BNC tipped to register profits

HARARE - Bindura Nickel Corporation (BNC) is forecast to return to profitability next year on the back of anticipated increase in international metal prices in 2016, a leading research firm has said.

The latest prediction comes as the troubled Zimbabwe Stock Exchange-listed miner recently recorded a $3,36 million loss in the half year to September compared to a profit of $8,51 million registered in the same period in 2014.

“We expect Bindura to return to profitability by financial year 2016 albeit a significant drop in net income year-to-year to $679 000 from $11,2 million in the full year to 2015,” said IH Securities on its BNC equities analysis.

“We expect margin expansion from 2018 financial year driven by the smelter restart and lower associated transport costs,” the research firm added.

Owned by ASA Resources Plc — formerly Mwana Africa Plc — BNC has struggled to perform this year due to declining global metal prices and boardroom squabbles that saw its founder and former group chief executive Kalaa Mpinga being shown the door by his erstwhile Chinese investors.

The miner’s share price has plunged by more than 80 percent this year from a peak of $0,06  in January to $0,013 in November.

IH Securities noted that as indicated by BNC management last year, the nickel miner’s profitability heavily depends on the nickel price which is expected to continue on a downward trend in the short to medium term.

In response to this, the company has had to revise its mining plan for Trojan Mine.

This revision entails reducing the original tonnage by about 50 percent while maximising higher grade massives and minimising lower grade disseminated ore.

The company expects this to lower their costs therefore returning to profitability and worst case, break even.

BNC is also undergoing a rationalisation and retrenchment process that should leave them with a leaner and more effective labour force.

“Stainless steel production worldwide, which accounts for about two thirds of global nickel demand has not changed year-on-year, however the market is in surplus and is expected to remain in surplus for a couple of months though LME stocks have reduced to around 426 000 tonnes,” IH Securities said.

A deficit however, is most likely to be felt in 2016 as demand increases. This is expected to provide support to the price and the Bindura-based miner will feel these effects in the 2017 financial year.

“We expect revenue of $47,06 million for the full year, 40,3 percent down year-on-year as the company is expected to operate undisrupted for the full half and then for revenue to improve to $59,40 million in the financial year 2017 due to the expected price increase in 2016,” the equities firm said.

IH Securities have forecast an improvement in earnings before interest, taxes, depreciation and amortization (Ebitda) margins, based on guidelines from management that the second half of the year will be a much better half.

“However, we expect margins will still be lower than prior year. The restart of the smelter has been slower than anticipated and is now only expected to be fully functional by 2017. Management is optimistic that the company will be able to service its coupon obligations on the $20 million bond raised last year as they believe their operations will be able to cover the repayments,” the company said.

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