06 Apr 2025

Government has put a rescue plan for Minergy Coal to fix its solvency status by agreeing to a conversion of government’s debt into equity in order to improve the balance sheet of Minergy Coal. 

Answering a question in Parliament on behalf of the Minister of Minerals and Energy, the Minister of Environment and Wildlife Mr Wynter Mmolotsi said this would allow Minergy Coal to raise capital for the medium to long term whilst operations continue. He said Minergy Coal owned and operated the Masama Coal Mine near Media and added that Minergy Limited owned Minergy Coal, a public company listed on the Botswana Stock Exchange (BSE). 

Mr Mmolotsi said Botswana Public Officers Pension Fund held a significant shareholding of the 51.15 per cent shares at BSE through various asset managers such as Vunani Fund Managers (9.15 per cent), Morula Capital Partners (13.73 per cent) and others. He further said some Batswana have also invested individually and others through local pension funds through various fund managers. 

The minister said according to Minergy Limited’s latest annual financial statements, there was a well-diversified subscription of investors in Australia, and New Zealand. He said currently, no state owned entities held any shareholding in either Minergy Limited or Minergy Coal.

Mr Mmolotsi further explained that government’s interest in the company was through the Minerals Development Company Botswana (MDCB) and the Botswana Development Corporation (BDC), with both interests being a result of loan advances over time to Minergy Coal for operations. MDCB, he noted, had lent Minergy P636m and BDC P80m. Mr Mmolotsi said these investments were in a form of quasi debt instruments and were both convertible to equity at the election of MDCB and BDC. 

He said due to the fact that Minergy Limited was listed on the BSE and currently in a closed reporting period, he was limited on providing details outside of what was currently publicly available as per the BSE listing rules. 

The minister said MDCB made its initial investment into Minergy in 2019 following a comprehensive review of the proposed business case from the promoters of the business and approval by MDCB shareholder, the government. The funding, he said, was undertaken through convertible facility and the facility was amended to include a further P40m in March 2020 under the Amended and Restated Secured Debenture Facility Agreement (ARSDFA). 

The minister further said in December 2020, an additional facility of P125m was disbursed in two equal tranches of P62.5m under ARSDFA, bringing the total facility to P235m, excluding accrued interest and fees. He said that Minergy Limited, being Minergy Coal’s shareholder listed on the BSE had made an equity investment of P310.5m into the business whilst BDC invested P80m through a convertible preference share note programme in 2020. 

Mr Mmolotsi said the investments reflected capital requirements and that the mine was initially proposed to have a production throughout of 250 000 tonnes per month or three million tonnes per annum, providing significant economies of scale and market pressure resilience. 

However, he said owing to challenges in raising the required capital, the mine was developed at half of its ideal capacity or 1.5 million tonnes per annum, with a view of doubling up production post the commencement of operations. In 2023, he said MDCB loaned Minergy a further P90m to assist with its working capital challenges, which has led to the shutdown of mining operations by the mining contractor, Jarcon Opencast Mining. 

Mr Mmolotsi said that the investment afforded Minergy Coal the latitude to manage the mining contractor exit strategy prudently. He added that in the same year, there was subsequent funding of P289m by MDCB as part of the wider business stabilisation and turnaround plan that saw the exit of the then mining contractor, replacement of the mining contractor with a new citizen owned contractor, resumption of operations and market re-entry. 

Mr Mmolotsi explained that a further funding of P22m was made by MCBD in 2024 to assist the company against the prolonged depressed coal market and prices. Additionally, he said the stabilisation and turnaround strategy included a subsequent capital restructuring of the business to deleverage the balance sheet and attract investment and capitalisation to give the business more resilience towards realisation of its full potential. He said the plan was in tandem with the parent company’s plan for recapitalisation. 

Pertaining to the status of the loans, he said since 2019, Minergy Coal had made payments of P8.5m towards BDC facility over the period, while there were no payments that had been made on the MDCB facilities but interest accrued on the facility. He added that Minergy has been operating under unstable coal market challenges in the inland market, South Africa and Namibia and that the COVID-19 impact and implications on the business, as well as coal logistical hurdles prevailing at the current production capacity impacted the company’s profitability. 

Mr Mmolotsi said that since the inception of the mine, Minergy Coal had paid P32 119 782.46 to the government as royalties and that the government does not have any equity interest. He also said that since inception, the mine has produced a total of 4 163 072 tonnes of coal from a total coal resource of 380 million tonnes. 

Mogoditshane East MP, Mr Letlhogonolo Barongwang had asked the minister to apprise Parliament on the shareholders of Minergy and the shareholders’ percentage and to further state if any state owned entity had funded the mine. He also wanted to know the status of the facility and how much the mine contributed toward government coffers as royalties and as profit sharing as well as the total quantities of coal mined from inception to date. ENDS