BNC plunge drags mining index

BINDURA Nickel Corporation’s share price, which last year had a stellar performance, hit a 12-month low last week to USc2 as nervy investors fretted about falling global commodity prices.

At this time last year, BNC’s share price traded at USc8,99, a marked rise from USc1,4 at the beginning of 2014, spurred by firm prices for the industrial metal and increased production.

Global metal prices have declined between 15 and 45 percent since January 2015 as China’s economic growth slows.

The Asian giant, the world’s second-biggest economy, consumes about half of global mineral output.

All of the four resource counters on the Zimbabwe Stock Exchange - BNC, Falgold, Hwange Colliery Company Ltd and RioZim Ltd - have struggled, pulling the mining index down more than 50 percent year-to-date.

Last year, BNC single-handedly doubled the value of the mining index to 64 points, but this year the counter has shed about US$86,5 million of its value.

By crashing 77,5 percent in the past 52 weeks, the stock is the second worst performer of the 60 tradable counters on the stock e 0xchange.

Only Falgold, which crashed 87,5 percent, has fared worse than BNC.

YTD, the nickel producer is down more than 66 percent from January’s opening price of USc6.

“Minings have been largely undone by the depression in the global commodities markets coupled with long running recapitalisation issues,” said stockbrokers EFE Securities in a recent market update.

Last month, Bindura reported nickel production in the first quarter of the 2016 financial year dipped 34 percent to 1 349 tonnes compared to 2 032 tonnes from a quarter earlier.

During the quarter, Bindura said it sold its nickel at an average US$8 461 per tonne compared to US$9 489 per tonne in the fourth quarter of 2015.

Nickel prices have continued wilting on the international market this year.

Between May and August, prices skidded 23 percent to US$10 500 a tonne from US$13 700 a tonne.

Of key metals, nickel has been the hardest hit, with prices falling 35 percent since beginning of the year followed by rhodium, which is 33 percent weaker.

Gold and platinum prices have since four and 17 percent respectively.

Stockbrokers MMC Capital forecast that retreating commodity prices will have a knock-on effect on profitability of Zimbabwe miners.

And the China’s economic slowdown has seen a substantial reduction in commodity imports by firms there.

On September 8, Beijing’s customs administration said imports had weakened by 14,3 percent in August.

In a research note last week, MMC Capital said: “Our view is that, commodity prices will likely remain under pressure as long as growth prospects in China remain murky and the greenback continues to strengthen. Global stock prices continue to trend down with the volatility in the Chinese currency and fall in the leading indicators of GDP.”

The analysts added that investors were likely to shift their demand from commodity prices to investments in currencies and risk-free assets (government securities).

The World Bank said in its Commodities Market Outlook report it expects metal prices to average 16 percent below 2014 levels this year, down from the 12 percent estimate in April, dragged by the China’s economic slowdown.

“For countries such as Zimbabwe, Zambia and Angola that export 30 percent, 48 percent and 60 percent of their total exports to China, respectively, trade deficit pressures should increase in the short to medium-term,” said ABC Stockbrokers.

China accounts for over 30 percent of Zimbabwe’s exports, mainly tobacco, nickel and chrome.

Experts, however, discounted the impact of a recent boardroom shake-up on Bindura’s share price.

“Share prices respond positively when with new appointments that may be seen as adding value to the company.

‘‘The converse is true when those appointments are viewed with suspicion.

“However, I do not believe the recent board changes at Bindura had anything to do with the decline in the company’s share price. It is more to do with developments in the Chinese economy,” said an analyst who spoke on condition of anonymity.

Mwana Africa’s new Chinese major shareholders recently booted out the company’s founder and chair, Mr Kalaa Mpinga.

Bindura is subsidiary to Mwana Africa. Following Mr Mpinga’s ouster, many of his proxies were also shown the dollar. Mr Mpinga holds about three percent of Mwana Africa.