BNC to float US$21m rights offer to restart mining operations

Shareholders’ approval will be sought at an Extraordinary General Meeting (EGM) set for June 29 .

 

Should shareholders approve the rights issue, this will be open for investment for approximately three weeks following the EGM.

The funds are intended to be applied to resume operations at BNC’s Trojan nickel mine, which was put on care and maintenance in late 2008 owing to poor nickel prices on the international market, combined with a difficult operating environment in Zimbabwe.

In a circular to shareholders, the company said the rights issue amount of US$21 million was enough to get BNC’s Trojan mine back into production and to the point of selling nickel concentrate and generating  revenue.

But further funding, currently estimated at about US$12 million, will be required for the second year of the Trojan restart. 

The company said it was confident that debt funding would be secured for the second year of operations, helped largely by the fact that by that stage, the mine would be selling product and generating revenue. 

While US$21 million was sufficient to restart Trojan, it was not sufficient to pay off legacy creditors of US$16,2m and to pay out  severance packages and settle staff backpay liabilities.

These issues would need to be resolved prior to the rights issue closing on 27 July. Failure to resolve these issues, the rights issue will not be able to conclude.

“In the event that the proposed Transaction is not implemented: the company’s operations will remain on care and maintenance; the cash costs of which, at an averageUS$950,000 per month, is not sustainable and may result in liquidation of the company; the company’s assets and equipment will be exposed to further deterioration thereby compromising their integrity and putting the company’s going concern status in doubt; the Company will continue to lose valuable skills; and the company will not be able to take advantage of the improving global economic climate, which is positively impacting commodity prices,” the company said.

BNC is the only integrated nickel mine, smelter and refinery in Africa.

The nickel mining concern owns and operates the Shangani Nickel Mine and Trojan Nickel Mine, as well as its own smelter and refinery which is situated in Bindura, all of which are currently on care and maintenance.

The company also released its full year audited financials to March 2012.

Gross turnover was US$ 1,5 million from US$ 4,1 million in the prior year, mainly from the sale of leach alloy from stock.

The company reported a loss attributable to ordinary shareholders of US$ 12,7 million from the prior year loss of US$ 16,5 million, largely owing to low turnover and care and maintenance costs.

Non-current assets increased year on year to US$ 35,1 million from US$ 34,9 million. BNC attributed the increase to the capitalisation of costs associated with the corporation’s capital drilling programme.

The current assets of US$ 8,3 million reduced from US$ 12 million due to a reduction in trade debtors and cash on hand.

Current liabilities increased to US$ 40,6 million from US$ 37,2 million in the prior year, due to an increase in employee-related costs. In September 2011 the corporation secured a shareholders’ loan of US$ 10 million to fund the ongoing asset preservation programme. At year-end, an amount of US$ 5,3 million had been drawn down against the facility.

The nickel mining concern owns and operates the Shangani Nickel Mine and Trojan Nickel Mine, as well as its own smelter and refinery which is situated in Bindura, all of which are currently on care and maintenance.

The company also owns the potentially world scale Hunters Road nickel project, which is situated in the South Greenstone belt of central Zimbabwe.
Once the full suite of assets is back in operation, BNC will have the potential to take ore from the ground and add value right through to producing LME grade metal.

BNC is the only integrated nickel mine, smelter and refinery in Africa.

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