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BNC faces liquidation threat

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Bindura Nickel Corporation (BNC) says it should secure new funding by the end of the first quarter of the year or lose its going concern status which could plunge the country’s sole primary nickel extractor into liquidation.

The ZSE-listed resources company in which AIM-listed Mwana Africa owns 52,9% is currently sweating to reopen its three nickel operations, Trojan Mine, Shangani Mine and Bindura Smelter and Refinery, which it placed on care and maintenance in December 2008.

Sources say Mwana Africa is ready to dilute its shareholding to equity-finance its restart programme under which the three operations would be brought back on stream in phases starting with Trojan Mine.

But the restart programme is lagging behind schedule after the miner missed its November 2010 deadline to commence Phase 1 as talks for project funding dragged.

In a statement to shareholders, BNC disclosed its balance sheet can longer bear the burden of extended care and maintenance, let alone the costs of restructuring the company, and expressed doubts it could secure the required finance in the first three months of the year.

“BNC requires new funding by the end of the first quarter of 2011 to continue its care and maintenance programme as well as to restart Trojan,” the statement said.

“The directors consider that the requirement to raise new finance for BNC represents material uncertainty that may cast significant doubt on BNC’s ability to continue as a going concern beyond the first quarter of 2011.”

BNC, which is currently surviving on past earnings and sales of limited nickel recoveries, nickel by-products and scraps, estimates its recapitalisation bill at $100 million, $65 million of which would be committed to the Trojan Mine restart programme.

The Bindura-based miner in August obtained a Competent Persons Report (CPR) for Trojan Mine, the most critical instrument in the restart of the mine, which confirmed that Trojan’s mineral resource runs at 3,5million tonnes of ore with a mean grade of 1,29% Ni with potential to increase at depth.

The CPR has cleared the way for the resources company to open negotiations with potential financiers and off-takers and commence the requisite preparatory work, including limited underground developments.

Compiled by SRK Consulting (UK) Ltd, the report has, however, been criticised for glossing over BNC’s outstanding financial liabilities to creditors and employees, both of which may weigh on and probably hold up the restart programme.

BNC is currently embroiled in a growing trail of long-drawn-out labour disputes triggered by its decision to shut down in December 2008 and from a failed retrenchment bid and unilateral suspension of employee benefits the following year.

In the statement to shareholders, the commodity producer glossed over the issue saying “labour litigation cases are being handled on a case-by-case basis”, announcing for the first time that the organisation was being remodelled to embrace multi-tasking and multi-skilling.

However, its worker leadership suspects the process is a subtle retrenchment bid and is determined to resist the move.

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