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Corporate News with Golden Sibanda
THE announcement by Mwana Africa that its majority- owned Bindura Nickel Corporation signed an off-take agreement with Glencore International should calm the nerves of uneasy investors.
As majority shareholder Mwana Africa has pursued numerous avenues to raise funding for Trojan Mine and ensure the nickel mine resumes mining after it suspended operations in 2008.
The multi-resource commodity firm expressed confidence that operations would resume at Trojan following the completion of a competent person’s report carried out by SRK Consulting.
Even then Mwana Africa expressed concern later on that failure to secure the requisite funding for resumption of operations at Trojan posed a threat to BNC’s continuity as a going concern.
“Directors consider the requirement to raise new finance for BNC a material challenge that may cast significant doubt on BNC’s ability to continue as going concern beyond the first quarter of 2011,” said BNC.
BNC had also indicated in March last year that it could start operations at its flagship mine within six to seven months, but this did not come to fruition due to capital-related challenges.
Although the firm stressed negotiations for funding were in progress, this could have left minority shareholders a bit uneasy by now that the funding will be secured by the end of March this year.
However, the fact that BNC continues to explore mechanisms that would support resumption of operations could be evidence of controlling shareholders’ resolve to resume operations.
Mwana Africa announced on Monday that it had signed an off-take agreement with Glencore International AG, a leading global trader of commodities.
Under the terms of the agreement, Glencore will buy all the nickel concentrate produced at Trojan until such a time as BNC’s smelter and refinery are back on stream.
Glencore will pay the nickel-mining firm an LME-linked price based on agreed terms of the final contained nickel.
Mwana Africa chairman Mr Kalaa Mpinga said the off-take agreement was a key step in ensuring operations at BNC resume at the earliest possible time.
“The off-take agreement with Glencore is a very significant step towards the restart of operations at Trojan Mine in due course, unlocking the unique potential of BNC’s other nickel assets.”
Mwana Africa requires US$26 million to revive BNC’s Trojan Mine, which was closed in 2008 at the height of an almost decade-long economic crisis.
A competent person’s report compiled by SRK Consulting established the business plan for the resumption of Trojan was realistic and achievable.
The report confirmed the mine had 3,5 million tonnes of ore with an average grade of 1,29 percent nickel with potential to increase the resource confirmed.
SRK Consulting’s report did not cover Shangani Mine or the restart of Bindura’s smelter and refinery complex.
Additional aspects of the Trojan restart programme such as settlement of debts and reassessing staffing levels, for additional investment will be needed, were also not covered.
Loan finance amounting to US$10 million from the Industrial Development Corporation of South Africa remains undrawn pending conclusion of terms to allow utilisation of the much-needed funding.
BNC is one of over 100 mining firms that were put under care and maintenance at the height of economic turbulence in Zimbabwe in 2008.
After the Government, adopted several economic recovery programmes including the Short-Term Emergency Recovery Programme and multi-currency system, the mining sector set on a recovery.
The biggest challenge to that end remains that of funding as the mining sector requires an estimated US$3-US$5 billion for recapitalisation in the next five years.