LISTED nickel producer Bindura Nickel Corporation (BNC) reported a US$1,2 million after-tax profit in the first half of the year ended September 30 2016, reversing a US$3,4 million loss in the same period prior year, management has said.
Taurai Mangudhla/Fidelity Mhlanga
Production of nickel in the period under review went up by 23% to 3 420 tonnes, resulting in a 9% revenue growth to US$22,5 million. The growth in output was achieved despite a 19% slump in nickel prices.
A 33% reduction in costs, coupled with improved production, resulted in the company’s gross profit growing by 261%, MD Batirai Manhando said.
“Last year, we reduced the total tonnage mined and sent to the mill. In so doing, we reduced the pieces of equipment, reduced capex and costs. But we upped the quality of that ore. In other words, we improved the grade so the actual nickel units coming through are higher. That’s why you have seen a 25% increase in sales and 23% increase in production,” Manhando told businessdigest on the sidelines of the interim analysts and media briefing in the capital on Monday.
“We also took drastic measures to reduce the costs. You will recall we retrenched about 300 people, we slashed our salaries ourselves. Salaries were cut all the way from 5% to about 45%,” added Manhando.
The various initiatives reduced costs by a global figure of about 33% and saw a reduction in cost of production.
Going forward, BNC targets to produce nickel at US$5 000/t.
Manhando said the company was expecting just under US$500 000 incentive to be paid by the Reserve Bank of Zimbabwe for exports that were made since May. Under the RBZ export growth strategy, exporters get a rate of up to 5% in incentives.
“This is money which came without us having to change anything in the business and it also encourages us to keep exporting, actually to up our exports,” Manhando said.
BNC’s interest bearing loans and borrowings stood at US$15,4 million compared to US$13,9 million in March.
BNC raised US$20 million to finance the restart of its smelter through a five year bond at a coupon rate of 10% per annum.
It also secured US$1 million from local banks and a US$7 million working capital overdraft with a local bank.
Giving an update on the smelter project, Manhando said: “It’s about 71% physical progress. We have spent about US$19,8 million of which we raised about US$10 million from bond holders. We are going to finance ourselves about US$6,5 million to make the whole project cost about US$26,5 million.”
He said the smelter was expected to be running at the beginning of the company’s new financial year in May 2017, subject to favourable nickel prices.
“On nickel prices, we are bullish. We think it’s going to go up and we have actually seen the metal going up. It had fallen to about US$9 000. Now,we are seeing between US$11 000 and US$11 500 and we anticipate in the next financial year, we will see prices as high as US$13 000 which will support the coming in of the smelter,” Manhando said.