Reconstruction Order Issued for BNC Amid Price Plunge and Operational Challenges
The government has initiated a reconstruction order for Bindura Nickel Corporation (BNC)’s Trojan mine, Zimbabwe’s leading nickel producer, which is grappling with equipment breakdowns and plummeting global prices.
In a notice published on Thursday, Justice Minister Ziyambi Ziyambi appointed Mutsa Remba as the administrator, placing the company under reconstruction. This entails transferring control to the administrator, who is tasked with reviving the company.
“The board of the company under reconstruction shall be divested of the control and management of the company’s affairs, and any person managing or controlling the company’s affairs in any capacity other than as simply a member of the board referred to above shall continue in office subject to the control and direction of, and be answerable to, the administrator.” Remba, formerly an assistant administrator of Hwange Colliery, has experience in similar restructuring efforts from 2022.
The government can invoke the State Indebted Insolvent Companies Act to salvage distressed state-affiliated entities. BNC, predominantly owned by the state-owned Kuvimba Mining House (KMH), falls under this purview.
BNC’s plight reflects the broader crisis among Zimbabwean mining firms, which are struggling with capital shortages amid declining metal prices and escalating expenses. BNC anticipates an 8% increase in losses for the six months ending in March compared to the same period last year.
Since last year, Trojan Mine ceased nickel production due to a critical equipment failure – the Sub-Vertical Rock Winder (SVR) bull gear, essential for ore extraction. Although a replacement winder has been installed, operational challenges persist, delaying mining resumption, as stated in a Thursday stock exchange notice by BNC.
The company attributes its woes to nickel prices hovering at economically unsustainable levels, unable to offset soaring operational costs, particularly energy expenses, which surged by 40% for miners last year. BNC’s deep mining operations incur high production costs compounded by low ore grades.
Moreover, BNC underscores the imperative of securing capital for equipment upgrades, especially underground mining machinery and the processing plant, to revitalize operations.
Nickel prices surged to record highs of $100,000 per tonne in 2022, fueled by supply concerns following the Ukraine conflict. However, oversupply dynamics have since slashed prices to below $19,000 per tonne, marking a 25% decline from a year ago.