Mwana Africa expects a $3,5m profit

Published: 14 November 2013

MWANA Africa is expecting a profit of $3,5 million in 2014 after it revised its earnings from an initial loss forecast of $14,5 million on the strength of its subsidiary Bindura Nickel Corporation's new mining plan, a report by Edison Investment Research shows.

"Edison has adjusted its forecasts for financial year 2014 to reflect the faster-than-expected adoption of Trojan's revised, high grade mine plan. In combination with reduced central costs, this has resulted in a forecast net profit for FY14 of $3,5 million, compared to a prior assumption of a loss of $14,5 million".

More importantly, Edison said the new high grade mining plan significantly alleviates the group's funding requirement for Mwana's Zimbabwe subsidiary, Bindura Nickel Corporation.

BNC' financing risk has diminished after the nickel miner's revised mining plan for phase two of the restart of its Trojan Mine reduced production cost and jolted cash flows.

According to Edison Investment Research, the new mining plan targeting high grade reserves reduced funding requirements from the initial $22 million to $5 million.

"The improved operational and financial performance at Trojan means the funding requirement at BNC has fallen from an estimated $22 million to $5 million currently."

The $5 million requirement will be funded through working capital facilities. Mwana's second quarter operations were characterised by above forecast results at Freda-Rebecca and a faster-than-expected transition to the new Trojan mine plan.

Freda Rebecca output continued on a strong upward trend, with tonnes milled being the highest since the September 2011 quarter, aided by material from the promoter open pit.

BNC's Trojan Mine recorded a similarly encouraging performance in quarter 2 of 2013, reporting record nickel in concentrate since production began in 1968 in both August and September.

This reflects a very rapid transition to the revised mining plan.

The main challenges faced by Trojan during the quarter related to equipment avail- ability, which was lower than required owing to the restricted availability of working capital.

In the short term, the adoption of the revised mine plan (described in a competent person's review conducted by SRK Consulting as realistic and achievable), higher profits and cash flows that are arising there from, have allowed BNC to reduce its funding requirement for Trojan.

The second phase of the restart of Trojan appeared threatened by lack of capital after successful reopening of the first phase since operations were suspended and the assets put on care and maintenance due to macro-economic instability in 2008.
- herald

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