Mwana Africa looks to Freda Rebecca mine and Bindura Nickel for self sufficiency

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By Zimbabwe Investor on October 2, 2013. No Comments

Mwana Africa’s new chairman Mark Wellesley-Wood sounded an upbeat note as he said the group had defined a three-pronged strategy, which he believes will deliver significant value over coming months.

UPBEAT: New Mwana Africa Chairman Mark Wellesley-Wood

UPBEAT: New Mwana Africa Chairman Mark Wellesley-Wood

He said the group was out of “financial distress” after the recent two-part fundraiser, which brought in U$6mln.

And thanks to the Freda Rebecca gold mine and the Bindura nickel mine (both in Zimbabwe) the business will be self-sufficient from here on in.

“We see an opportunity to concentrate on the assets and maximising those for shareholders,”  Wellesley-Wood said in an interview with Proactive Investors.

The first prong of Mwana’s strategy has been to find significant cost savings and it is almost halfway to unearthing an annual total of US$1mln.

This is now being ploughed into “improving” the existing asset base, which also includes the 3mln-ounce Zani Kodo deposit in the Democratic Republic of Congo (DRC).

And finally, management’s main focus will be on a smaller number of core assets from a portfolio that spans gold, nickel copper, diamonds and magnesium in four African countries.

“We have one cash flow generator in Freda Rebecca,” said Wellesley-Wood.

“We have Bindura’s bigger operations, which are on the cusp of turning around and being a contributor and we have a significant resource in the DRC.

“The size and the definition of what’s core and what’s not is partly in the future, and is part of a piece of work we are conducting, and we will report back on that later in the interims, but it is fair to say this cost reduction exercise will spread throughout the group.”

There are a number of events that should point investors to the true value of Mwana’s assets, chief executive officer (CEO) Kalaa Mpinga told Proactive.

The first is an updated competent person’s report prepared by SRK Consultants for the Bindura Nickel Corp.

To make it financially viable in this low price environment for the metal, the group accelerated its programme to access the higher grade material.

It’s this which should ensure Bindura is a far stronger contributor to the business than has been previously predicted. The SRK update, expected by the end of the month, will put the meat on the bones, the Mwana CEO revealed.

Last month some 700 tonnes of nickel was produced by the Trojan smelter, which is a new record, Mpinga revealed.

The Freda Rebecca mine, meanwhile, is expected to produce around 72,000 ounces of gold next year, while emphasis will be on getting the C3, or total cash cost of the operation, below US$1,000 an ounce.

A boost to the operation will come if Mwana successfully gets the tailings retreatment plant up and running. This could add a valuable 15,000 ounces to output of the precious metal – a kicker that hasn’t been factored into the current share price.

Finally, the group is currently assessing how best to exploit the potentially world class Zani-Kodo ore body in the DRC.

On Wednesday the company unveiled a 13% increase in the JORC compliant 2.975mln ounces.

The total in the higher-confidence indicated category was 643,000 ounces at 3.33 grams per tonne, while the main Kodo deposit is estimated to contain 1.73mln ounces of the yellow metal.

The recently-discovered Lelumodi target has yielded 549,000 ounces.

CEO Mpinga told investors: “The latest exploration drilling at Zani-Kodo has once again yielded positive results, with a further significant increase in the gold resource there.

“There is clearly a great deal of potential in this project and we remain excited about the future of Zani-Kodo.”

The decision to be made now is how to tap that undoubted potential. Mwana has the option to develop it in-house as an “intermediate-sized project”, or it may go for the “big bang” by aping the giant 20mln-ounce Kibali development in the same Archaean greenstone belt.

Mwana’s story is a familiar one seen right across the natural resources sector. Its share price has tumbled more than 70% as it struggled to get the funding required to fund its development.

Unlike many others it was able to find the funds to survive and prosper. If it is able to deliver on the plans, then a market capitalisation of £17mln will look anomalous.

However, the chairman is adamant that actions speak louder than words. “I don’t have a target for a share price as that is the wrong way to operate a company,” he said.

“I aim to run a better businesses, better operations and demonstrate through our costs and cash generation that our shares are worth considerably more than today’s level. I’m old fashioned like that.”