Asa Resources has concluded the sale of its controlling interest in Bindura Nickel Corporation (BNC), the country’s largest nickel producer said in a statement Tuesday.
BNC said the buyer of Asa’s controlling 74.13% stake is “a Zimbabwean based mining entity with interests in the mining and production of ferrous metals, non-ferrous metals and precious metals”.
While BNC does not disclose the buyer, reports have suggested that one of the leading bidders was Sotic International, a company linked to businessman Kuda Tagwireyi, who already holds interests in Africa Chrome Fields and has been involved in bids for ferrochrome producer Zimbabwe Alloys.
“Shareholders are referred to the Cautionary statement published on 1 October 2019 advising that the ultimate holding company of BNC, Asa Resource Group plc (currently under administration), has entered into a sale and purchase agreement with a third party in relation to the 74.73% shareholding in BNC,” BNC said in a cautionary.
“Shareholders are hereby informed that the transaction involving the sale of 74.73% of BNC’s issued shares to the above-mentioned third party has been successfully concluded.”
Landela Mining Venture, another subsidiary of Sotic International, has recently emerged as the local joint venture partner in Great Dyke Investment, the Russia-Zimbabwe platinum project being developed near Darwendale.
BNC: good time to buy?
The new owner of BNC is making the buy at a good time for nickel prices, but also a time the company needs a large injection of capital to ramp up production and take advantage.
Nickel prices rose to US$18,850 per tonne in September after Indonesia, the world’s largest producer of the metal, announced it would ban ore exports. Indonesia’s nickel miners agreed on Monday to stop nickel ore exports immediately.
BNC’s buyer will need to invest additional capex into the business, if it is to increase output.
The company suspended a project to revive its smelter, which is 83% complete, because nickel prices were too low to justify the investment. Since the project began in 2015, nickel prices have averaged US$12,000 per tonne, according to the company’s last earnings report. For the smelter to make sense, BNC has said it needs a nickel price of US$16,200 per tonne.
While prices are expected to ease – some believe the metal is now overpriced – nickel is already above BNC’s forecasts of US$12,000 per tonne this year, US$13,000 per tonne up to March 2020, and US$16,625 per tonne by March 2021.
According to BNC chairman Much Masunda, the company needs at least US$500 million of capex to raise production. But, he said, Zimbabwe’s poor credit score and isolation means the company cannot access that money from global markets.
In 2017, Asa had planned to incorporate the Trojan mine into the Bindura complex, but missed its deadlines due to weak nickel prices and rising costs.
The battle for Bindura
The latest BNC sale adds to sometimes dramatic ownership changes at the mine.
BNC was founded in 1966. In 2004, Mwana Africa, owned by businessman Kalaa Mpinga, acquired 53% of the asset from Anglo American Corporation for US$8 million. Mpinga, however, lost control of the company in 2015, after a hostile takeover by China International Mining Group Corporation, an Asa associate, which had invested US$21 million in 2012 to rescue Trojan Mine.
Asa gained control of 74.3% in BNC and 85% in Freda Rebecca gold mine. But claims of fraud and externalisation soon crippled Asa. In 2017, warrants of arrest were issued on chief executive Yat Hoi Ning and financial director Yim Kwan over allegations that they had illegally shipped out ore and stolen US$4.3 million from the company.
Asa was soon after placed under the administration of Duff and Phelps in London, who immediately began talks with various suitors to sell-off the company. Asa then faced a hostile takeover from Rich Pro, a Chinese firm allegedly tied to the sacked executives.
In June 2018, a year after it was suspended from the AIM board over the fraud, Asa cancelled its London listing after delays in fixing a deep cash flow crisis.
In 2018, London and Johannesburg-listed Pan African Resources announced that it was in “exclusive negotiations with the joint administrators of Asa Resource Group” for the acquisition of “certain of the assets and liabilities of the (Asa) group”. The talks were cancelled early 2019.