HARARE (FinX)- Bindura Nickel Corporation says revenue and profit for the second quarter to September 30 were ahead of forecasts after the company realised a higher average price for the sale of nickel concentrates while average costs were below forecast.
In a trading update at the company’s AGM, chairman Much Masunda said that the nickel market is cautiously bullish with previous sensitivity to the macro-environment, Sino-USA geopolitical tensions and surges in the COVID-19 cases being outweighed by an increasingly positive sentiment.
This sentiment is being bolstered by positive data from coronavirus vaccines drug trials, anticipated economic recoveries and unprecedented stimulus packages from central banks globally. The COVID-19 scourge continues to have bullish and bearish implications on the short term outlook with potential supply disruptions being supportive of price increases whilst the threat of a second wave of lockdowns that could dent demand cannot be discounted.
The average LME cash settlement price of $14 254.79/t ($6.47/lb.) was 14% higher than the previous quarter’s average of $12 197.26/t ($5.53/lb.). The average for the same period in 2019 was $15 556.42/t ($7.06/lb.) The current LME stock levels have stagnated around the 235kt mark from February 2020 until now.
Masunda said price gains were experienced as the Asian stainless steel market recovered from the economic fallout caused by the COVID 19 pandemic. Physical demand recovered due to unprecedented stimulus packages rolled out by central banks globally in order to resuscitate economies in their respective countries. The Chinese government made funds available for local stockpiling of metal and infrastructural development projects.
Speculative buying after statements from Electric Vehicle (EV) manufacturing giants with regard to potential Class 1 nickel shortages saw prices rallying before the momentum abated at the end of the quarter. The global nickel market remains well supplied as the global economic recovery is sluggish with the exception of the Chinese steel sector.
Price is forecast at $13 900/t for the third quarter of the calendar year.
In terms of performance in the first quarter, Masunda said tonnes mined decreased by 19% to 91 322 (Q4 FY2020: 113,249), due to low production achieved in April 2020 as a result of the Covid-19 lockdown. In July, the tonnes mined improved to 39 845, dipped slightly in August to 38 066 and are forecast to have recovered to 39 997 in September. The second quarter outlook is at 117 908 tonnes, an improvement from the first quarter performance.
Tonnes milled decreased 18% to 91 717 due to depressed ROM but are projected to increase to 118 613 in the second quarter.
Production of nickel in concentrate decreased 9% to 1 162t (Q4 FY2020: 1 281t), primarily due to the Covid-19 induced lockdown and is forecast at higher at 1 747t at Q2.
Head grade was 10% higher at 1.49% (Q4 FY2020: 1.36%) due to an improved access to higher grade massive draw points which carried through in the second quarter to an expected outcome of 1.68% in Q2. Recovery was 1% higher at 84.95% (Q4 FY2020: 84.12%).
Masunda said that the major mining constraint remains development, which continues to lag behind. “The mine is continuously reviewing the business plan which includes numbers and state of equipment, mineral resources, systems and structures with a view to improving performance in the 2nd and 3rd quarters of FY2021. Focus is now on replacing aged loading and drilling equipment which is now very expensive to run and constantly breaking down.”
He said the emphasis is on increasing overall equipment uptime and asset utilisation so as to optimise productivity and cost effectiveness.
The Re-deep tie-in has been moved to next year. However, the feasibility of the tie-in will be reassessed in the light of the operational delays caused by the Covid -19 induced lockdown.
The average LME nickel price was US$12 197/t (Q4 FY2020: US$12 716/t) reflecting a 4% decrease in global nickel prices for Q1. Nickel sales volumes were 98% lower at 27t (Q4 FY2020: 1 133t) due to the adverse impact of the Covid-19 pandemic, which saw no sales during the first quarter and the delay in securing a new sales contract. However for Q2, nickel sales volumes are projected at 2 287t. In the first quarter, BNC secured a nickel in concentrate sales contract with ZOPCO, in terms of which dispatches will be based on LME spot prices. The total material dispatched to ZOPCO to date is 22 020 tonnes of concentrate. All concentrate sales proceeds due to BNC were received from this new customer within 5 days from dispatch.
The C1 cash costs for nickel in concentrate decreased by 18% to US$7 310/t (Q4 FY2020: US$8 924/t), while the all-in sustaining C3 costs of nickel in concentrate decreased by 15% to US$8 450/t (Q4 FY2020: US$9,962/t) due to the continued efforts in controlling costs.
Masunda said the company was up to date with regard to all its obligations to bondholders.
He also said that following the transfer of the majority shareholding to Sotic International, a further restructure that has been consummated at parent company level would soon be announced. It will however not affect the overall total issued shares held by the parent company.