In terms of resources, Botswana is most well known for its diamonds — the gems account for one-third of the country's total gross domestic product, as well as 76 percent of its export revenue and 45 percent of its government's revenue. However, those impressive numbers are not expected to last. International Monetary Fund forecasts indicate that Botswana's diamond reserves are set to peak at 31 million carats in 2017, declining sharply three years later and then reaching depletion in 2029. If that outlook is correct, the African nation could be sitting in a fairly dire position 15 years down the line. Fortunately, Botswana is already taking steps to save itself. It is currently laying the foundation for economic diversification by expanding its diamond industry; its hope is that doing so will result in the development and expansion of other industries. Coal takes the lead Interestingly, it's starting to look like coal could be the country's savior. In an article published at the end of last week, Mining Weekly notes that back in 2012, Botswana's government put together a national strategy on coal development called the Coal Roadmap. Its goal is to "develop the country's infrastructure to take advantage of its ... coal reserves." Further, the government set up a Coal Development Unit within the Ministry of Minerals, Energy and Water Resources to fulfil a number of objectives, including the implementation of a strategic coal monetization plan and the improvement of the coal value chain. Thus far, the country's focus on coal seems to be going fairly well. In the same article, Mining Weekly quotes Sinethemba Zonke, an associate consultant at Africa Practice, as saying recently that the fuel's importance in Botswana is growing, and as a result, "could enable the country to diversify its exports."
"The country is exporting only coal from a single project - diamond mining company Debswana's wholly owned colliery the Morupule coal mine (MCM)," he continued, "[h]owever, there are a few companies with projects currently in the development phase, including projects managed by diversified mining major Anglo American and diversified resources group Exxaro."How much coal? Of course, one of the key questions regarding coal's place in Botswana's future is exactly how much of the fuel the country holds. Answering that question, a 2012 report from the US Chamber of Commerce's Africa Business Initiative states that it has an estimated coal resource of 212 billion tons; of that amount, 7.1 billion tons are measured reserves. Putting those numbers in perspective, the report explains that if they were producing at the same time, four of Botswana's known coal deposits could surpass South Africa's output of 70 million tons a year. However, last year, two South African geologists disputed those figures. BDlive notes that one of them, PC Meyer Consulting's Peet Meyer, said at a conference, "[p]eople who calculated the coal reserves were wrong. The calculations are the same as those done as far back as the 1980s and do not take into account how much coal has been mined since then and how much has been depleted." The other, Xavier Prevost of XMP Consulting, believes Botswana's government "should group all qualified and professional geologists to identify coal and help with the coal roadmap, because it is evident there is a serious lack of knowledge." Botswana's Department of Geological Surveys has reportedly said feasibility studies are taking place "to gain an accurate coal reserves figure." Challenges Despite Botswana's abundance of coal and the work it has been doing to increase interest in that resource, coal-focused companies in the country face a number of challenges.
Chief among them, Zonke said, is transport infrastructure. Botswana is a landlocked country, and "will have to increase cooperation with its neighbours to establish links to regional ports, particularly those on the east coast of Southern Africa, such as Mozambique and South Africa," he noted.Luckily, it appears that Botswana is moving to address that issue. Bloomberg reported midway through February that at the end of the month, Botswana and Namibia will sign a deal to develop a 1,500-kilometer railway that will be used to transport coal to the port of Walvis Bay. Even so, the country is not out of the woods yet — the railway requires an initial investment of around $15 billion, and, according to Charles Siwawa, chief executive of the Botswana Chamber of Mines, "[i]t's not clear as yet where this financing will come from." Environmental concerns may also prove an issue for miners, Zonke said. Botswana's coal companies As mentioned, only one company in Botswana is currently exporting coal — that's Debswana, whose Morupule coal mine, located in Eastern Botswana, holds an estimated 12 billion tons of coal in reserve for all seams within its total mining lease area. However, that doesn't mean the country is short on companies focusing on the fuel. In fact, there are a fair number of them. Here's a brief look at a few: African Energy Resources (ASX:AFR) owns three large coal projects in Botswana that together hold more than 6 billion tons of thermal coal. A-Cap Resources' (ASX:ACB) Bolau coal project lies on the extensions of African Energy's Sese project. The company also holds the Mea coal deposit, which Sedgman recently said should move forward with a definitive feasibility study. Hodges Resources (ASX:HDG) is advancing the Morupule South project to the feasibility phase. As its name suggests, it is located directly south of Debswana's Morupule. Shumba Coal's flagship Sechaba project holds about 1 billion tons of thermal coal and, like Hodges' Morupule South, is near the Morupule mine. Other coal companies with assets in Botswana include: Asenjo Energy, Jindal Africa and Continental Coal (ASX:CCC,LSE:COOL).
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. Related reading: Diamond Exploration and Production in Botswana: A Snapshot Botswana: Soon to Become an International Diamond Hub Botswana Takes on Coal in Face of Diamond Decline from Coal Investing News