A new hope smoulders

BCL can be opened under a new business model – Report

While parliament recently shot down a motion to prioritise the re-opening of BCL mine, a finance due diligence report carried out by AfriFindInvest (AFI) suggests the mine could be re-opened under a new business model.

Selebi Phikwe West Member of Parliament, Dithapelo Keorapetse’s motion that government prioritise BCL’s resurrection through cost sharing was dismissed by the majority of MPs last Friday.

Keorapetse had proposed the re-opening of the mine through cost sharing of environmental rehabilitation liability and extending incentives to investors in buying and running the mine.

Under the proposed new model, AFI says the plan is to concentrate resources, management time and investment on two Selebi mines that have better economics and equip them to operate at maximum output.

Two shafts, Phikwe and the South East Extension will be excluded under the new business plan, which is expected to subsequently lead to a decline in production, from around 2 million tonnes per annum to 1.3 million.

Another key factor considered in the report is the smelter, which AFI believes could be an advantage to BCL financials if additional volumes are sought in the period up to 2020.

By the time of closure, BCL employed close to 6, 000. If the mine was to re-open under the proposed model, the number would have to be reduced to around 2, 300, cutting the annual wage bill to P367 million.

According to the report, costs can further be lowered by hiring only required labour, as well as merging support services between BCL and Tati operations and cutting administration overheads.

The collapse of nickel prices in late 2015 is partly blamed for the closure of BCL, in which the company reportedly lost 60 percent of its revenue. The report indicates that prices were adversely affected by high inventories.

This came after BCL spent close to P2 billion the previous financial year, a sum that included the refurbishment of the smelter at a cost of P750 million.

But now inventory growth is alleged to have tapered off with stock levels believed to be showing a decline from the peak levels of 2015.

Global consumption is also believed to be exhibiting encouraging growth, while on the other hand supply growth has stalled which has put the market into a deficit.

To restart the operation at both BCL and Tati mines, it is estimated that a total of US$139 million will be required, with P478 million going towards BCL while the balance will be channeled to the restarting of Tati Nickel Mine.

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