Unpacking Mining Recovery Prospects for 2022

As published on botswanaminingreview.com on December 17th 2021

Botswana continues to explore and interrogate the ever-changing mining landscape and outlook so that stakeholders can know the way forward during and post Covid-19. This is with a view to plan, build agility and ultimately enhance the ability and preparedness to create true shared value for clients and partners involved in the sector. As the industry forges ahead to 2022, this is an opportune time to reflect on the mining industry’s covid-19 economic impact and post recovery prospects and opportunities in the mining space. To share insights on the aforementioned, Botswana Mining Review interviewed Minet Botswana’s Consultant, Bryn Williams.

Key strategies have been developed to support the restoration of economic activity to facilitate economic growth, accelerate economic transformation and build the resilience of the economy by government and the private sector, which the mining industry plays and important role in Botswana’s economic growth. For Williams, he expects that there will be a rebound of sorts for the mining industry in 2022 carrying on from the strong growth noted in 2021, mainly underpinned by the strong rough diamond demand as well as new projects in the offing primarily from the coal sector as more foreign direct investment looks into tapping the country’s vast coal reserves for export into South Africa, India, and Chinese markets.

Some of the major mining assets that had either been on care and maintenance, and/or provisional liquidation or judicial management will come back into production. From an economic recovery point of view, the insurance market’s contributory role may be grouped into three important pegs, being financial stability, development, and – to a certain extent – safety over and above the obvious such as taxes payable in premiums, incomes and – up to a certain point – beneficiary from all the charitable works.

As Minet we are primed to help this recovery through the provision of innovative be-spoke solutions to the mining industry. Solutions around social protections for inter alia injuries at work, death, capital in-fusion through the provision of insurance policies that would allow mining houses to use capital elsewhere instead of saving for rainy days for unexpected losses, and most importantly we are able to as-sist with infrastructure development by providing insurance solutions that would allow huge capex investments into expanding and prolonging lives of mines, opening up of new mines that ultimately benefits the country through creation of employment, taxes and royalties due to the government. In addition, enquiries for environmental and cyber risk protection will continue to grow and new protective solutions will also be required here,” said Williams.

In terms of business, locally it has been a challenge for the mining industry. For instance, the Ministry of Finance and Economic Development’s 2020 Budget Speech, noted that the pandemic had created unprecedented shocks to the world economies of which Botswana has not been spared. Countries dependent on mineral revenues such as Botswana with diamonds, saw a slowdown in global rough diamond demand and sales. Major projects were either scaled down, postponed, or abandoned altogether. The im-pact on local economies is still being felt. Williams added, “As a supplier to the mining industry, we have not been spared either of some of the challenges. With insurance being an inter-personal relationship, physical client interactions by being on site have been compromised, thereby oftentimes inhibiting our ability to deliver a consistent service as one would have liked. From a financial point of view, there have been some challenges as well, with clients looking to reduce their overall costs and on many occasions, the insurance costs the first costs to be reduced.

The Botswana Government lockdowns and restrictions created an immediate challenge in the procurement and transition of staff working from home having to provide the necessary resources to ensure that staff were capable of completing their responsibilities out of office but smoothly from home. Time restraints had the ability to prejudice most operations, the scramble to organise internet and get staff acquainted and comfortable with virtual meetings was intense, and in the case of Minet, we were only allowed to have 25% of staff on duty to ensure that all Covid-19 protocols were adhered to. This i was challenging and tough for staff who had to obtain permits and cope with not only the virus exposure but also the pressure of dealing with clients wanting to come to the business premises.”

He further said that as the virus continued to impact upon lives, staff working from home found it safe and effective to work from home. Working from home has proved to be a positive mitigatory activity that still holds strong merit to this day. The daily use of virtual meetings has become an extremely effective and inexpensive way of dealing with Minet clients, helping to manage costs and maximise ensuring that their clients’ needs are achieved successfully. There is no doubt that working for home is going to become part of the working week for many members of staff in the future and the flexi working environment will supersede the previous orthodox Monday to Friday / 9 to 5 work behaviour.

“With the impact of covid-19 pandemic, t’s actually surprising that from the literature available some of the world’s top 40 miners were actually navigating the Covid-19 storms better than expect-ed according to a 2020 PWC report on mines. We learnt that most miners EBIT-DA would take some modest battering, CAPEX would slow down which would free up cash and allow them to pay dividends if they so wished. Locally we saw that mining companies – like other corporates – have had to adapt, evolve, and control events which they could control such as remote working and automation where possible.

Other lessons learnt are centred on how to de-risk supply chain and the role that the communities within which one operates continue to benefit mainly from such opportunities brought about by de-risking of supply chains. The biggest risk, and in hindsight the biggest opportunity for the insurance markets – that’s been brought about by the Covid-19 pandemic and remote working has been around cyber risks; what are a company’s views around this increased risk, its mitigations in place and its response to this increased risk?” highlighted Williams.to do so.

There are actually a few things happening within the global mining space to try and adapt to the lessons the Covid-19 pan-demic has taught the business community. Most of these seem to be centred on automation. Also, and as mentioned most are working from home, supply chain has been de-risked and local communities are more involved. Furthermore, the environmental, social, governance and cyber security reporting seem to be at the top of most mining entities reporting trends. This is likely to continue even beyond the Covid-19 pandemic.

“To a certain extent we believe that we will see a lot of job openings and/or opportunities in 2022. New mine developments tapping into the Kalahari Copper-belt, the expansion of current operating mines to pro-long their lives, mines previously on care and maintenance are now given a new lease of life as commercial operations commence, and opportunities around coal and independent pow-er production as well as many ongoing exploration activities are all arising. With regards to automation, our view is that automation will help mines improve efficiencies. This is the best time to learn from the pandemic and choose the best practices that have been effective and adopt them into standard practice, while using the lessons to prepare for any future disruptions. Automations that we unfortunately think are here to stay even in the mining industry are inter alia relocation of non-critical roles from sites, reduced office manpower, redesigning of shifts and most importantly the impact to local com-munities within which the mining entities operate,” explained Williams.

With regards to mining and the fourth industrial revolution (4IR), Williams believes there was no way the mining industry was not going to get affected by it. Mines are getting deeper and wider to be able to access the resource and this inadvertently has meant it’s getting more expensive to mine. He added that the 4IR has now brought about opportunities that potentially could improve the way miners go about their operations. Of importance here is the fact that new technologies without doubt change the risk profiles of any organisation including mines.

These risks must be understood and ad-dressed so that any automation potentially delivers better safety solutions that match a particular case study upon which it was founded. Minet’s global colleagues, and through their data analytics, are in a prime spot to partner with their clients to help them navigate these new unchartered waters going into the future with accurate long-term forecasting and the proactive mitigating activities that need to be taken to minimise catastrophe losses and assist with recovery mechanisms in as quick a time as possible.

According to Williams, as the world slowly moves to eradicate carbon fossil fuel emissions, Botswana is sitting on vast coal reserves. These reserves are used for cheap national power generation, and to maximise on export potential to various global buyers before the plug is finally pulled on this commodity in the decades to come. Also, as climate change priorities finally win the day, there is no doubt that mining of coal will increase: there are already a large number of thermal coal and coal export initiatives in the Botswana pipeline.

He further explained that with the global adjustment from petroleum & fossil fuels to electric or even controlled nuclear solutions, mining priority focus will switch to such products as the much sought-after commodities like manganese (electric batteries), uranium (nuclear), and gold (being the global safe haven for economic meltdowns) will continue to be mined and all three commodities will be ramped up for new mining operations.

Significant progress is being made in iron ore exploration, while pre mining feasibility studies in the nickel mining industry are also on track to recover the much-needed mining export revenue for Botswana. As Debswana and Lucara Diamond mines look to extend their life of mines operations, they are now progressing from open cast mining to underground mining. Diamonds will continue to be at the forefront of the Government Export Income for the next 10 to 20 years.

“Firstly, Botswana in most mining viability cases, sits on vast reserves of untapped minerals. As long as global demand continues for such minerals, Botswana will be able to consistently provide the supply required. As a land locked country, Botswana needs to ensure sustainability of all mining exports through proactive projects and an infrastructure that can deliver our goods to anywhere within the world. It is positive to note that the Dry Port at Walvis Bay in Namibia (used for exports to the West, progress on the new rail link up to ports like Richards Bay in South Africa (specifically for coal), as well as Durban and Maputo for other mining products, will ensure various options for mining sustainability and growth. All the above will ensure new employment opportunities and growth within this sector,” noted Williams.

He also highlighted that the next ten-year agreement with De Beers is also going to be crucial for Botswana’s momentum and determination (as the main contributor of quality diamonds). The continued positive focus of De Beers on Botswana, and a strong outcome for Botswana would have De Beers providing the major input towards Diamond growth resilience and strong export outcomes that make it a “win-win” scenario for both stakeholders.

Williams believes that as long as the Botswana Government continues to show a strong economic vision for the country and maintains a careful balance between the promotion of Foreign Direct Investment (FDI) and local citizen participation and encouragement to be accountable and astute in enjoying the fruits of success that Botswana has to offer, then future sustainability and resilience will be strong for whatever tough times that may come Botswana’s way.

“There are a lot of opportunities; mainly around coal, despite the concerns from the global community and pressures to go green. Botswana sits on over 212bn tonnes of coal which must be explored and utilized for the benefit of the country. More power plants must be built for both local (growing population, new mine developments, old mines starting commercial operations again) and export consumption. There also seems to be a growing export market into South Africa, India and China which continue to be important consumers of thermal coal. Furthermore, a new look at the beneficiation is now re-quired, which was spoken of in the past; what are the learnings, has it worked for the country and what needs are to be im-proved going forth so that more remains in the country and jobs are not exported,” said Williams.

In addition, Williams said the global electrification transformation will have investors keen on Botswana’s manganese. Nu-clear power initiatives will require uranium located up in northern Botswana, and Botswana’s abundance of copper and nickel is very much in demand, especially from China. He said there is no doubt that investors will find the “User Friendly “conditions and accommodating of investment in all mining arenas, attractive and safe to invest in.

“Because of climate change extreme, unpredictable weather patterns, and the feared pandemics emerging and evolving more frequently, the world is finding it more difficult to provide accurate and long-term predictions and will more frequently have to evolve to protect assets such as infrastructure, human populations, and flora and fauna. This will lead to more assistance from experts in such fields as insurance. Botswana will always require strong advice and solutions to combat the above catastrophes and to transition towards artificial intelligence. With the mining sector continuing to be at the forefront of the key revenue generation and economic strength, innovative insurance forecasting, advice and executions bodes well for the insurance industry, especially where mining is concerned,” concluded Williams.