MWANA Africa has not responded to calls by holders of Bindura Nickel Corporation’s $20 million bond for the release of security guarantees amid concerns of falling nickel prices. The bond holders allegedly called on the bond guarantees by Mwana Africa, which committed to providing the security in the event that its Zimbabwe nickel mining unit failed to repay or perform.
“Bond holders say there has been no word on the way forward, (regarding their calls for release of the guarantees made by Mwana),” said a well placed source that requested not to be named. Efforts to get a comment from BNC managing director Mr Batirai Manhando were fruitless as he would not pick up calls to his mobile phone. Earlier, he had said he was in a meeting in South Africa.
BNC floated a $20 million bond to raise the bulk of the $26,5 million Africa’s only integrated nickel extractor need to restart its Trojan Mine smelter, with significant attendant benefits expected. But nickel prices have plunged below the break-even price of $15 000 per tonne to around $9 000 per tonne, raising fears BNC might be in need of funding not sticking to terms of the bond.
This is because it is feared that BNC is losing money and not directing the bond proceeds, which are capital to ring fenced for the restart of Trojan Mine smelter, to a sinking fund as agreed. A source at the mine said bondholders feared that the proceeds of the bond might be going to meet the company’s funding gap while the restart of the smelter would have to be stopped due to funding.
BNC offered interest on the bond, to be directed to a sinking fund, ring fenced and managed by a trustee, in lieu of coupon and capital payments, but doubts abound if the fund is being serviced when nickel is gone below $9 000 while all in costs are at $12 000. Mwana Africa had provided parental guarantee of $20 million, given as prerequisite for the bond to be accorded prescribed asset status. The guarantee can be called if BNC is unable to pay.
If the smelter is stopped due to funding issues, the bond’s prescribed asset status would be revoked by regulators, the source said. Alternative Investment Market listed Mwana Africa and its Zimbabwe unit was positive that the restart of Trojan Mine smelter would significantly reduce costs and improve BNC’s bottom line.
This is because it would export nickel less impurities. BNC and Trojan Mine smelter were put on care and maintenance after global nickel fell below $8 000 per tonne at the height of the economic crisis in 2008, as it posted poor quarterly numbers.