A slump in nickel prices, together with a leach tank failure at the Freda Rebecca gold mine, left Mwana Africa (MWA) nursing a substantial loss. Hardly an ideal scenario given the miner is actively engaged in discussions to bridge an estimated $4m (£2.63m) funding shortfall brought about by weakening metals prices.
LME nickel prices are off by around 20 per cent since the end of March, so Mwana took the decision to write-down its 77 per cent interest in Zimbabwe’s Bindura Nickel Corp to the tune of $43.9m. Add back this non-cash impairment and Mwana was broadly earnings neutral for the year-end despite the fact that its tax charge doubled to $11.4m.
A one-third hike in revenues reflects the operating progress made through the period. Mwana was able to boost production at Freda Rebecca by 37 per cent to 65,350 ounces (oz), whilst driving down average cash costs by 13.6 per cent to $897/oz. Significant progress has also been made with regard to the Zani Kodo gold project, which has grown to 2.6m oz.
Reflecting weakening metal prices, Mwana has embarked on a cost-cutting programme including cessation of discretionary spending at Zani Kodo, reduction in Freda Rebecca capital expenditure and a substantial reduction in fixed costs throughout the group. It's still possible that nickel prices could recover next year, when Indonesia brings in a planned ban on unprocessed ore exports, but much will depend on whether stainless steel production picks-up in China.
| MWANA AFRICA (MWA) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1.23p | MARKET VALUE: | £14m | |
| TOUCH: | 1.1p-1.23p | 12-MONTH HIGH: | 7p | LOW: 1.23p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 7.4¢* | NET CASH: | $10.9m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 18.8 | -14.4 | -3.63 | nil |
| ($m) | ($m) | (¢) | (p) | |
| 2011 | 43.7 | -6.09 | -0.68 | nil |
| 2012 | 81.3 | -1.21 | -0.10 | nil |
| 2013 | 109.2 | -32.06 | -2.62 | nil |
| % change | +34 | - | - | - |
£1 = $1.52 *Includes intangible assets of $58m, or 5.2¢ a share. | ||||
