BINDURA Nickel Corporation (BNC) posted a significant drop in revenue of US$49,5 million in the year ended 31 March 2023 compared to US$74,2 million in the prior year as it expects injection of working capital from its parent Kuvimba Mining House (KMH) to ensure the business is adequately funded.
Based on the 2023 Annual Report, the Victoria Falls Stock Exchange (VFEX) listed mining firm says the period under review presented a host of operational challenges which impacted on production performance.
The mine was adversely affected by low underground mining mobile equipment availability due to obsolescence.
Production was also negatively impacted by an unexpected change in the ore body, leading to a severe decline in the high-grade massive resource footprint. The change requires a rapid transition in the mining model from a low-volume, high-grade strategy to a low-grade, high-volume strategy, the firm said.
Company chairman, Mr Masunda Muchadeyi says due to production constraints, sales and revenue took a knock.
According to the report, ore hoisted for the year was 418,587 tonnes, which was 11 percent lower than the previous year’s 463,338 tonnes. Tonnes ore milled of 418,020 were nine percent lower than last year’s tonnage of 461,130, in tandem with the lower tonnage hoisted.
“Revenue was US$49,5 million, versus US$74,2 million in the prior year. The decrease was in line with reduced sales volume which was attributable to the lower production as detailed above.
“Cost of sales increased by 18 percent to US$60,5 million, compared to US$51,4 million for the prior year. Cost of sales were heavily impacted by increases in power costs, high maintenance of aged equipment and the effect of exchange rate disparity,” said Mr Masunda.
A gross loss of US$11 million was realised in the year under review, compared to a gross profit of US$22,8 million in the previous year, mainly due to the reduced sales volume emanating from the lower production.
The firm posted an operating loss of US$21,8 million compared to an operating profit of US$11,9 million in FY2022.
The firm incurred losses before and after taxation of US$24,2 million and US$18,5 million respectively, which represented a decrease of 320 percent and 329 percent respectively, year-on-year.
The annual report highlights that the listed mining house’s total equity of US$41,6 million decreased by 31 percent from US$60,1 million as a result of the loss incurred for the year.
The company closed the year under review with a net liabilities position of US$13,4 million (2022: net current assets of US$8,4 million) due to operational challenges.
“In addition, the Company increased its current borrowings by US$4,5 million from the comparable financial year. Capital Expenditure Total capital expenditure for the year amounted to US$8,3 million (FY2022: US$6,5 million).
“This was driven by the programme to replace the old and unreliable underground mining mobile equipment and was being funded from bank loans and internal cash flows,” reads part of the report.
However, the listed entity is banking on the projected global rise in nickel prices. The annual report states that cash flows are highly dependent on the Nickel price.
Base metal prices have firmed since the previous financial year, with nickel prices increasing by 24 percent during the year under review compared to prior year.
“The most recent forecasts by analysts predict a steady increase in Nickel prices in the medium to long-term, owing to an expected rise in demand for Nickel and Lithium (energy metals), particularly given the anticipated increase in the use of electric vehicles.
“In assessing the future cash flows of the Company, Nickel prices have been assumed to average US$23,500 per tonne for the period April 2023 to March 2024. These projections have been taken from a consensus forecast compiled by market analysts.”
To address the operational challenges during the new financial year and beyond, Mr Masunda says the company is implementing a number of measures, which include the following ensuring consistent equipment availability and accelerating underground development using the acquired new and rented equipment.
He said the delivery of the new equipment during the period under review is expected to improve overall equipment availability in the ensuing year.
Plans are already underway to augment the current fleet in the new financial year by a combination of hiring and acquiring additional mining equipment.
Additionally, the chairman says there will be implementation of various cost-containment and cash-saving initiatives to ensure the business remains cost-effective.
“In addition to the above initiatives, the Company’s parent Kuvimba Mining House (KMH) has put in place a support structure to cover working capital gaps and ensure the business is adequately funded.”