BNC wary over high production costs

Listed miner, Bindura Nickel Corporation (BNC) has been hit by stubbornly high cost of production, labour and materials, in the quarter to June 30, 2021, which rose 25% to US$10 525 per tonne from US$8 450 recorded reported in the prior comparative period.

Exacerbating the cost pressures was the planned shutdown and Covid-19-induced lockdowns.

In a trading update, BNC company secretary Conrad Mukanganga said the adverse impact of the cost of local inputs and the increasing disparity between the auction foreign exchange rate, at which the company surrenders 40% of its revenue for Zimbabwe dollars, and the prevailing parallel market rate battered the miner.

“Production for the quarter was only slightly higher than for the quarter to June 2020.

“However, the unit cost of production increased significantly due to the higher costs incurred in the quarter, as a result of the high cost of maintaining aged mobile mining equipment, nonrecurring costs of refurbishing the concentrator plant during the planned shutdown and higher labour costs arising from the adjustment of employees’ wages and salaries to align with industry levels as well as payment of performance bonuses,” Mukanganga said.

He said production for both Q1 FY2022 and Q1 FY2021 was approximately 15% lower than average, hence the fixed cost burden per tonne of nickel produced was higher than normal, thus contributing to the higher unit costs.

The production for Q1 FY2022 was affected by the loss of most of the month of April 2021 due to the commissioning of the Re-deep Tie-in Project.

Mukanganga said the company’s production went up 2% to 93 113 tonnes from 91 322 tonnes while milled ore rose 4% to 95 518 tonnes from 91 717 tonnes.

During the period March to April 2021, a planned production stoppage came into effect to facilitate the completion of the Shaft Re-deep Tie-in Project, as well as the refurbishment of major components of the Concentrator Plant. Both were successfully completed.

Production resumed at the end of April 2021, following the commissioning of these projects.

Despite there being no production for most of April 2021, tonnes milled in the quarter under review were marginally higher than for the comparative period in FY2020.

This was due to the loss of production during the latter period, occasioned by the operational restrictions imposed by the government in response to the advent of the Covid-19 pandemic, coupled with the unavailability of missives in the production mix, which were in turn attributable to lagging development.

Head grade, at 1.45%, was marginally lower than in the prior year. The recovery of 86% was higher, in the quarter under review, than the 85% achieved in the comparative period in the previous year, mainly due to the improved plant performance after the above-mentioned refurbishment exercise.

Mukanganga said nickel in concentrates went up 2% to 1187 tonnes from 1162 tonnes.

Nickel in concentrates produced was marginally higher than the prior year’s production in the comparative period, mainly due to the increase in tonnes milled.

Nickel sales tonnage for the quarter ended June 30, 2021 was significantly higher than the tonnage sold in the quarter ended June 30, 2020.

In the latter period, the insignificant sales tonnage was attributable to the temporary suspension of sales, which was necessitated by the need to conclude a more favourable new off-take agreement with Zopco SA, a Switzerland based trading house, in place of the agreement with Glencore.

The average price of nickel on the London Metal Exchange was US$17 343 per tonne during the quarter under review, compared to US$12 197 per tonne, in the same period last year, reflecting the positive impact of the increasing demand for clean energy.

Going forward, the production of nickel in concentrate is expected to be higher than achieved during the quarters ended September 30, 2020 and June 30, 2021 respectively.

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