Nickel Industries Limited

Thank you for standing by and welcome to the Nickel Industries Limited June quarter results webcast. All participants are in listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Justin Warner, Managing Director. Please go ahead.

Thank you very much and welcome to the Nickel Industries June quarter results call. Moderator, if I could please ask you to move to slide three. To kick it off, another record quarter. What was particularly pleasing is record EBITDA from operations in excess of US$100 million as we see the continued ramp-up of Angel Nickel with all four RKEF lines now in operation. We had record nickel metal production in the quarter of 15,567 tonnes, an increase of almost 40% on the March quarter. Record RKEF revenue of US$315 million, which translated into record RKEF EBITDA of US$84.9 million. Once again, the Heng Jaya mine continues to go from strength to strength with production of 1.3 million wet metric tonnes. As we recommence sales of limonite with more than half a million tonnes of limonite sold during the quarter, that translated into a record Heng Jaya mine EBITDA of US$18.4 million. As I said, that continues to go from strength to strength. As I opened this, it resulted in record underlying cash generation of in excess of US $100 million, and that's our first quarter where we've achieved that result of in excess of $100 million. We also completed a further 20% interest in the Oracle Nickel project, plus made an early construction payment of US $81.2 million. That was to facilitate an expected accelerated October 2022 commissioning of the Oracle Nickel project, which is four more RKEF lines under construction at IMIP and that's progressing very, very well. All four of our angel nickel RKEF lines are now successfully commissioned. With the recent announcement of the power plant now coming online, we expect to see that production ramp up significantly and start to hit somewhere in the order of sort of 130% of main plant capacity, which is the historical achievement for for all of our existing RKEF lines. And then finally, on a corporate note, there was a change of company name to Nickel Industries Limited. If we could just move to the next slide, please. Just in terms of the summary table, you can see the number of records that were achieved during the quarter. I've highlighted most of those numbers on the previous slide, but just to rehash, 40% increase in nickel metal production. We had record realized NPI price, $19,943. Significant increase in revenue, up to $315 million US. There was slight contraction in EBITDA per tonne. margin and that sort of has been driven by a bit of a lag in costs coming through, particularly in thermal coal. Pleasingly, what we're seeing is nickel ore and metallurgical coal. We're starting to see a downtrend in those costs, whereas thermal coal does remain stubbornly high. But if you look, that margin is still significant, still very large. and still much larger than the margin that we achieved at the same June quarter last year. So margins are still very, very strong. I mentioned the Hang Jaya mine, very pleasing result. And again, more than US$100 million underlying cash generation from operations. Moderator, if we could go to the next slide, please. From the operating performance summary here, you can see Angel Nickel really kicking in there in June, in the June quarter. Significant increase. March, we produced 1,077 tonnes. June, that was 6,389. And then, as I said, for the next quarter, we expect to see the ramp up to nameplate and in excess up to around sort of 130%. And based on history, we expect that... ramp up to be fairly seamless and to be achieved over the course of this quarter. If we could just move to the next slide, please. I mentioned the Ibadah-Patan margin. There was some contraction this quarter, and look, you're not going to set records every quarter. We've come off a very large Ibadah-Patan margin, which was a record. As I mentioned, in terms of the result compared to this time last year, you can see there still some $635 per tonne above the margins at the same point this year. And I should add that that margin and cost was somewhat impacted by a power shortage within IMIP for HNI and RNI, and also the A&I running at sort of 60% to 80% of capacity. With those power problems now solved, we would expect to see a... That did contribute to an increase in the OPEX costs. Both of those power issues have now been resolved. As I said, pleasingly, nickel oil costs and MET costs are decreasing, and thermal coal, whilst it... remains quite high, as I said, I think for those reasons in terms of the power. We expect costs to have hit their peak. If we could just move to the next slide, please. The Hang Jaya mine, I won't go into too much detail there other than what I stated earlier, the US $18.4 million EBITDA significant record that's a doubling of the $8.9 million in the March quarter and was boosted particularly by a significant increase in the price of the nickel ore that was received. In the March quarter, we averaged $40. In the June quarter, we averaged $52. And also the sale of limonite. And you can see the average price received there close to $15 a wet metric tonne. And we expect to see continued strong production from the mine moving forward. In terms of production, the saprolyte production is well in excess of the targeted sort of 3 million wet metric tonnes per annum. If we could just move to the next slide, please. EBIT data cash flow conversion, again, remains unchanged. You can see there 99%. That's not the profile of a mining company, hence the change in name to Nickel Industries to reflect the industrial nature of the business. If we could just move to the next slide, please. On the corporate front, as I mentioned, change of company name occurred and we're now Nickel Industries, which we think better reflects the nature of the business. and the nickel pig iron production and other production opportunities that we have. Angel Nickel was granted a commercial sales license and that allowed us to commence commercial sales. And by the end of the June quarter, we sold in excess of 6,000 tons for revenue of US $132.9 million. All four, Angel RKEF lines commissioned during the quarter and produced 6,389 tonnes of nickel for the June quarter. Once we're running at 130% of nameplate, we expect that number to be in around 11,000 to 12,000 tonnes on a quarterly basis. Pleasingly, the power plant is now commissioned well ahead of schedule. And we expect, as I said, that to contribute to ANI operating in excess of sort of 30% of the nameplate capacity. Ownership in Oracle Nickel was increased to 30%. That was completed by way of a placement of 108.1 million shares to Shanghai Decent at $1.37 a share. And that satisfied US $106 million consideration of the angel nickel purchase price. There was also, as I mentioned, an early construction payment during the quarter, and that was to expedite construction of the project. And as I mentioned, we expect first lines now coming on in October 2022. In terms of the nickel mat, everything is in place to produce nickel mat. The decision to switch will be determined by prevailing pricing relativities between the NPI and the nickel mat market, and we're looking at that very closely as to when would be an appropriate time to switch on two lines for production of nickel mat. Finally, during the quarter, we also executed a binding definitive agreement for the staged acquisition of 100% of the SITO-RC contract of work. It's a nickel contract. large tonnage limonite nickel cobalt project in West Papua Province. It's a contract of work, potential to host a large world-class limonite resource, and it has a lot of similarities to the Ramu resource, which is on the other side of the island but in PNG, and that is the world's lowest-cost HPAL producer, and so the drilling that we're currently undertaking there is progressing very well. If we could just move to the next slide, please. You can see here we're well sort of two-thirds of the way through a significant or tripling of our production profile. If you look at the top charts there, The green is the nameplate. If you start on the far left there, you can see 30,000 is the nameplate capacity. 10,400 is what we achieved. 10,410 in the blue is what we achieved over and above nameplate for last year. So 40,000 in excess of 40,000 tonnes. With ANI now coming online, you can see what that does to our production. And again, that 66,000 is just nameplate. ANI we expect to ramp up in excess of nameplate, as I mentioned, during this quarter. And then with ONI now coming on in October, you can see what that will do. That will put us in excess of 100,000 tonnes on a nameplate basis. And given the historical 30% increase, it's a more than tripling of our current nickel production profile. I would also add that these new lines have a 20% larger nameplate capacity than our existing HNI and RNI operations. And with the power, that's expected to deliver a 20% saving on our power costs, which is our second largest cost component. If we could just move to the next slide, please. So in summary, another very strong quarter. As I said, pleasingly in excess of US $100 million in cash generation. We are progressing very well through our tripling of production. ANI has said all four lines commissioned, power plant now commissioned. Expect this quarter to see significant ramp up there. To reiterate, we expect that the power plant will deliver significant cost savings on the cost of power. which is where we're seeing most of our cost increases across our RKEF lines. All of this growth is pretty much locked in, comes as it has historically with a CapEx guarantee. It's not growth that relies on inflated commodity prices. And if you look back at the production history, very strong, stable margins. These are low-cost, long-life operations. And so, you know, With the ability, as I mentioned, to produce nickel mat, we have flexibility to be a diversified producer of not just class one, but also class two nickel. I'll finish it there and hand over to Q&A.

Thank you very much. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. We have a first question from the lineup. Tim Hoff with Canaccord, please go ahead.