Auditors cast doubt on BNC survival

Bindura Nickel Corporation

BINDURA Nickel Corporation (BNC) auditors Grant Thornton have cast doubt on the mining giant’s ability to continue as a going concern after the group’s current liabilities exceeded current assets by a wide margin.

The mining company incurred an operating loss before tax of US$24,2 million for the year ended March 31 2023.

“Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report,” the auditors said in their audit report accompanying the firm’s financial results.

“However, future events or conditions may cause the group to cease to continue as a going concern.”

Going concern refers to a company's ability to make enough money to stay afloat or to avoid bankruptcy.

During the period, BNC’s current liabilities exceeded its current assets by US$13,3 million and this material uncertainty, according to the auditors, may cast  significant doubt on its ability to continue as a going concern.

“We draw attention to note 34 to the group’s financial statements, which indicates that the group incurred an operating loss before tax of US$24 192 436 for the year ended March 31 2023 and as at that date the group’s current liabilities exceeded its current assets by US$13 375 451,” the auditors stated.

“This indicates that a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.”

The groups’ financial statements show that BNC incurred an operating loss of US$21,8 million compared to the operating profit of US$11,9 million in financial year (FY) 2022.

The company incurred losses before and after taxation of US$24,2 million and US$18,5 million respectively, which represented a decrease of 320% and 329% respectively, year-on-year.

 Total equity of US$41,6 million decreased by 31% from US$60,1 million as a result of the loss incurred for the year.

The company closed the period with a net liabilities position of US$13,4 million due to operational challenges experienced by the mining firm.

In addition, the company increased its current borrowings by US$4,5 million from the comparable financial year.

Production for the group during the period was negatively impacted by an unexpected change in the ore body, leading to a severe decline in the high grade massive resource footprint.

The company said this change required a rapid transition in the mining model from a low-volume, high-grade strategy to a low-grade, high-volume strategy.

“Unfortunately, the transition is behind schedule due to the delays in the delivery of the new underground mining mobile equipment, which is a prerequisite to the realisation of the new mining strategy,” BNC chairperson Muchadeyi Masunda said.

Masunda, however, said the company was set to address the operational challenges during the new financial year and beyond, as it was  implementing a number of measures. He said the measures included expediting the transition in the mining model from a low-volume, high-grade strategy to a high-volume, low-grade strategy.

The strategy also includes replacement of the damaged SVR bull gear in August 2023.

“A replacement bull gear, similar in size and duty to the existing one, was identified in South Africa and is currently undergoing refurbishment,” he said.

“The fully refurbished bull gear is expected to be ready for installation in August 2023.”

In addition, Masunda said plans were afoot to augment the current fleet in the new financial year by a combination of hiring and acquiring of additional mining equipment, and implementing various cost containment and cash-saving initiatives to ensure the business remained cost effective.

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