adminBINDURA Nickel Corporation share price has tumbled by 38 percent year-to-date driven by nose-diving nickel prices on the international market.
Nickel prices, which by March were trading at US$13 756 per tonne, a little more than a quarter of their all-time high in 2007, have dropped 9 percent in the first quarter of 2015.
The average nickel price per metric tonne between April and June 2014 was US$18 584.
According to a World Bank quarterly report titled “Commodity Markets Outlook” released in April 2015, the previously high prices and large investments made by nickel miners led to significant new capacity resulting in substantial surpluses in recent years. Weaknesses in the stainless steel sector, which consumes about 70 percent of the world’s refined nickel, have seen inventories surging to record highs.
Market watchers believe demand is already improving and that as stocks wind down, the outlook for the rest of 2015 and onwards is considered bullish.
Before the significant decline in nickel prices, BNC was the driving force behind the gains in the mining index early last year on the Zimbabwe Stock Exchange.
On Monday the mining index had traded flat at 42,93 points for 17 consecutive sessions.
BNC stock remained stable at a paltry US4cents. Analysts however say the plunge in the BNC share price cannot be linked to the ongoing boardroom squabbles at Mwana Africa, the parent company.
Mwana’s Africa’s minority shareholders led by Mr Ian Dearing have called for an extraordinary general meeting (EGM) where they plan to reconstitute the board, targeting to wield the axe on Zimbabweans Mr Ngoni Kudenga, Mr Herbert Mashanyare, Mr Stuart Morris and Mr Johan Botha. The EGM has been slated for June 10 in London.
Last week, EFE Securities researcher Mr Respect Gwenzi said BNC share price is being weighed down by falling nickel prices.
The fall in BNC’s share price – though markedly higher than the 4 percent drop of the Zimbabwe Stock Exchange (ZSE)’s main index is in line with market-wide losses.
“Contextualising Bindura’s share price losses needs a broad look beyond the current boardroom squabbles as investors are primarily driven by the desire for a return which varies directly to operational performance, though in turn, this performance needs to be driven by a capable management.
“Such developments at Mwana, which is Bindura’s parent (company), are however a common feature among effective corporates and good corporate governance gestures though the bearing may temporarily be negative to the share price of mainly the parent company.
“To scale investors’ sentiment properly, one needs to consider the US$20 million smelter restart bond which Bindura managed to successfully raise locally at the very same time the tiff at the parent company had begun.
“This feat shows that investors assign less weight to the boardroom tussles and instead prefer to put stakes based on the expected return envisaged in financial performance terms.
“The main dampener of Bindura’s share price performance year-to-date has been the continual weakening of commodity prices globally which has seen nickel prices tumble to lows of US$12 750 earlier this year from highs of US$19 000 in the second half of 2014,” said Mr Gwenzi.
Mr Gwenzi said the firmer prices naturally created high valuations for BNC, coupled with the immediate turnaround of operations at Trojan Mine. He added that the outcome of the June 10 EGM will see investors re-evaluating their positions and factor their considerations into the share prices of mainly Mwana with “marginal to zero effect on Bindura”.
BNC re-entered the ranks of nickel producers with significant production and profit performances in the financial year to March 31 2014.
Trojan Mine had been under care and maintenance since November 2008, but resumed production of nickel in concentrates and made its first delivery in terms of an off-take agreement with Glencore Xstrata in April 2013.
So critical is nickel to Mwana Africa that the company recorded improved cash flows which enabled it to reverse US$28 million of the previous year’s US$43,7 million BNC assets impairment.
Online Reporter