Published: 17 February 2015

Bindura Nickel Corporation released a subdued set of numbers for their Q3 trading update, as nickel concentrate production declined by 30% from 1,989 tonnes in Q2 to 1,383 tonnes. This was on the back of reduced tonnage of nickel ore milled, reduced recoveries and a lower head grade. Nickel tonnes mined declined by 3% from 160,741 tonnes to 155,129 tonnes and the average price of nickel slipped by 15% from $18,952 in Q2 to $15,867 in Q3.

The refurbishment programme also contributed to lower production levels, which in turn led to a 31% quarter-on-quarter decline in nickel sales from 2,008 tonnes to 1,395 tonnes. Cash costs and all-in sustaining costs grew by 17% per tonne as a result of the reduced levels of production. The refurbishment programme on mobile equipment continued in Q3, with the mobile equipment expected to assist in achieving monthly targets during Q4 2015. The smelter and refinery refurbishment is still in progress, and BNC floated a $20.0m bond in December 2014. The tenure is 5 years, with a semi-annual coupon rate of 10%.

Approximately $15.0m of the bond has been subscribed to date, and the balance of $5.0m waits for subscription. The closing date of the bond has been extended to 27 February 2015 at the request of prospective bond holders. The cost of constructing the smelter is projected at $26.5m, and the repayment ability of BNC for the bond is based on future projected nickel prices of $16,500 tonnes. On the outlook, management states that production levels at Trojan mine will reach sustainable levels by March 2015, and the refurbishment of equipment is scheduled for completion in March 2015. Estimates for nickel sales for FY 15 have been projected at between 6,900 tonnes and 7,200 tonnes.

Kelvin Msimanga an analyst at Imara Stockbrokers says the current slump in global commodity prices is expected to continue in the medium term, as nickel demand from China slowed towards the end of 2014.

Imara Stockbrokers downgraded BNC from a hold recommendation.

"The company is in considerable risk if the nickel price fails to recover to above $16,500 per tonne. We downgrade our recommendation to take profit," said Msimanga.
- BusinessDaily

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