Bindura Nickel Mine has accused the current micro-economic environment of hindering its profitability.
ng chief executive officer Joe Schwarz said the operating environment was not friendly to their business.
He castigated the current exchange rate, which he said did not tally with the operational cost of the company.
“We are a company which mainly depends on our export earnings and you can see that most of our product is bought from overseas, but the central bank policy of requesting that the company sell 25% of their forex at the old rate has provided a challenge to the company’s operations,” Schwarz said.
He said the macro-economic environment was an issue of major concern to the company.
“The current business environment has driven up the cost for the company significantly,” said Schwarz.
He said the current political environment had led to the company’s suppliers demanding cash upfront because of what they termed risk in dealing with the country’s businesses.
Zimbabwe is now regarded as a risky investment destination because of its failure to pay its debts on time.
“The issue of risk over Zimbabwe has affected our operations and instilling confidence in our markets has become a challenge for the company,” said Schwarz.
He said recent changes in the rate used to calculate duty had a big impact on the company’s operations considering that it had to import most of the machinery and equipment used in the mines.
“Recent changes in duty have affected the company. The duty bill for the company has increased considerably,” said Schwarz
He said the company’s other form of income, purification and smelting for other companies from the region, had been falling over the years and this contributed a significant share to the company’s earnings over the years.
“Toll from Botswana and other countries has fallen and because of that the company is already starting from a difficult position, considering that we are currently mining low grades of nickel in our mines,” said Schwarz.
He said the issues of switching the movement of the toll from rail to road were other factors that were contributing to the rising operation cost.
He said such a move had been necessitated by the failure of the NRZ to effectively move the company’s loads.
“Infrastructural issues, inefficiency of the NRZ has forced us to resort to road transport. Toll material has now been switched to road, factors which have contributed to the rising costs,” said Schwarz.
He said scarcity of power for the company was of major concern because of the dependence of their furnaces on its supply. He however said the cost of power was major concern since export companies were now charged in forex.
“Price of power has been a subject of concern for us, we consume a lot of power and pay an average of US$800 000 a month for it,” said Schwarz.
Bindura Nickel Corporation, in its annual report for the year ended December 31, said the macro-economic environment in Zimbabwe continued to be a very challenging one with year-on-year inflation reaching 599%. The authorities did not review the foreign currency exchange rate fixed in February 2003 during the year as anticipated.
The group’s nickel sales for the year amounted to 7 109 tonnes compared to 6 746 tonnes achieved in 2002.
The average price achieved, at US$4,23 a pound, improved by 38% on last year.
Group turnover, which stood at $196 billion, was 10% down on last year.
“The decrease was largely attributable to a fixed exchange rate of $824: US$1 that was not reviewed by the authorities as anticipated,” Bindura said.