BNCL overturns loss, posts US$887 000 after tax profit

MINING firm, Bindura Nickel Corporation Limited (BNCL) overturned a loss-making position to register a profit after tax of US$886 637 due to lower cost of sales for its financial year ended March 31, 2020.

During the period under review, the cost of sales was down to US$37,66 million from a 2019 comparative of US$40,28 million. In the 2019 period, BNCL recorded a loss of US$253 065.

BNCL’s overturning of its loss-making position was despite recording lower nickel in concentrate sales of 5 685 tonnes during the period under review from 6 410 tonnes sold in the comparative 2019 period.

In a statement accompanying the mining firm’s latest results, BNCL chairperson Muchadeyi Masunda said: “Global nickel prices improved during the period under review, leading to an 8% year-on-year increase in the average price realised by the company for the sale of its nickel in concentrate. In spite of the improved price performance, annual turnover of US$52,4 million was 1% lower than the US$54 million realised in the comparative period last year.

“This was in sync with the decrease in sales tonnage referred to above. Cost of sales decreased by 7% from US$40,3 million last year to US$37,7 million in the year under review, mainly due to lower production. Gross profit increased by 7% from US$13,7 million in the comparative period last year to US$14,7 million.”

He added: “This, to a large extent, is a reflection of the corresponding decrease in the cost of sales. However, operating profit decreased by 86% to US$2,8 million, compared to the prior year’s achievement of US$20,2 million.”

This profit erosion was mainly attributable to a reduction in the net foreign exchange gains recognised on the introduction of the ZWL in the prior year amounting to US$17 million, versus US$500 000 realised in the year under review.

“However, profit and total comprehensive income of US$0,9 million, was higher than prior year restated amount due to a prior period error adjustment,” Masunda said.

During the period under review, ore milled in the year under review was 434 077 tonnes, compared to 443 876 tonnes milled in the same period last year.

BNCL explained that the 2% decrease was due to a decrease in grade.

“Head grade was 1,53% versus 1,64% in the same period last year. The decrease in grade was due to an increase in the mining of disseminated ore as opposed to massives, following the investment in new mining equipment. Recovery remained constant at 86,3%, year-on-year,” Masunda said.

“The nickel production of 5 720 tonnes was 9% lower than last year’s output of 6 289 tonnes due to the lower ore grade and lower milled tonnage achieved respectively year-on-year.”

He said the all-in sustaining cost of producing nickel in concentrate increased from US$6 610 per tonne in the prior year to US$7 606 per tonne because of the decrease in production.

Masunda added that incessant increases in the prices of local inputs also contributed to the increase in costs.

The price increases were fuelled by the sourcing of scarce foreign currency on the parallel market by local suppliers for the importation of inputs.

Total assets were down 3,1% to US$93, 96 million in the period under review owing to decreases in trade and other receivables.

In the comparative 2019 period, from the one under review, assets were US$96,97 million. In terms of liquidity, BNCL had a current ratio of 1,27, meaning that for every one dollar of current debt the firm had more than enough to cover it.

In an outlook, Masunda said the market’s direction will depend on the demand/supply balance.

“The demand side will depend on how fast economies re-open. The supply side will depend on the extent of the total reduction in supply due to national lockdowns, which have forced mining houses to either stop or reduce production,” he said.