Poor nickel prices halt BNC smelter completion

By Tendai Sahondo

Bindura Nickel Corporation (BNC) has halted progress on its highly anticipated Nickel smelter as prevailing global nickel prices do not justify its completion, BNC MD Batirai Manhando has said.

Speaking at an analyst briefing today, Manhando said the project which is currently 83% complete will be stalled until prices shore up to more sustainable levels of at least $15 000 per nickel tonne.

“The fundamentals of completing the smelter project are not in place. We decided instead to recapitalise our operations and re-deepen Trojan mine. We continue to talk to various parties in terms of augmenting the ore that will come from Trojan to make sure that the smelter runs at full capacity when commissioned.

“We had targeted prices of at least $15000 per nickel tonne when we raised the bond to finance restarting of the smelter. We have however not seen these prices yet which are currently in the range of $10 000 per nickel tonne. We look forward to a time when prices will improve to sustainable levels, until then, the smelter project remains parked. If we proceed with its completion, it will not be helpful but rather worsen the business case,” he said.

Manhando said he expects prices to shore up to $14000 in the coming year, surging up again to $16000 the following year before settling for more sustainable levels of $17000 in the third year backed by consistent demand for the nickel on the basis of upcoming electrical cars which will run on nickel batteries.

“We expect the smelter to come into line three years from now, provided prices go up,” he added.

He said the firm has partners ready to finance the completion of the smelter in exchange of their nickel. Following the completion of the smelter which will process ore to 80% purity, Bindura will proceed with constructing of a refinery which will further process the ore to 99.9% purity.

Manhando said operations have been severely hampered by power cuts which left the mine with a measly allocation of 5MW when the plant runs on 10MW. He said players in the industry have since lobbied government to prioritise the mining sector as it is one of the highest foreign currency earners. Alternately, Manhando said government could give the green light to industry to directly import power from neighbouring countries.

Meanwhile, Bindura realised a profit and total comprehensive income of US$13.5 million compared to US$5.8 million in the prior year for the year ended 30 June 2019. Annual turnover was up 1% to US$54 million in comparison to US$53.6 million in the prior year. This was attributed to an increase in global nickel prices that were pegged at an average of US$8 376 per tonne, compared to US$7 249 per tonne achieved in the comparative period last year. Nickel in concentrate sold amounted to 6 410 tonnes, compared to 6 470 tonnes sold in the comparative period last year.

Cost of sales increased by 14% year on year from US$34.7 million last year to US$39.5 million in the year under review, mainly due to an increase in local input costs. In line with the subdued growth in turnover and the year on year increase in cost of sales, gross profit decreased by 23% from US$18.9 million in the comparative period last year to US$14.5 million.

Nonetheless, operating profit increased by 141% to US$21.3 million, compared to the prior year’s achievement of US8.9 million. This was mainly attributable to exchange gains recognised on the introduction of the Zimbabwean Dollar.

 

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