.
The Morupule South Mine (MSM) Project aims to produce 1.5 million tonnes per year of export quality coal for local and regional industrial users. The project is being developed by Shumba Energy, and has a JORC compliant resource value of 2.45 billion tonnes. Both the ESIA and mine feasibility studies have begun.
SODA ASH & SALT
Salt and soda ash are produced at Sua Pan by Botswana Ash. Chlor Alkali Holdings has a 50 percent shareholding in the company, with the balance being held by the Government of Botswana. The plant has a production capacity of 300 000 tonnes of soda ash and 650 000 tonnes of salt per annum, with soda ash reserves expected to last until 2080. Soda ash makes up 80 percent of the mine’s revenue while salt contributes the balance.
Botswana Ash has diversified its offering through the manufacture of table salt under the Botsalt brand. The company is looking to diversify further to produce and sell fertiliser, bicarbonate of soda and carbon dioxide (CO2), which has seen the recommissioning of the liquid carbon dioxide plant. It is also considering tapping into the detergent industry, as light soda ash is used in powdered paste and soap detergents.
The company presently exports its products to South Africa, Zambia, Zimbabwe, Malawi and Democratic Republic of Congo (DRC). South Africa is the recipient of 90 percent of its soda ash and 50 percent of its salt exports. The mine employs more than 400 direct employees in addition to approximately 200 contractors. Botswana Ash is currently conducting a feasibility study to diversify its products through beneficiation of the Sua Pan brines. The project is expected to come on stream in 2024, and will see the company producing a premium fertiliser – Sulphate of Potash (SOP) – among other products.
COPPER-NICKEL
Copper-nickel was for many years Botswana’s second-highest export earner after diamonds. However, the profitability of the industry is heavily dependent upon favourable world market prices for base metals. Depressed international markets along with prolonged non-profitability saw both Bamangwato Concessions Limited (BCL) and Tati Nickel Mining Company placed in provisional liquidation. BCL Mine is currently in final liquidation. The care and maintenance of BCL Group assets at the Selebi- Phikwe, Phoenix and Selkirk sites continued during 2020 in order to preserve them for potential investors. During the year, the liquidators received three indicative offers for the estate. The intention is to complete the transaction during the course of 2021 after detailed due diligence. A wholly owned subsidiary of private-equity firm Cupric Canyon Capital (CCC), Khoemacau Copper Mining is developing the Khoemacau copper-silver resource (formerly the Boseto copper and silver mine operated by Discovery Metals) in north-west Botswana’s Kalahari Copperbelt. A 3.6 million tonnes per annum starter project is currently under construction to process ore from the 91 million tonne resource. Copper concentrate production is expected to commence in the first quarter of 2021, with annual production forecast at an average of 62 000 tonnes of copper and 1.9 million ounces of silver over a 21-year mine life. The mine will be highly mechanised, using the latest automated technology to improve productivity and safety. There are presently a total of 2 131 employees, of which 1 952 (92 percent) are citizens. Khoemacau also has a comprehensive training programme to equip workers with the requisite technical skills.