Bindura Nickel Corporation is seeking short-term bridging finance to cover the funding shortfall as it continues to focus on the preservation and integrity of the business and its assets.
The company pointed out that it will continue to focus on the preservation and integrity of the business and assets, but warned shareholders to exercise caution when dealing in its shares until it has resolved the funding constraints.
The update follows a recent announcement by parent company Mwana Africa that its local subsidiary had failed to raise the funding required for the next phase of the Trojan Mine restart programme.
Trojan Mine resumed operations late last year after BNC raised the US$23 million Trojan Mine required for recapitalisation, having put all operations under care and maintenance at the height of Zimbabwe’s economic downturn in 2008. BNC management then indicated last year that after the recapitalisation, an additional US$10 million was required to attain a positive cash generation and annual production of 7 000 tonnes of nickel concentrate.
“Further to the announcement on June 25, 2013, shareholders are advised that management of BNC are examining alternative mining plans with the objective of improving the short-term cash flow of the company and reducing the funding requirement,” the company said in a statement.
The nickel miner would require a further US$60 million to restart its smelter and refinery.
BNC recently said despite making significant progress over the past year, including the completion of the financial restructuring in September 2012 and also delivering its first nickel concentrate in April 2013, it had been unable to raise additional funding through debt to finance for phase two of the restart of Trojan Mine, as had been anticipated at the time of the September 2012 rights offer and private placement when it managed to raise the US$23 million.
It said this was attributable to negative market sentiment associated with falling nickel prices coupled with challenging capital markets, which has created a funding shortfall at the Zimbabwe Stock Exchange-listed miner.
BNC added that while Freda Rebecca Gold Mine, which is owned by BNC, remains cash generative, its cash contribution to the group in recent months has fallen in light of lower gold prices.
The Mwana Africa board said it had therefore embarked on a significant cost-cutting exercise targeting annualised savings from budgeted corporate costs of about US$5 million.
London Alternative Investment Market listed Mwana Africa raised its shareholding in BNC from 52,9 to 76,5 percent after underwriting the company’s US$21 million rights offer.
Last year, the company restructured through reducing its head count while at the same time it reached a payment plan with creditors in an effort to significant improve cash flows.