Botswana - The Economy

World-class diamond mines were discovered in Botswana in the late 1960’s and this has brought rapid growth to the country. These major mines are operated by Debswana, a 50-50 joint venture between the Botswana Government and De Beers Corporation. Debswana is the world's leading diamond producer by value and has played a significant role in the transformation of Botswana’s economy that it was. It is the largest non-government employer and the largest earner of foreign exchange in Botswana.

Today, Botswana is said to be the wealthiest country in all of Africa, in terms of GDP per capita, with healthy foreign exchange reserves, negligible Government debt and, generally, a strongly growing economy.

The Government has established an excellent infrastructure of sealed roads, grid power and piped water throughout the country. Education and health are also priorities for Government spending. Altogether, Botswana provides a very favourable environment in which to operate and to plan for a possible mine development.

Foreign Investment in the Botswana Minerals Industry

Botswana abolished all foreign exchange controls in 1999 specifically to encourage foreign investment. Importantly Botswana has also recognised the need to continue diversification in the mining industry away from diamonds, and actively encourages explorers to seek out other opportunities.

A number of listed Australian and International Companies have taken advantage of the Investment friendly environment in Botswana to establish operations there. These include IAMGOLD Corporation who made a successful takeover bid for Gallery Gold Limited in 2006 (BML’s joint venture partner in the Jim’s Luck project), Albidon Ltd, Mt Burgess Ltd. African Energy Resources Ltd and Discovery Nickel Limited.

In addition to the Debswana owned diamond mines at Jwaneng, Orapa and Lethlakane, other currently active metalliferous mining operations are at the Phoenix and Selkirk mines (Collectively known as Tati Nickel) which are owned by LionOre Mining International Limited and the Selebi Pikwe Ni deposits operated by Bamangwato Concessions Ltd (BCL). LionOre have recently begun construction of an Activox® plant at an estimated cost of over $US450 million. In addition African Copper PLC have recently commenced operations at the Dukwe copper deposit approximately 100km north of Francistown.

Botswana Mining Act

Recent growth and the overall success of Botswana’s minerals sector over the past thirty years have been partly due to the Botswana Government’s progressive mineral policies. The minerals policy framework is intended to engage the private sector as the main driving force in exploiting the country’s mineral resources, in a constructive partnership with the government.

Botswana’s minerals policy framework is intended to provide a stable, investor-friendly framework to support private sector investment decisions, enabling them to earn an adequate return on capital and reward for risks taken, while ensuring that excess profits, or mineral rents, are secured for the nation through a suitable fiscal regime. In maximizing economic and other benefits for the country, the government’s minerals policy aims to:
(i) accelerate prospecting and new mine development;
(ii) encourage activities that generate added real value to, and linkages with, the rest of the economy;
(iii) create training and employment opportunities for its citizens;
(iv) minimise the environmental damage caused by mining operations.

As part of this policy Botswana introduced a new “Mines and Minerals Act” in 1999. This Act was based substantially on International models and, importantly, provides for excellent security of title within a simple yet comprehensive reporting framework.

Once a mining licence has been issued the Government has the option of acquiring up to 15% working interest participation in the proposed mine, including the right to appoint up to two directors. If the option is exercised, the Government pays for its shareholding by contributing its working interest percentage of all audited expenditure incurred by the company to which the licence was issued that is directly attributable to the acquisition of the licence, including relevant prospecting expenditure. The value of the 15% interest is calculated by independent third parties. If the Government chooses not to exercise the option at the mine development phase, the option lapses.

The holder of a mineral concession is liable to pay royalties to the Government on any mineral right obtained by him.

The prescribed royalty rates are percentages of the gross market value of production as set out below: namely,
• Precious stones 10%
• Precious metals 5%
• Other minerals or mineral products 3%

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