Bindura Nickel Corporation Limited ( 2019 Abridged Report

We have extracted below the Chairman’s Statement from the 2019 abridged report of Bindura Nickel Corporation Limited (, listed on the Zimbabwe Stock Exchange:


Highlights for the year under review are summarised below:

  • Zero fatalities;
  • 16% increase in average nickel price realised;
  • Revenue up by 1% year on year to US$54.0 million (2018: US$53.6 million);
  • EBITDA: US$25.6 million compared to US$11.5 million in prior year (122% increase);
  • Profit after tax: US$13.5 million, up 131% on last year’s US$5.8 million;
  • 1% decrease in nickel sales tonnage
  • 5% decrease in nickel production;
  • Capital expenditure: US$5.4 million (2018: US$4.6 million);
  • Smelter Restart Project still at 83% complete;
  • All Smelter Bond obligations for the year were met in full.


No fatalities were recorded at any of our operations or projects during the year. The Board and Management take safety very seriously, given the inherently hazardous nature of mining. We have a zero tolerance to accidents. SHEQ systems are continually being developed and implemented to improve performance. The main area of focus on safety is to change the behaviour of employees in order to prevent or minimize accidents in line with the Corporation’s zero harm goal.


Income statement

Nickel in concentrate sold amounted to 6 410 tonnes, compared to 6 470 tonnes sold in the comparative period last year.

In line with the increase in global nickel prices, the Company realised an average price for its nickel in concentrate sold of US$8 376 per tonne, compared to US$7 249 per tonne achieved in the comparative period last year.

The above fundamentals translated to an annual turnover of US$54.0 million (2018: US$53.6 million). Cost of sales increased by 14% year on year from US$34.7 million last year to US$39.5 million in the year under review, mainly due to an increase in local input costs.

In line with the subdued growth in turnover and the year on year increase in cost of sales, gross profit decreased by 23% from US$18.9 million in the comparative period last year to US$14.5 million. However, operating profit increased by 141% to US$21.3 million, compared to the prior year’s achievement of US8.9 million. This is mainly attributable to exchange gains recognised on the introduction of the Zimbabwean Dollar. The Company realised a profit and total comprehensive income of US$13.5 million, compared to US$5.8 million in the prior year.

Balance sheet

Total equity increased by 29% year on year, in line with the increase in profit. Non-current liabilities of US$19.2 million decreased by 31.1%, mainly due to a decrease in interest bearing loans and borrowings. Current liabilities decreased by 37% from US$32.8 million to US$20.5 million, mainly due to a decrease in trade payables and interest bearing loans and borrowings respectively. Current assets decreased by 21% from US$28.1 million in the prior year to US$22.1 million, mainly driven by a decrease in cash and short term deposits. However, the net current asset position improved to a positive USD$1.5 million from a negative USD$4.7 million in the prior year.

Cash Flows

The Company maintained a number of overdraft facilities secured from local financial institutions in order to finance its working capital requirements. All commitments due to Bondholders at the September 2018 and March 2019 intervals respectively, were honoured.


Some 443 876 tonnes of ore were milled in the year under review, compared to 390 211 tonnes milled in the same period last year. The 14% increase was due to the improved availability of mining equipment following the introduction of two new LHDs and one rebuilt Dump Truck.

Head grade was 1.64% versus 1.89% in the same period last year. The decrease in grade was in line with the decision made to increase the mining of disseminated ore as opposed to massives, following the investment in new mining equipment referred to above. Recovery was 86.3%, compared to last year’s achievement of 89.6%. The decline was in sympathy with the lower ore grade achieved. Nickel production was 6 289 tonnes, which was lower than last year’s output of 6 620 tonnes. The decline was in line with the lower ore grade achieved, year on year.

The all-in sustaining cost of producing nickel in concentrate increased from U$6 289 per tonne to US$6 610 per tonne, year on year. The increase was mainly attributable to the drastic increase in the prices of local inputs.

The industrial relations atmosphere was reasonably calm throughout the year, thanks to the ongoing proactive and constructive engagement of employees on all pertinent issues.


Total capital expenditure for the year was US$5.4 million, mainly in respect of the following projects:

  • Installation of steelworks for the loading station
  • Sub-vertical Rock Winder mechanical and electrical control upgrades
  • Decommissioning of services in the Service Winze shaft
  • Civil works for the 44/0 Level spillage handling hoist

The Smelter Restart Project is still at 83% complete.The Project was put on hold due to the cash flow deficit arising mainly from the outturn on the LME nickel price, which has averaged US$12 000 per tonne since the Project commenced in 2015, compared to the average LME price of US$16 000 that was forecast then. With the promising global Nickel price outlook,
plans are afoot to complete the Project in the near future. The Refinery and Shangani Mine remained under care and maintenance.


The Market

The average LME nickel cash settlement price fell by 5.6% to US$12 388.34 per tonne (US$5.62 per pound) compared to US$13 278.84 (US$6.02 per pound) in the same period in 2018. The nickel demand that was expected to come from the electronic vehicle (“EV”) did not materialise as it was now realised that the demand had been premature. However, this demand was now expected to increase significantly by 2025.

Demand for nickel in the steel sector was muted, despite an increase in the usage of nickel which was attributable to the production of high grade 300 series steel. Supply remained robust as more Indonesian mills either ramped up or came into production. Meanwhile, it is expected that there will be a reduction in supply as the Chinese environmental audits are underway, which are expected to result in the closure of some Nickel Pig Iron (“NPI”) plants.

The five major nickel producers have reported a reduction in production. The market is expected to be in a supply deficit for the third year in a row. The market seems to be more responsive to the macro environment now than to fundamentals. The main factors in the macro environment include:

  • the trade tensions between the United States of America (“USA”) and the People’s Republic of China;
  • geopolitical tensions between the USA and Iran and
  • the strengthening USA dollar

Consequently, investors are moving money out of commodities and are investing in such assets as gold.


Under the current circumstances, it is not feasible to declare a dividend for the period under review.


Prior year tax dispute

It was reported in the previous year that the Company was involved in a tax dispute with the tax authorities emanating from tax assessments which were issued in February 2018, amounting to an estimate of US$29 million. The assessments mainly related to historical issues pertaining to how the Company was structured many years ago, as well as issues arising from differences in the interpretation of standard commercial agreements in the mining industry.

Following further engagements with, and submissions to the tax authorities during the year, the tax assessments were revised downwards to approximately US$14 million. Both parties agreed to declare a dispute in respect of the outstanding amount and to pursue the matter through the courts. The matter is now before the courts pending hearing. Except for this disclosure, no provision has been made in this year’s financial statements with respect of this contingent liability. Based on legal advice received to date, the Company has acted within the statutes of the law. The Directors are still of the view that a positive resolution to this matter will be reached. At the time of reporting, the Company was not able to reasonably estimate the likely timing of resolution of the matter.


In assessing the going concern position of the Group, the Directors have considered the current trading activities, funding position and projected funding requirements for the Group, particularly in respect of the main operating subsidiary, Trojan Nickel Mine Limited, for at least eighteen months from the date of approval of these financial statements.

While the Group earned a profit before taxation for the year ended 31 March 2019 amounting to US$18.3 million (2018: US$7.9 million), and while at that date its current assets exceeded current liabilities by US$1.5 million (2018: -US$4.7 million), its ability to continue as a going concern is dependent on its ability to generate positive cash flows.

The following factors constitute material conditions that require consideration in assessing the Group’s ability to continue as a going concern.

  • The Company’s cash flows are highly dependent on the Nickel price. During the year, LME nickel prices remained subdued for the greater part of the year, but started picking up in the last quarter to average around US$12 885 per tonne for the year (2018: US$11 000 per tonne). Latest forecasts by analysts predict a steady increase in Nickel prices in the medium to long term owing to expected rise in demand for Nickel and Lithium particularly given the anticipated increase in the use of electric vehicles in developed countries.
  • In assessing the future cash flows of the Group, an average Nickel prices have been assumed as follows: US$12 000 per tonne for the period April to December 2019, US$13 000 per tonne for the period January to March 2020 and US$16 625 per tonne for the period April 2020 to March 2021. These projections have been taken from a consensus forecast compiled by market analysts. In addition to the Directors’ assumptions regarding the Nickel price, the 18 month cash flow forecast for the Group from 1 July 2019 will depend on the following key assumptions:
  • The availability of sufficient foreign currency. While the Group realises all its revenue in foreign currency
    (USD), it only retains 50% of the sale proceeds in foreign currency and the remaining 50% is surrendered to the Reserve Bank of Zimbabwe (RBZ) in exchange for the local currency, in line with the current

Exchange Control regulations. For the amount surrendered to RBZ, in the past, the Group was paid at a rate of 1:1 which represented a loss of value as the local currency was not at par with the USD. The regulations have limited the availability of foreign currency for the Company to meet its critical payments for the operations. The Group requires more foreign currency for the importation of specialised mining equipment and spares which are not readily available on the local market. Following the promulgation of SI 33 of 2019 and SI 142 of 2019 in February and June 2019 respectively, it is expected that the Company will realise true value from the compulsory exchange of its foreign currency with the local currency at the interbank rate.

The Directors consider it appropriate to adopt the going concern basis in preparing the financial statements for the year ended 31 March 2019. It is the Directors’ view that the Group will be in a position to finance future operations and settle any liabilities that may occur in the ordinary course of business.


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

On Behalf of the Board
Bindura Nickel Corporation Limited

Muchadeyi Ashton Masunda
Board Chairman