BNC profits to jump 45 percent: Report

HARARE - EFE Securities has tipped Bindura Nickel Corporation (BNC) to increase its profit by 45 percent in 2015 to $34,3 million up from $23,7 million recorded this year due to an anticipated rise in nickel prices.

In its review of BNC, the equities research company said global Nickel price has been on a rebound augured by improved sentiment following Indonesia’s ban on exports of unprocessed ore, which is believed to be behind the 40 percent upsurge in Nickel prices this year.

“The higher nickel prices are a sure source of strength for BNC’s cash flows this added to the offtake agreement with Glencore which enables them to get cash settlement within 14 days giving the group higher flexibility and ability to ramp up operations faster,” said EFE Securities.

The report also noted that BNC’s plans to restart its smelter in the last quarter of the current financial year – in an effort to re-establish its former status as the only combined mining and smelting facility in Sub-Saharan Africa –  will also significantly add to the company’s top line.

“Going into the 2015 financial year we believe BNC can post a turnover of $104 million assuming average nickel prices of $19 000 per tonne and a stable production of 700 tonnes per
month.

“We believe the better prices obtaining in Nickel compared to last year should see the group achieve better margins resulting in profit before tax forecasts of $42,8 million after
factoring finance costs inclusive of funding for the smelter,” read part of the report.

At the current corporate tax rates, EFE Securities forecast earnings of $34,3 million which should be 45 percent ahead of last year.

This comes as the Mwana Africa’s Zimbabwean unit has ricocheted up plans to restart a nickel smelter at Trojan nickel mine.

The company announced in June that an independent study of an accelerated restart plan for the nickel smelter, of which Mwana owns 76,3 percent, had been completed.

Kalaa Mpinga, the Mwana Africa chief executive recently said the overall capital cost to execute the restart of the nickel smelter, which is based in Bindura, is estimated to be $26,5 million.

“Half of this capital cost will be funded through debt financing, with the remainder to be financed from existing BNC cash flow and company cash balances.

The completion of the independent study paves the way for us to capitalise on the opportunity presented by a favourable nickel market,” said Mpinga.

The study, conducted by engineering consulting firm Hatch Goba, involved a technical and economic assessment of the potential refurbishment and restart plans of the smelter complex.

“Mwana Africa plans to have the smelter in operation by 2015 and to have it contribute to the company’s cash flow by 2016,” he said.

Mpinga noted that the installed power for the smelter’s furnace is 14 MW and that concentrate throughput will be 160 000 tonnes per year.

Trojan Mine’s concentrate production is expected to be 106 677 wet metric tons a year, thereby allowing for spare capacity on the smelter to treat material from other sources, at cost.

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