Botswana Mining Report Q1 2008

Exploitation of rich mineral reserves, especially diamonds, has been a significant driver behind Botswana's rapid economic growth. Notably, the mining sector of Botswana contributes in double digits to the country's gross domestic product (GDP). Diamonds, along with copper and nickel, are the major focus areas in metal and mineral exploration in Botswana and earn more than three-fourths of the country's export revenues.

Botswana has a strong and well-managed mineral economy. Coupled with a long record of political and macroeconomic stability, the nation provides mining companies many lucrative opportunities for growth. However, mineral exploration in Botswana is difficult. Geology of most of Botswana is poorly understood and information is based largely on drilling. On the positive side, the potential for coal mining, a relatively unleveraged sector in the nation, has heightened with the increase in demand for coal from the emerging economies of the world. Another factor working in favour of Botswana is its membership in the Southern African Customs Union (SACU), which allows preferential access to the EU market under a free trade agreement (FTA).

Mineral exploration and mining are regulated by the Geological Surveys Department and the Department of Mines, respectively. As in many other countries, three basic types of mining licences are granted in Botswana: the reconnaissance permit, the prospecting licence and the mining lease. To ease the licensing process, the government did away with the 1977 legislation regarding mining in 1999.

Thus, to a large extent, it can be said that the Botswana government adheres to transparent policies and maintains effective laws to foster competition.

Industry Forecast Despite efforts by the government of Botswana to diversify to non-mining sectors, diamond mining as a source of revenue remains the backbone of the economy. Sharp rise in global prices of gems and metals leaves little possibility of any major deviation from this trend in the medium term. However, to sustain the economy in the long term, Botswana needs to explore the potential of its other sectors such as tourism. BMI forecasts an average growth rate of 11.48% for the Botswana mining industry over 2007- 11 and expects that the industry value would reach an estimated US$6.52bn by 2011.