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Harare Bureau
BINDURA Nickel Corporation is projecting a cash positive position by the end of next month after overcoming its immediate funding constraints by revising its mining plan.The projection is contained in the firm’s financial action plan based on assumptions of bearish nickel prices with the base case being the current price of $13 660 per tonne.
BNC projects that the worst case scenario would be a nickel price of $12 770 per tonne, that will still see it achieving a cash positive position by December 2013 with a small adverse in January.
At the current price of nickel BNC’s cash flow highlights statement reflects gradual improvement in the firm’s cash position from a negative $3,5 million in July to cash positive position of $988 000 going into November.
“At $13 660 per tonne this option allows the business to be cash positive by October 2013 and to complete repayment of existing legacy creditor agreement by December 2013. Creditor assistance or bridging finance is required.
“At $12 770 the business is cash positive by December 2013, the cash deficit starts in May 2014 with a small adverse in January 2014, which can be managed,” said BNC.
The Zimbabwe Stock Exchange listed Mwana Africa nickel mining subsidiary is reportedly on the verge of sealing a $4,5 million short-term debt funding deal.
“BNC has secured the $4,5 million short-term bridging finance. The company has overcome its immediate short-term funding needs,” a source said.
BNC revised its funding needs for phase two of the restart of its Trojan Mine in September last year since being put on care and maintenance in 2008.
Initially, Africa’s only integrated nickel mining and smelting company required a total of $37 million, but managed to raise $23 million last year with parent firm Mwana Africa putting in $21 million through a rights issue.
While a total of $15 million was required for phase two of the Trojan Mine ramp up, efforts to raise the funding were hampered by falling nickel prices, liquidity crunch on global capital markets and negative sentiment on Zimbabwe.
Nickel price plummeted on over supply in global markets with deliveries seen at 1,8 million tonnes against a projected 1,77 million tonnes while demand went down in major consumers China due to the use of a substitute metal, pig iron.
Against this backdrop, BNC’s alternative was a revised mining plan targeting ore massives that would ordinarily have been mined later in the life of the mine.
“The overall effect of this strategy on the life of the mine would be timing issue only, with the total depleted nickel remaining the same,” reads an excerpt of BNC’s operational plan.
Trojan Mine is sitting on 114 000 tonnes of nickel confirmed in a competent person’s report carried on the mine last year by the UK’s SRK Consultants and confirmed again in February this year, extending the mine’s life from 8 to 15 years.
The effect of the new plan, dependent on the firm securing bridging finance, will be reduction of per unit costs due to high nickel content of massives.
BNC said the extraction of footwall massives with high grade nickel ore (9 percent) will contribute an additional 6 290 nickel metal in concentrates over for 18 months. Output will be ramped out to 870 000 processed ore per annum.
The company has made significant strides since securing equity funding in September last year to commencement of production in March this year and shipment of first concentrate in April to global commodity trader, Glencore International, with which BNC signed an off-take agreement for its nickel.
BNC has resolved the issue of historical creditors with $7,8 million converted to equity while the payment of $5 million was deferred to 2014.
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