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Norilsk Nickel takes legal action against BCL over failed asset sale

1st December 2016

By: Megan van Wyngaardt

Creamer Media Contributing Editor Online

  

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JOHANNESBURG (miningweekly.com) –  Norilsk Nickel Mauritius and Norilsk Nickel Africa have filed legal claims against Botswana's largest copper and nickel producer, BCL Mine, in the Botswana courts and in the London Court of International Arbitration to recover $271.3-million, plus damages and other costs, in relation to the October 2014 sale of a 50% interest in the Nkomati joint venture in South Africa.

Norilsk agreed in October 2014 to sell its operations in Africa to BCL for $337-million. The acquisition, 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.

In late 2015, in view of the situation on global metals markets and following BCL’s request for renegotiation, Norilsk agreed to make a number of price concessions.

Since then, Norilsk says, it has consistently signalled its intent to constructively discuss any further proposals reasonably required to complete the transaction.

The transaction obtained final regulatory approvals and, therefore, became unconditional on September 6 and the parties were obliged to complete the deal on September 13.

Norilsk states, however, that BCL has made no attempts to close the transaction.

In early October, Norilsk learned through the media that BCL had been placed into provisional liquidation.

“BCL has failed to honour its obligations under the sale agreement concluded in October 2014. The failure of BCL to abide by its obligations under the sale agreement is unacceptable in any business transaction. This deplorable conduct has resulted in the BCL smelting and mining operations being placed into provisional liquidation.

“The closure of BCL will have a devastating effect on the livelihoods of thousands of people and a negative impact on the regional economies which rely on the BCL smelter to beneficiate nickel, copper and PGM concentrates,” Norilsk Nickel Africa CEO Michael Marriott said in a statement issued on Wednesday.

He added that it was disappointing to note that the Botswana government recently invested 700-million pula in refurbishing the BCL smelter, giving hope to the people of Botswana that BCL had a good future, with Nkomati able to supply the bulk of concentrates for beneficiation.

“Throughout the process, Norilsk has acted in good faith, and given BCL repeated opportunities and offers of assistance to complete the transaction, including concessions to significantly reduce the sale price.

“Norilsk has done everything possible to support BCL in its endeavours to secure its long-term future and, therefore, sees no other option but to defend its interests in courts with jurisdiction over the matter,” Marriott stated.

The sold assets comprise a 50% share in the Nkomati nickel and chrome mine in Mpumalanga.

Since the transaction, Nkomati has been the primary supplier of concentrate to BCL’s smelter in Selebi-Phikwe, an important mining town in central Botswana and the largest local employer.

Without concentrate supplies from Nkomati – which had continued since the transaction was announced – the Selebi-Phikwe smelter may become unviable, with the potential loss of more than 5 000 jobs and a negative impact on families and businesses in Selebi-Phikwe.

Marriot added that the fallout could also be even wider. “The Southern Africa Development Community has repeatedly announced their desire to beneficiate minerals within the region and the South African Department of Mineral Resources was also highly supportive of the transaction as it meant that Nkomati’s concentrate, containing nickel, copper, platinum and palladium, would be beneficiated by BCL in the region, thereby benefiting the Southern African economy. 

“Instead, if BCL were to be closed, this means that Tati Nickel, and the Selkirk project, will most likely not proceed, severely impacting people and businesses in Francistown as well,” he noted.

Speaking on behalf of BCL, KPMG Botswana senior partner Nigel Dixon-Warren confirmed to Mining Weekly Online that a legal process had started, but could not comment further.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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