Bindura Nickel Corporation (Zimbabwe) revenue up 41% to US$35.3 million in HY2021

By Published On: December 2nd, 2021Categories: Corporate announcement, Earnings


Bindura Nickel Corporation Limited (BIND.zw) HY2022 Interim Report

ECONOMIC OVERVIEW

The Zimbabwean economy is forecast to grow by between 5% and 7% in 2021, underpinned by a successful 2020/21 agricultural season and high commodity prices. However, the threat of a resurgence of COVID-19, persistent foreign currency shortages, the widening gap between the auction and unofficial exchange rates as well as the potential of an increase in the already high inflation rate, will pose serious threats to continued growth and economic stability.

The operating environment for the remainder of the current financial year is therefore expected to remain challenging.

OPERATIONAL PERFORMANCE

Safety, Health, Environment and Quality (SHEQ)

COVID-19 Update
A total of fifty-eight (58) COVID-19 positive cases were recorded among the 1,039 employees during the six months to 30 September 2021, an increase of forty-four (44) positive cases over the same period last year. Trojan Mine Clinic was granted ‘Voluntary Vaccination Site’ status on 28 July 2021 and vaccinations have been carried out daily since then, aided by the supply of vaccines to the clinic under the Kuvimba Mining House Private Sector Initiative, for the voluntary vaccination of employees and their dependants.

As at 30 September 2021, 76.5% of the Company’s employees had been fully vaccinated against COVID-19. Since then, all employees have been fully vaccinated.

Safety
Safety performance in the first quarter was unsatisfactory with two (2) Lost Time Injuries (LTI’s) recorded during that period. Safety performance improved in the second quarter with no LTI’s recorded and thus, total LTI’s for the six months remained at two. Management remains focused on ensuring that the workplace is safe and positive employee behaviour is reinforced to eliminate injuries at work.

Operations
Nickel in concentrate production for the half-year to 30 September 2021 was 2,553 tonnes, 13% lower than 2,929 tonnes produced in the same period last year. The decline was mainly due to the head grade of 1.26%, which was 22% lower than for the 6 months to September 2020. In addition, and as previously reported, the late commissioning of the Shaft Re-deep and Tie-in project, resulted in only four (4) days of production in the month of April 2021.

Tonnes ore milled of 241,325 were 15% higher than the 209,153 tonnes ore milled in the same period last year as the mine initiated the transition from the high grade, low volume strategy to the new low grade, high volume strategy. As the high grade massives (which constitute 5% of the resource) get depleted with depth of mining, ore head grade will continue to decline in view of the fact that the Company’s ore reserves and resources are predominantly low grade. The new strategy thus presents the most effective model of exploiting the mineral resource whilst guaranteeing the business’ long term economic sustainability.

In making the transition to the new mining strategy, the business is also continuing with its capital expenditure/re-investment program, with specific emphasis on replacing the dilapidated and obsolete underground mining mobile equipment. This will assist the business to mine and process higher volumes of ore, as distinct from the historical over-mining of high grade massives, which approach is being corrected through the new mining strategy. In addition, the rate of development underground has been increased to unlock the higher volumes required going into the future.

Recovery at 84.2% was 2.8% lower than in the previous year, in sympathy with the lower head grade. Nickel sales volume was 2,549 tonnes, which was marginally lower than last year’s sales of 2,566 tonnes. The average LME nickel price of US$18,234 per tonne was 38% higher than the previous year’s price of US$13,214 per tonne, reflecting the global increase in nickel prices.

The C1 cash cost of US$9,045 per tonne was 49% higher than the previous period’s US$6,067 per tonne, while the C3 All-In Sustaining cost of US$10,364 per tonne was 52% higher than last year’s unit cost of US$6,819 per tonne. While both are disappointing, they were an inevitable result of lower production arising from the delay in the commissioning of the Shaft Re-deepening Tie-in Project. Nickel production in September 2021 was also lower than plan due to both lower tonnage milled and head grade, a result of poor equipment availabilities and unexpected reduction of higher-grade ore sources. In addition, operating costs for the period were higher than plan due to necessary wage adjustments made in April 2021 to align employee wages to the rest of the mining industry. Further NEC negotiated wage increases were effected in July 2021. Costs were also affected by the adverse impact on local operating costs arising out of the disparity between the auction rates and unofficial foreign exchange rates that suppliers use in their pricing models, coupled with the high cost of maintaining the old and obsolete mining equipment.

In terms of the Exchange Control regulations, 40% of the Company’s export revenue is compulsorily surrendered to the Reserve Bank of Zimbabwe for Z$ converted at the auction rate. For the six months to September 2021, the Z$ auction rate devalued by just under 4% while the Z$ exchange rate on the parallel market, which local suppliers use in their pricing models, devalued by approximately 50%. The combination of compulsory surrender of 40% of revenue and the discrepancy between the auction and parallel market rates, resulted in an estimated loss to the Company of US$1.2 million for the six months.

The industrial relations atmosphere remained calm throughout the six-month period, as Management continued to proactively and constructively engage employees on all pertinent issues.

Capital Expenditure
The Company continued with its on-going programme to replace old and obsolete mobile mining equipment. Total capital expenditure for the period was US$4.7 million of which US$1.2 million was spent on a new exploration drill rig, a Load, Haul and Dump (LHD) machine and also on major rebuilds of existing LHDs and rigs. A total of US$1.1 million was spent on Haulage and Ramp developments to provide operational access to deeper resources.

The Sub-vertical Rock Winder was