The future of Bindura Nickel Corporation (BNC) now rests almost entirely on its parent company, Kuvimba Mining House (KMH), as access to capital from other sources appears increasingly difficult.
By Ryan Chigoche
An analyst has said that local shareholders grappling with trust issues stemming from past experiences have grown sceptical of the company’s prospects. This comes as Zimbabwe’s sole primary nickel producer, BNC, faces significant operational challenges that have heightened concerns among investors and stakeholders alike.
BNC is currently in distress, facing significant disruptions that have drawn the attention of investors and stakeholders alike. On May 6, 2024, BNC’s shares were suspended from trading on the Victoria Falls Stock Exchange (VFEX) after a Reconstruction Order was imposed on its major subsidiary, Trojan Nickel Mine Limited. This decision followed severe operational setbacks and a dramatic decline in nickel prices, casting a shadow over the company’s future.
The primary reason companies list on capital markets is to raise capital, making the suspension a major blow to BNC, which has been grappling with challenges such as equipment failures, declining nickel prices, and mounting financial pressures. The broader market downturn has only compounded these troubles, with nickel prices plummeting from record highs in 2022 to levels significantly below historical averages. As Zimbabwe’s only primary nickel producer, the operational issues at Trojan Nickel Mine not only affect BNC but also have broader implications for the national economy and the mining sector.
Speaking to Mining Zimbabwe, Tafara Mtutu, an investment analyst and Head of Research at Morgan and Co, emphasized that BNC must consider a significant capital injection from KMH. He noted that sourcing capital elsewhere will be difficult, especially given the distrust stemming from the 2017/18 incident when investors were repaid in local currency instead of USD.
“And I think it’s time they should consider either getting an injection from their parent company to tap into that resource. If the controlling shareholder isn’t very liquid, they might also need to explore strategic partnerships, ideally with the off-taker of the company’s nickel or other international players willing to invest in Zimbabwe. Another alternative could be listing a bond, but given the current situation, that might be a tough sell,” Mtutu said.
He further remarked, “Raising capital now will not be easy, especially considering the previous experience investors had in 2017 and 2018. The distrust between the company and investors in Zimbabwe is significant, making them unlikely to invest again in the short term. BNC really needs to work on how to raise capital and change that narrative.”
However, Mtutu emphasized that the company’s revival hinges on its ability to secure capital, which is vital for a potential relisting on VFEX. “We can’t just write the company off due to past experiences with similar companies. Their ability to raise capital will be key going forward.”
The Suspension and Its Origins
On May 6, 2024, BNC’s shares were suspended from trading on VFEX after its major operating subsidiary, Trojan Nickel Mine Limited, was placed under a Reconstruction Order due to severe operational and financial difficulties, including equipment failures and falling nickel prices. This suspension complies with Section 8 of the Securities and Exchange Rules, 2020, and the Reconstruction of State-Indebted Insolvent Companies Act [Cap 24:27] (“Reconstruction Act”).
The suspension stemmed from significant operational challenges at Trojan Nickel Mine, including halted production due to equipment failures and low nickel prices. In September 2023, the mine suspended production following a seismic event that damaged critical ore-hoisting equipment. While new gear was installed by April 2024, operations could not resume due to ongoing low nickel prices and high input costs, such as electricity.
Operational and Financial Challenges
Trojan Nickel Mine, 70% government-owned and employing around 1,100 people, has faced severe setbacks. Its nickel concentrate output fell drastically to 1,314 metric tons in the financial year ending March 2024, down from 3,180 metric tons the previous year. This significant reduction reflects both equipment failures and unfavourable market conditions.
Nickel prices have dropped dramatically from record levels above $100,000 per ton in 2022, largely due to geopolitical tensions affecting Russian supply. Currently, prices hover around $19,000 per ton, representing a 25% decrease from the previous year. This decline has strained Trojan Nickel Mine’s profitability and led to global reassessments of nickel operations, such as BHP Group’s review of its nickel business.
Administrative Changes and New Strategic Direction
To navigate these challenges, BNC appointed Mutsa Remba as Administrator in May 2024. Remba’s primary role is to guide BNC through the Reconstruction Act’s requirements, involving a thorough review of the company’s operations and finances to develop a viable recovery strategy.
The administrator’s responsibilities include conducting thorough investigations into the operational and financial challenges facing Bindura Nickel Corporation (BNC), assessing the causes of equipment failures, the impact of falling nickel prices, and the company’s overall financial health. Additionally, the administrator will craft a comprehensive reconstruction plan to address the identified issues, which may involve restructuring debt, upgrading equipment, optimizing processes, and securing additional capital. Effective stakeholder engagement is also crucial, as the administrator will communicate with creditors, shareholders, and other stakeholders through meetings to discuss the proposed reconstruction plan, gather feedback, and ensure transparency throughout the process.
As part of this reconstruction process, BNC requested a waiver to delay the publication of its Financial Year 2024 Audited Financial Statements. The VFEX Listings Committee granted this waiver on July 15, 2024, conditional upon publication by December 31, 2024. This extension is crucial for allowing BNC to complete its investigations and prepare detailed reports.
The Broader Context and Future Prospects
The current global oversupply and low prices for nickel present significant challenges for BNC. However, these market conditions could change, and a potential rebound in prices driven by shifts in global demand or supply constraints might provide opportunities for recovery. Monitoring global market trends will be essential for BNC’s strategy moving forward.
Financial and Operational Revitalization
To revive Trojan Nickel Mine and BNC, a strategic focus on financial and operational revitalization is essential. The company must secure funds for retooling and upgrading equipment, potentially through negotiations with financial institutions, investors, or government bodies. Additionally, addressing inefficiencies and enhancing maintenance protocols will be crucial to stabilizing production.
BNC must also adhere to legal and regulatory requirements throughout the reconstruction process. Compliance with the Reconstruction Act and VFEX Listing Rules will be critical for resuming trading and restoring investor confidence.
Long-Term Strategy and Conclusion
Beyond immediate recovery efforts, BNC should develop a long-term strategy to ensure sustainability and resilience. This may involve diversifying revenue streams, investing in new technologies, and exploring growth opportunities both within and beyond the nickel sector.
Bindura Nickel Corporation’s suspension from VFEX represents a significant obstacle but also a critical opportunity for restructuring and renewal. The appointment of Mutsa Remba as Administrator and adherence to the Reconstruction Act’s requirements are positive steps toward addressing the company’s pressing issues.
While the path to recovery may be complex and uncertain, BNC’s commitment to effective restructuring, stakeholder engagement, and strategic adaptation provides a foundation for potential revitalization. Investors and stakeholders should remain informed and engaged as BNC navigates this complex process, working to restore trust with the hope that these efforts will lead to a successful resumption of trading and a more resilient company.
