Bindura Nickel Corporation releases its 2022 Annual Report

By Published On: August 18th, 2022Categories: Corporate announcement, Earnings
Bindura Nickel Corporation Limited 2022 Annual Report

Bindura Nickel Corporation Limited 2022 Annual Report



I am pleased to report on a good year’s performance, despite the challenges that your Company faced.


The Nickel price on the London Metal Exchange (LME) started the year at $16,001 per tonne and progressively increased during the year, supported by strong demand from the stainless steel and electric vehicle sectors. In addition, global Nickel inventories were progressively declining during the course of the year. Nickel prices traded between $16,000 and $20,000 in the first three quarters of the financial year before a pronounced uptrend starting in January 2022. High energy prices, macro environmental fears over simmering geopolitical tensions between Russia and Ukraine, industrial growth from government stimulus in Europe and China, and expectations of demand increase from energy storage systems and electric vehicles, all supported prices.

Prices reached decade highs in March 2022 with a peak of $42,995/t on 7 March 2022 after Russia’s invasion of Ukraine heightened fears over supply disruptions when the West imposed sanctions on Russia, upending global commodity markets. On 8 March 2022, prices on the LME Nickel contract temporarily breached the $100,000 per tonne mark due to a short squeeze. The LME suspended trading on the Nickel contract and cancelled the day’s trades. Trading resumed on 16 March 2022, after the LME had put in place measures to control daily price changes. Prices stabilised within a narrow range although trading volumes were low as participants felt the prices on the LME were not supported by market fundamentals.

Fundamentals for Nickel remain strong as global stocks remain at low levels. The downward trend in LME inventories continues unabated, with stocks dwindling to 72,570 tonnes by the end of March 2022, in comparison to 259,182 tonnes on 1 April 2021.


The Zimbabwean economy grew by an estimated 6% during the 2021 calendar year, buoyed by a good 2020/21 agricultural season and improved export earnings arising from high commodity prices. However, the economy continued to be hampered by high inflation and persistent foreign currency shortages, despite the good export performance. While the commodity price boom has continued into 2022, partly aided by the uncertainty arising from the Russia-Ukraine war, Zimbabwe’s economic prospects for the calendar year 2022 are not as promising due to a poor 2021/22 agricultural season and the adverse impact of the twin evils of high inflation and persistent foreign currency shortages.


In consonance with the overall national COVID-19 situation, the threat posed by the pandemic has receded drastically, with the Company ending the year with the pandemic under control. All company employees were fully vaccinated during the year and no COVID-19 related deaths were recorded. The Company has however continued with preventative measures and control programmes to ensure the pandemic remains under control.


There was an improvement in the Company’s safety performance during the year, with two Lost Time Injuries recorded compared to five for the previous year. The Company achieved a new record of 3.1 million fatality-free shifts by 31 March 2022, the last fatality having been recorded in June 2015.

Safety remains a priority for the Board and Management, given the inherently hazardous nature of mining operations. The Company has a zero-tolerance policy towards injuries in the workplace. Safety, Health and Environmental (SHE) systems are continually being upgraded and improved to enhance performance. The main area of focus continues to be on instituting and deepening the desired safety culture in order to prevent accidents, in line with the Company’s Zero Harm policy.

The Company continues to comply with all applicable environmental legislation and remains ISO 14001:2015 and ISO 45001:2018 certified.


The year under review was a challenging one. Commissioning of the Re-deepening and Tie-in project was delayed by nearly one month, due to unforeseen technical challenges, resulting in only 4 days of production in April 2021. The project was, however, successfully completed and resulted in the intended benefits of reduced ore tramming distances, elimination of double handling and provision of access to deeper-lying mineral resources, being achieved. The aged and obsolete underground mining mobile equipment resulted in poor and inconsistent availabilities during the year under review and thus compromised production. In addition, significant challenges associated with changes in the massive orebody footprint were experienced in September and October 2021.

The changes in the massive resource footprint, coupled with the need to optimise the extraction of the entire mineral resource, necessitated the pre-planned transition from the low-volume, high-grade strategy to the new high-volume, low- grade strategy.

The combined effect of the above factors led to tonnes ore mined for the year totalling 463,338, which was 13% higher than the previous year’s 412,605 tonnes.

Tonnes ore milled of 461,130 were 12% higher than last year’s tonnage of 411,754, in tandem with the higher tonnage mined. In line with the new strategy, head grade declined to 1.30% from 1.52% for the prior year while recovery efficiency was 85.0% versus 85.9% for last year.

Consequently, Nickel in concentrate production declined by 5% to 5,082 tonnes from the previous year’s 5,363 tonnes. Unit cash cost of production (C1) increased by 43% to $10,749 per tonne while the all-in-sustaining cost of production increased by 45% from $8,552 per tonne in the prior year, to $12,396 per tonne. The increase in unit production cost was mainly due to the decrease in Nickel production and the high cost of maintaining the old and obsolete underground mining mobile equipment. The disparity between the official auction and parallel market rates continued to widen during the year. With local suppliers using the parallel market rates rather than the auction rates in their pricing models, the discrepancy in the two rates had an adverse impact on the Company’s costs of local inputs.

Unit cash cost of production (C1) increased by 43% to $10,749 per tonne while the all-in-sustaining cost of production increased by 45% from $8,552 per tonne in the prior year, to $12,396 per tonne. The increase in unit production cost was mainly due to the decrease in Nickel production and the high cost of maintaining the old and obsolete underground mining mobile equipment. The disparity between the official auction and parallel market rates continued to widen during the year. With local suppliers using the parallel market rates rather than the auction rates in their pricing models, the discrepancy in the two rates had an adverse impact on the Company’s costs of local inputs.

Nickel sold for the year, amounted to 4,720 tonnes, 14% lower than prior year sales of 5,496 tonnes, reflecting not only the lower Nickel production but also the fact that there were 316 tonnes of Nickel in stock at year end. The Company’s off-take contract lapsed in early March 2022, after requisite contracted Nickel concentrates had been delivered. Deliveries under the now expired contract were completed on 9 March 2022. Finalisation of a new two-year contract for the supply of 100,000 tonnes of Nickel concentrates took longer than planned. The contract was only signed and approved by the relevant regulatory authorities at the end of April 2022. Deliveries under the new contract commenced on 2 May 2022, at which time, there were 700 tonnes of Nickel in stock.

The average London Metal Exchange (LME) Nickel price achieved during the year was $20,600 per tonne, compared to $14,999 per tonne for the previous year. The 37% increase in the average Nickel price was driven by the global increase in the demand for the metal.


We previously reported that the Company, through its operating subsidiary, TNML, was involved in a dispute with the tax authorities emanating from tax assessments which were issued in February 2018 in respect of the 2009 to 2017 tax years. The dispute mainly related to historical issues concerning how the Company was restructured in 2004, as well as issues arising from differences in the interpretation of standard commercial agreements in the mining industry. The Company objected to the assessments but when the objection was dismissed by ZIMRA, it was obliged to pay the disputed tax liability of ZW$14,368,623 equivalent to $1,272,485 at the time of payment, while seeking legal redress.

An appeal was then filed at the Special Court for Income Tax Appeals (SCITA) by TNML. The matter was heard on 12 November 2020. Unfortunately, TNML lost the case on a technicality as the respondent (ZIMRA) was incorrectly cited in the pleadings as The Commisioner-General, ZIMRA instead of the Zimbabwe Revenue Authority. The appeal filed by TNML was, therefore, held to be invalid as the improper citation meant that there was no proper appeal before the court. Since the case was dismissed on the basis of a technicality and not on its merits, TNML refiled the appeal. A date for the appeal hearing is yet to be set. Since then, however, the Supreme Court has handed down a judgment on a case that has some similarities to the TNML case.

In that case, the Court ruled that group consolidated accounts cannot be submitted in support of tax self-assessments filed by a company. TNML is the only operating subsidiary in BNC and therefore generates all group revenues. Group consolidated accounts were thus submitted and accepted by ZIMRA, in support of the Company’s tax self-assessments for the years in question. In the light of the Supreme Court decision, it is the considered view of our legal counsel that the SCITA is likely to consider the tax self-assessments filed then as invalid and therefore dismiss our appeal, citing the Supreme Court precedent. On the recommendation of legal counsel, we have accordingly withdrawn the case in the SCITA before a set down date for the appeal is given.

Upon the withdrawal of the appeal, the disputed tax liability of ZW$14,368,623 or $1,272,485 that was previously disclosed as a contingent liability, has now been expensed through the Income Statement. As stated above, the amount had been paid soon after dismissal by ZIMRA of the Company’s objection to the assessments. There will, therefore, be no cash flow impact, arising from the withdrawal of the case.


Despite the challenging economic conditions prevailing in the country, the industrial relations atmosphere remained calm throughout the year. Management continued to proactively and constructively engage employees on all pertinent issues.


Income Statement
Despite the decline in the volume of Nickel sold, revenue for the year ended 31 March 2022 increased by 25% to $74.2 million, from the prior year’s $59.4 million. The increase in Nickel price more than compensated for the lower sales volume.

Cost of sales increased by 15% to $51.4 million, compared to $44.9 million in the prior year. The increase was a result of the high cost of maintaining the old and obsolete underground mining mobile equipment, higher labour costs arising from reviews of wages during the year to align with the industry, as well as inflationary pressure on local input costs.

A combination of the discrepancy between the auction foreign exchange rates and the rates prevailing on the alternative markets, coupled with the regulated surrender of 40% of the Company’s export revenue in exchange for Zimbabwe Dollars at the auction rates, resulted in loss of value amounting to $2.5 million for the year under review. The Reserve Bank of Zimbabwe introduced an export incentive scheme in June 2021, applicable on incremental export revenues. In terms of the scheme, an 80% export retention applies on incremental revenues instead of the standard mining retention of 60%, while companies listed on the VFEX and those operating in Special Economic Zones, are permitted to retain 100% of the incremental revenues.

The export incentive scheme, inclusive of the enhanced regime applicable to VFEX listed entities, resulted in the Company achieving an overall export retention marginally above the mandatory 60%.

Gross profit for the year amounted to $22.8 million, which was 59% higher than the prior year’s $14.3 million, mainly due to the increase in revenue.

An operating profit of $11.9 million was achieved, 263% higher than the $3.3 million for the prior year, also due to the increase in revenue. Net interest expense amounted to $940,757, up from $235,648 due to new loans accessed during the year.

Profit before tax for the year was $11.0 million, 260% above last year’s $3.1 million.Income tax charge for the year amounted to $2.9 million, giving an effective tax rate of 27% compared to the corporate tax rate of 24.75%. This was due to prepaid income tax of $1.2 million on a tax dispute with ZIMRA, which was previously reported as a contingent liability but was recognized as an income tax expense in the current year, upon withdrawal of an appeal that had been lodged with the Special Court of Income Tax Appeals. Thus, profit after tax for the year amounted to $8.1 million, 361% higher than the $1.7 million recorded in the previous year, also reflecting the increase in revenue.

Balance Sheet
Total equity of $60.1 million increased by 16% as a result of the profit achieved for the year. During the year under review, a total of 16,495,755 ordinary shares were issued to employees that were eligible to be allotted shares under the Share Option Scheme (2016). This resulted in an increase in the issued share capital of the Company from 1,272,732,638 to 1,289,228,393 ordinary shares, as at 31 March 2022.

Current liabilities increased by 39% to $25.7 million due to an increase in trade and other payables as well as working capital facilities in the form of bank overdrafts and short-term loans which, at 31 March 2022, amounted to $3.1 million. Subsequent to the year end, an additional $4 million loan facility was secured as part funding of the programme to replace the old and obsolete underground mining mobile equipment.

Property, plant and equipment grew by 7% reflecting the capital expenditure incurred during the year, which included the acquisition of new exploration, face and support rigs which are part of the retooling exercise currently underway.

Current assets increased by 65% to $34.1 million due to an increase in trade debtors, outstanding VAT Refunds and unsold Nickel stocks. The VAT Refunds balance as at 31 March 2022 amounted to $5.2 million (FY2021: $2.2 million). ZIMRA are taking much longer to process VAT Refunds, resulting in the average age of the refunds increasing to 467 days (FY2021: 242 days).

In spite of the above-mentioned issues, the group balance sheet remains strong, with a sustainable level of borrowings.

Cash Flows
Cash generated from operations amounted to $1.3 million, down from $10.4 million due to the increase in debtors and inventories referred to above. Capital expenditure for the year amounted to $6.5 million. Net loans raised amounted to $2.6 million while net interest paid was $940,757. Consequently, at the close of the year under review, there was a negative cash balance of $1.3 million, compared to a positive cash balance of $1.9 million at the end of the previous year.


Total capital expenditure for the year amounted to $6.5 million (FY2021: $8.9 million). The programme to replace the old and unreliable underground mining mobile equipment commenced in the year under review and is expected, subject to funding being available, to take at least two years to complete. The programme will be funded from a mixture of internal cash flows and external loans.


The Company’s shares were delisted from the ZSE on 15 December 2021 and BNC became the fourth company to be listed on the VFEX on the 17th of the same month. While trading volumes on the ZSE have generally been low, BNC had, as at 31 March 2022, contributed 97% of the total 96 million shares traded since the Company made its debut.

Since migration to the VFEX, the Company has been realising improved export retentions from the enhanced export retention scheme applicable to companies listed on that bourse.


The LME Cash settlement price of Nickel averaged $33,298 per tonne in the month of April 2022. Although the recent ‘short squeeze’ became topical globally, the LME Nickel price had already been on a steady upward trend due to healthy fundamentals but, after trading in a narrow range for the whole of April 2022, prices fell to around $28,400 per tonne in early May 2022. This was due to the increased dominance of negative macro-environmental factors, including a firm dollar, tighter liquidity conditions and concerns over the slowdown in the Chinese economy due to COVID-19 induced lockdowns and trade disruptions, as well as tight liquidity, which are expected to adversely affect global manufacturing and metal demand.

Analysts forecast that Nickel prices will drift lower in the near term. Prices are, however, expected to recover from the third quarter with the price rebound from current low levels likely to be aided by Nickel’s tight fundamentals and supply disruption threats. Although a number of projects are expected to come online during the year to increase Nickel supply, there is still uncertainty on the timing of the availability of the new supplies to the market.

The global electrification agenda and the shift to greener forms of energy are likely to support Nickel prices in the medium to long term. Prices will be supported by global infrastructural spending if previously set targets are met. It is envisaged that a resolution of the conflict in Ukraine will likely be bullish for Nickel as more infrastructural spending will be needed to rebuild the country after the scourge of war. While there will always be some volatility in the Nickel market, the underlying forces that drive it are positive for the long term.


The Board has not declared a dividend for the period under review. The Company’s current priority is to replace underground mining mobile equipment which is critical for the future and for consistent levels of production, particularly so in the light of the on-going transition from the high-grade, low-volume strategy to the low-grade, high-volume strategy envisaged from FY2023 onwards.


The following changes to the Board of Directors of the Company which took place during the financial year, have been previously reported on:

Mr. Jozef Clifford Behr resigned as Non-Executive Director with effect from 30 September 2021. I thank Mr. Behr for his contributions during his tenure on the Board.


  • Mr. Patrick Maseva-Shayawabaya joined the Company in the executive position of Finance Director, with effect from 1 April 2021.
  • Mr. Michiel Jakobus Bronn joined the Board as Non-Executive Director on 1 October 2021.
  • Messrs. Simbarashe Chinyemba and Innocent Rukweza were appointed as Non-Executive Directors with effect from 21 March 2022.

I welcome the appointees to the Board and look forward to their respective contributions in the Company’s deliberations.

The late Mr. David Hugh Brown It was with a deep sense of shock and sorrow that we received the news of the passing on of Mr. David Hugh Brown, in South Africa, on Sunday, 19 June 2022. He would have turned 60 years of age on 7 August 2022.

David joined the Board of BNC on 1 April 2020, upon his appointment as Chief Executive Officer of Kuvimba Mining House (Private) Limited and became a member of the Audit and Risk Committee soon thereafter.

David contributed immensely to deliberations at the BNC Board and Committee meetings and will be sorely missed. May his soul rest in eternal peace.


The Board pays tribute to management and staff for their dedication and hard work during a difficult and challenging year.

On Behalf of the Board
Bindura Nickel Corporation Limited


23 June 2022


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