BNC smelter upgrade project on ice

BINDURA Nickel Corporation’s (BNC) says it has put its $20 million smelter project on hold due to declining nickel prices.
When the company raised funds for the smelter project through a bond in 2014, it had assumed that nickel prices would rise from $16 500 per tonne in 2014 to $21 000 in 2016 before easing to about $18 000 in 2018.
The industrial metal’s price however defied the “consensus” forecasts, which were based on projections by “approximately 20” traders and fund managers, after prices fell from about $14 000 in 2014 to $10 000 in 2016 before recovering to $11 000 in 2018.
Batirai Manhando, BNC’s managing director, said the listed firm was of the view that for as long as the nickel market fundamentals have not driven the price to significantly higher levels than where it has been on a year on year basis, it would not make economic sense to continue injecting more capital into the project.
“The nickel prices that obtained during the period under review, though better than the previous period, were not high enough to change the circumstances under which the project can be resumed. At the current prices, power tariffs and available feed levels, the smelter will not be viable, hence the decision to put it on hold until favourable conditions prevail,” he said at an analyst briefing recently.
When the company raised $20 million capital for the project, it was then envisaged that the balance of funding required for the $26,5 million project would come from cash generated through operations.
The project, which was initially conceived to have a nine to twelve month time horizon, had been expected to be completed in the first quarter of 2016. However, the project has experienced many delays influenced “mainly by nickel price related cashflow constraints experienced after the exhaustion of the $20 million raised through the bond”.
In the face of challenges encountered during the course of the project, the company in 2016 considered converting the smelter to a plant that would process platinum group metals.
Feasibility studies however indicated that this would not be viable due to a limited supply of platinum concentrates.
Muchadeyi Masunda, BNC’s board chairman said the project, which is now 83 percent complete, will be completed as soon as the fundamentals improve.
“It only becomes viable to pursue smelting at a nickel price of at least $16 200 per tonne,” he said in comment accompanying the company’s financial results for the half year ended September 30, 2018.
The company expects nickel prices to remain under pressure in the short-term but maintains its bullish sentiments for the medium to long-term.
“The electric motor vehicle story did not manage to prop up the nickel price on a sustained basis. It now appears as if the market sentiment on electric motor vehicles was too bullish, hence the price correction mode that prevailed during the last quarter of the period under review,” Masunda said.
“A boost in the consumption of nickel sulphate, which is used in the manufacture of batteries, is expected to start in 2020, at the earliest.
“New nickel sulphate capacity is being built, with some global operations expected to ramp up as from 2019,” he