‘BNC revenue to fall 40,3 pc’

Stories by Enacy Mapakame
Business Reporter
Bindura Nickel Corporation’s full-year to March 2016 revenue is forecast to plunge 40,3 percent to US$47,1 million from a year ago on the continued slump in global commodity prices, market watchers say.
BNC is only expected to return to profit in financial years 2017 and 2018 when the topline climbs to US$59.4 million and US$6,5 million respectively.
At that time, global nickel prices are expected to have recovered from the current rout that has seen the metal crash 38 percent so far this year.
In the half-year to September 2015, BNC reported a net loss of US$3.4 million from a net profit of US$8,5 million in the comparative period due to low commodity prices.
The company earned US$7,654 for a tonne of nickel during the interim compared to US$11,809 a tonne earned in the prior year.
In its latest report, brokerage firm IH Securities said it expects stainless steel production to boost global nickel demand beginning next year, pushing prices higher.
Nickel accounts for over 65 percent of the raw materials in global stainless steel manufacturing.
“Stainless steel production worldwide has not changed year-on-year. However, the market is in surplus and is expected to remain in surplus for a couple of months though the London Metal Exchange stocks have reduced to 426 000 tonnes.
“A deficit is likely to be felt in 2016 as demand increases. This is expected to provide support to the price and Bindura Nickel Corporation will feel the effects in full year 2017,” said IH Securities.
The battering in world commodity prices has largely been occasioned by weaker Chinese demand.
China accounts for 30 percent of Zimbabwe’s total exports; mainly nickel, chrome, ferrochrome, platinum and tobacco, and consumes 50 percent of all the world’s minerals.
A host of other metals such as gold, platinum, copper and coal have seen their prices tumbling by between 10 and 45 percent this year. In its commodities market outlook report, the World Bank says it expects metal prices to average 16 percent below 2014 levels this year, down from the 12 percent estimate in April, dragged by the Chinese slowdown.
Management at BNC is hopeful of recovery next year due to a plethora of cost cutting measures.
In addition to planned job cuts, the nickel miner has revised its mining plan for Trojan Mine which involves reducing tonnage by about 50 percent while maximising higher grade ore.
“The company will remain with a leaner and more effective labour structure when it completes the ongoing rationalisation and retrenchment in the second half of the year ending March 2016,” said BNC chairman Mr Yim Kwana in the 2015 half-year financials.
For the next four years to 2019, IH Securities predicts that BNC will return no dividends to its shareholders.
The market analysts have guided 2016 net income recovery to US$700 000 before jumping to US$8,9 million the following year.
Earnings before interest, tax, depreciation and amortisation margins are seen falling to 14,2 percent in full-year 2016 from 22.9 percent in 2015.
In 2018, margin expansion is expected to be driven by the restart of BNC’s smelter, whose refurbishment was funded through a US$20 million bond floated last year.
The restart of the smelter has been slower than anticipated and is now only expected to be fully functional in 2017.
BNC says it will be able to service interests on the bond when they become due.
IH Securities is targeting a 12-month price for BNC’s share of US2.6c, up more than 100 percent from Wednesday’s closing price of US1.3c. During the six months to September 2015, production was down 25.4 percent as the company milled 231 200 tonnes against 310 000 tonnes in the first half of 2015 due to the planned shutdown in July to allow for equipment upgrades at the Trojan Mine.
Total recovered nickel for the half year was 2,762 tonnes, down from 3,892 tonnes in the comparative period.
Head grade was 1,41 percent against 1,51 percent whilst the recovery rate improved from 83,3 percent to 85,8 percent as a result of improved plant uptime following improved maintenance and significant process improvement initiatives.
Two key capital projects were completed and commissioned in the first half of 2015, with capital expenditure for the half year closing at US$8,80 million.