Nickel Industries Limited

Thank you for standing by and welcome to NECO Industries Limited December quarter results webcast. All participants are in a listen only mode. There will be a presentation followed by a question and answer section. 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 Werner, Managing Director. Please go ahead.

Thank you everyone for joining the December quality results presentation. Slide person, could you move to slide number two, please? I'm very pleased again to report another record quarter in excess of 23,000 tonnes of nickel metal produced. Apologies, slide number two, so the next slide, please. which is up considerably on the 20,000 tonnes that was produced in the September quarter. And that's really, we're seeing that from the contribution from ANI. Pleasingly, we also saw very good production in our nickel map and very strong margins from our nickel map. As a result, RKF EBITDA of US $90 million As I mentioned, the margins on our nickel map, almost $6,000 a tonne and over $4,000 a tonne for Angel Nickel. So you can clearly see there the results of having the integrated power plant that we have at Angel Nickel. And now with Oracle coming online, expect that 23,000 tonnes to continue to grow significantly. At the mine, also another record, 2.7 million tonnes. of all was mined and mine delivered an EBITDA of US$16.1 million which is up over 58% on the last quarter. So underlying cash generation from operations of close to US$100 million for the quarter and as I said the transition to Nickel Mat has proven very successful and we are currently enjoying very strong margins there. Finally, as I mentioned, Oracle, two lines of commissioning. Another two over the coming weeks will commission and we will start to see the result and impact of additional profitable nickel units coming through with the Oracle commissioning. If we could move to the next slide, please. The table here just summarises those numbers that I've been through. As I said, 23,000 tonnes in excess, a record. the RKEF sales, RKEF EBITDA and Heng Jaya Mine production, all records as well. If we could just move to slide four please. You can see here quite clearly the impact of Angel Nickel and what that's had on our nickel units. You can see it's continued to grow from quarter to quarter. and we expect to see a similar profile for oracle nickel. So that 23,000 tonnes for the quarter will probably likely grow by another sort of 10,000 to 12,000 tonnes per quarter. If we could just go to the next slide please. Slide five. You can see here the margins. And pleasingly, we've seen a doubling in EBITDA from the September quarter and also almost a doubling of our EBITDA per tonne margins back to sort of the more historical levels that we've enjoyed. We could just go to the next slide please, number six. Mentioned record quarter for the Heng Jaya mine, 2.7 million tonnes. You can see both the saprolyte business and the limonite business currently making very strong margins, almost $20 a tonne on our saprolyte and more than $10 a tonne on our limonite. Pleasingly, the haul road which will link up our Hangia mine to IMIP is progressing very well and we hope to be able to commission and start using that haul road by the by the end of the second quarter. And then just finally, the Hang Jaya mine was awarded a green proper rating from the Indonesian Environmental Authority, one of only two mines to receive that award. And so we're very proud of that. The other mine is Vale Inco, and it's in recognition of not just meeting but exceeding environmental and ESG standards. So as I said, it's a tremendous achievement, given that we are one of only two mines in Indonesia to have been awarded that rating. If we could just move to the next slide, please. Just a refresh. We did update the JORC resource in the September quarter. And again, on this slide here, if you could just go to slide seven, please, you can see 3.7 million tonnes of contained nickel metal. we still have probably another 500 hectares that is prospective so that number potentially could continue to grow and you can see there that puts us amongst the top 10 global known nickel resources and we mentioned in the recent raising that new mine acquisitions and we are working on those and we will look to grow from that 3.7 million tonnes of contained nickel metal. Ideally we would like to sort of situate ourselves right at the very top of that curve in terms of known nickel resources that NIC would have control of. If we could just move to slide eight please. Post the quarter, in fact only sort of one to two weeks ago, We finalised the electric vehicle battery supply chain strategic framework agreement with our largest shareholder, Shanghai Decent. There's a number of elements to it, but it really is a transformational transaction for the company in that it will diversify us into the Class 1 nickel space and could eventually see sort of two-thirds of NIC's production being Class 1 EV suitable nickel and cobalt battery metals. The elements to the agreement, there is a 10% acquisition of the Huayu Nickel Cobalt HPAL which is for US$270 million and they've elected to take that in NIC shares, obviously subject to shareholder and further approval. The HNC HPAL project is the world's lowest capital intensity, fastest build, fastest ramp up and has very low carbon intensity, less than 10 tonnes of carbon per tonne of nickel. In fact it sits at around 7. How they achieve that is it has the world's largest sulfuric acid plant which generates a lot of heat which is obviously then turned into power. The first element of that agreement is the acquisition of 10% in that HNC project. Importantly, it gives us access to 10% of the MHP that's produced. So we will have marketable MHP of about 6,000 tonnes per annum. And so it allows investors to get a see-through into what a successful HVAL plant looks like and how it operates. It sits at the very bottom end of the cost curve. and has enjoyed margins up to and in excess of US $10,000 a tonne. So it is a very profitable business. We're also acquiring another 10% in Oracle Nickel for US $75 million. That is the same price that we paid almost 14 months ago and is certainly cheaper than some of the more recent transactions that have been done in the market. The other elements of the framework agreement are two options. The first one is $25 million for the construction of a HPAL plant where NIC would have the opportunity to take a majority and that plant will actually go further than just producing MHP. It will go right down to nickel sulfate or nickel cathode to allow more of the margin capture. And then the second option, US$15 million to construct a low-grade to high-grade nickel-mat converter for Oracle Nickel. And you've seen this quarter the very strong margins of US$5,950 a tonne from the nickel-mat business. The transaction was funded by a recent capital raise. which was fully underwritten and very heavily oversubscribed. We had very good support from existing and new shareholders. And we have now just launched a share purchase plan for retail shareholders to also participate in what we see as a very exciting transaction for the company. And as I said earlier in the call, something that will set us up to be a significant producer of Class 1 nickel. but also make us the only diversified nickel producer. So a number of nickel products, MPI, nickel mat, MHP and potentially in the future nickel sulfate or nickel cathode. I'll end the presentation there and happy to turn over to any questions anyone has.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel a request, please press star 2. If you're on a speakerphone, please pick up the headset to ask your question. We will now pause for a brief moment while waiting on some questions to be registered. Once again, if you wish to ask a question, please press star 1 on your telephone and wait for a name to be announced. Your first question comes from David Coates from Bell Potter Securities. Please go ahead.

Good morning, Justin. Thanks for the presentation and congratulations on a really strong December quarter result. We're starting to show the benefits of some of your strategic decisions. So just, and on that, you know, the benefit of going down the nickel mat path has been shown. What kind of, with that diversified production that you just sort of pointed out, you guys will be the only sort of producer with that, you know, different product exposure. How do you see the margins? or the outlook for the margins in those different markets over the next sort of six to 12 months? Do you have much visibility on that? It's a good margin in nickel-mat at the moment, but just sort of see, you know, improved margins in the NPI market. What's your outlook for those different markets in the next six to 12 months, do you think?

Yeah, look, thanks, Casey. We've certainly seen an improvement in NPI pricing, and look, that's probably predominantly driven by China opening up which was always going to happen. So look, I think we're expecting stable NPI pricing moving forward and obviously the decision to, as I said, integrate and have that power, you can see the difference. RNI margins are sort of $2,000 a tonne. Angel nickel margins are over $4,000 a tonne, so there's a clear advantage in having that integrated power. But coming back to the question, MPI we see as stable. Nickel mat is obviously very strong, and the margins based on the analysis that we've done that we're seeing in MHP also look very strong. whilst MHP sort of pay abilities have perhaps been coming down, I think it's just probably important to remember that, you know, the price, the net price received is sort of still around, you know, $20,000 a tonne. So, you know, if your OPEX is $10,000 and less, you know, that's where those strong margins come from. So, yeah, look, the next six or 12 months, we're looking forward to sort of stable pricing across NPI and OPEX. and even LME and SHFE.

Excellent. And just another question on that diversified, with those diversified products, are you guys, you know, looking to diversify your customer base as well and sort of sell direct to, you know, other customers yourselves or will you largely sort of continue to sell through the, you know, sort of SDI slash SimSharn's existing customer base and through them?

Yeah, look, we have the opportunity at the end of March to seek other buyers for our nickel map. And so we're sort of in the process of doing that. And then for our MHP and the acquisition of 10% of HMC, we also have the freedom there to market that to whoever we choose. So, yeah, look, there's a number of, number of discussions and dialogue is already commenced with potential off-takers. So you're right, it will diversify our customer base. Look, we don't see Tsing San as a risk, but the ratings agencies, people like that, see single customer exposure as a risk. So it certainly will give us diversification. Excellent.

Thanks so much Justin. Cheers. Thanks Kasi.

Thank you. There are no further questions at this time. I'll now hand back to Mr Werner for some closing remarks.

Just to close again, very pleasingly another record quarter. I can't talk enough about achieving the green proper rating. It's a tremendous achievement. and I think reflective of the fact that our Hang Giant mine has now become a showpiece for sustainable and responsible mining. It is very important, particularly as we now make this transition into the Class 1 and EV battery space, all investors are taking a very keen interest upstream and what is happening, where the ore is sourced from and how it's mined. And so, as I said, we see that as a tremendous achievement. And we're also very excited by the most recent transaction, which, as I said, has been well received by the market. And we'll see NIC further diversify and also look to reduce our carbon footprint, given the very low carbon intensity of an HPAL. And again, with the HPAL deal, As with all of our deals with Ching San, it comes with a CapEx guarantee. And I can't overstate how important that is as well, particularly if you look around the market recently. The number of CapEx blowouts that have been announced by several major companies in the battery material space have been significant. Some of them have been in the order of 100% or doubling. of the original forecast capex. So to have that guarantee we also see as extremely valuable and so we look forward to another strong quarter for the March quarter. And thank you all again for your time.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.