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Mr Kalaa Mpinga

Harare Bureau
MWANA Africa has written off Bindura Nickel Corporation’s non-current assets on concerns over viability of the subsidiary’s operations, plunging the AIM listed group into a humongous loss. In a statement, Mwana Africa said it had impaired BNC’s plant, property and equipment worth $43,7 million.

As a consequence of the impairment, Mwana Africa has suffered a $43,5 million loss in the 12 months to 31 March 2013 from $6,7 million incurred in the comparative period last year.

Mwana had registered a $500 000 profit before impairment, but the multi-commodity miner plans to review mining plans at BNC’s Trojan Mine could result in reversal of the impairment.

“While we have, as a result of a steep decline in the nickel price, decided to impair BNC in our accounts this year, current reviews of BNC’s mine plan may result in some reversal of this impairment in the future,” said Mwana Africa chairman Mr Kalaa Mpinga.

Mwana said the impairment was based on a decision based on a discounted cash flow model prepared on the basis of the Trojan Mine life model, but a decision to exploit ore massives along with current mining plans may increase revenue, reduce BNC’s funding needs and make it self sufficient.

The cash flow model that resulted in the impairment of BNC’s assets in the Mwana accounts included the discount rate, budgeted production plans and the London Metal Exchange future nickel prices.

The model cash flow sought to establish the viability of BNC operations in the wake of the drastic fall in global nickel prices in view of funding requirements at BNC’s reopened Trojan Mine.

Given the fall in nickel prices, Mwana Africa said it has taken the decision to impair BNC in this year’s accounts, which led to the huge loss.
“However, BNC is currently reviewing strategic options including considering alternative mine plants that could reduce the funding requirement in the short term, and this may result in some reversal of the impairment in the future,” Mwana Africa said.

Mwana was confident about the viability of BNC, which resumed operations last year since putting assets under care and maintenance in 2008 due to the global financial crisis and a fall in nickel prices.

The resumption of operations at BNC followed a successful rights issue that raised $21 million and a private placement that injected a further $2 million for the restart of Trojan Mine.

But an additional $15 million was required in financial year 2013 to support operations for the second phase of the restart of Trojan Mine.
The additional funding to ramp up output could not be secured while the fall in metal prices from about $18 000 per tonne to about $13 000/t has increased BNC’s funding requirements.