70 percent of nickel producers operating at a loss – BNC
BINDURA Nickel Corporation (BNC) says an estimated 70 percent of nickel producers around the world are operating at a loss despite no production cut by the mineral producers in the financial year to March 31 2016.
Managing director, Batirai Manhando, said in line with the reduction in overall output, sales of nickel in concentrates for the year were 6 613 tonnes compared to 7 352 tonnes sold in the prior year.
Turnover achieved from this reduced sales tonnage was US$42,3 million from US$78,9 million.
“This was a 46 percent decrease to US$36,6 million compared to last year. The average nickel prize realised for the period was US$6 737 per tonne compared to 10 855 per tonne last year,” said Manhando.
He said prices were mainly driven by the market sentiments towards the strength of the United States dollar, the contracting Chinese economy and fall in crude oil prices.
Cost of sales decreased by 22 percent to US$33,2 million from US$42,8 million. The decrease was said to be in line with the reduced sales tonnage and cost reduction initiatives.
BNC said reduced profitability resulted in modest two percent year on year growth in total equity. Total equity and liabilities grew by nine percent from US$90,7 million to US$98,4 million mainly due to the US$7 million overdraft facility secured during the year under review.
Current assets declined by 15 percent from US$32,1 million from US$27,2 million, driven mainly by the reduction in nickel prices.
“In response to the liquidity challenges experienced as a result of the persistent decline in the price of nickel during the year, the company secured an overdraft facility from local financial institutions, amounting in total to US$7 million in order to finance on-going working capital requirements,” the company said in a statement accompanying its financial results.
Going forward some analysts believe that the global market will be “in a balance-to-deficit during 2016” and that nickel prices will increase in the medium term.
Other analysts expect nickel prices to increase in the last quarter of the year as energy cost for producers increase. They estimate that the fall in oil prices in reduced nickel production costs of between 20 percent and 30 percent. Production costs are expected to increase as the price of crude oil recovers.
While the group earned a profit before tax amounting to US$1,2 million for the year to March 31 from US$15,9 million and at that date its total assets exceeded total liabilities by US$39,6 million, its ability to continue as a going concern is dependent on its ability to generate positive cash.
Follow us on Twitter @FingazLive and on Facebook – The Financial Gazette