Nickel Industries Limited

Thank you very much and could I please ask that you turn to page two of the presentation and we'll start there. Everyone who's on the call, thank you for your attendance today at the Nickel Industries June quarterly results presentation. Once again, very pleased to report record nickel metal production of 32,558 tonnes. Apologies, it's page two. You're on page one. If you could just move to the next slide please. Record nickel metal production of 32,558 tonnes. That was almost 20% higher than the March quarter which was 27,399 tonnes and it includes 10,141 tonnes from oracle nickel. We expect a further 20% scale up across the September quarter so there's still significant production upside to be delivered across the September quarter and I'll talk a little bit more what that means for our financial profile. For NIC's attributable production that was 25,000. That on a quarterly basis now takes us to in excess of 100,000 tonnes of nickel on an annual basis and so making us firmly cement this as a top 10 diversified global nickel producer. As I mentioned, further production growth expected across the September quarter with the power plant that we announced commissioned at the end of June and I'll talk a bit later on about what that means. RKEF revenue was down 11%, US$434.3 million, primarily driven by lower realised contract pricing. We believe that we have seen the bottom and we have seen a bit of an uptick. And I'll talk about that as well a little bit later on. RKF EBITDA was $43.9 million. That was lower than the March quarter, as I mentioned, primarily driven by the lower realized contract pricing. But pleasingly, we are also seeing corresponding reduction in OPEX between 8% to 15%. and we expect this reduction in OPEX to continue across the September quarter. The production weighted EBITDA per tonne was 1,533, which has said it was down significantly from March, although, and I'll talk again about this a little bit later on, ANI still maintained very robust margins of 2,754. That weighted average number of 1,533 was dragged down lower by ONI which had a margin of about 744. As I stated earlier, as the power comes on this quarter we expect to start to see ONI matching the ANI EBITDA per tonne margin of that 2,700 that we experienced this quarter. So there's about a $2,000 a tonne margin upside that we expect to start capturing across the September quarter. Another record this quarter for the Hang Jaya mine, 2.7 million tonnes of ore which was 10% higher than the March quarter. The opening of the HM mine to IMIP Hall Road is imminent. and we will expect to start to see a significant scale up in our mine production once that haul road is officially opened. Mine EBITDA was US$12 million, slightly lower than our March quarter, predominantly driven by lower realised saprolyte ore prices. Whilst that has an effect on our mine EBITDA it will also those lower saprolyte prices which we're starting to see will also push our RKEF costs lower. Underlying cash generation from operations of US $48.6 million and based on the performance for the first half of this year with a record EBITDA in March and a strong EBITDA for this quarter given where the nickel price currently sits, happy to announce an interim dividend of Australian $0.02 per share. If we could just move to page three please. Happy to report on the environment and safety front, 5.5 million man hours without an LTI for our RKF operations since January of this year. More than 7.3 million man hours since the last recorded LTI at our mine operations back in November of 21. These are obviously significant numbers. A couple of million man hours without an LTI is a tremendous achievement given the number of employees that we have across all of our operations. Also pleased to report across the quarter that the Hangia Mine received two gold trophies at the Noosantara CSR Awards. and most promising transition award at the ESG World Summit in Bangkok. So the hard work and the focus that we've placed on ESG continues to be acknowledged and we remain focused on being the most sustainable and responsible integrated nickel producer in Indonesia. If we could just move to page four please. Summary of the numbers versus the March quarter. As I mentioned, record for nickel metal tonnes, 32,558, an almost 20% increase on March. Our attributable production, 25,000 as I mentioned. That takes us to in excess of 100,000 tonnes on an annualised basis. And then the Hang Jaya mine, 2.7 million tonnes, again almost a 10% increase on the March quarter. In both of those nickel metal production numbers and hangiomine production numbers, as I said, we look forward to working towards delivering an increased number on both of those across the September quarter. If we could just move to page five please. You can see here since the June quarter of 2022 where we reported 15,556 tonnes of nickel metal production. We've increased that 110% since that point in time to the record number today of 32,558 tonnes. ANI produced 12,422 tonnes of that 32,000, which was 38%. and ONI 10,000, which is about 31%. So those two operations accounted for about 69% of our production. As I mentioned, with the commissioning of the power plant, we expect ONI to start to replicate ANI. So ANI did 12,400, ONI 10,000. we would expect that ONI will start to operate towards that same number, 12,400, and we expect those additional nickel units to come online across the September quarter. Not only do we have that further production upside, but more importantly we have further EBITDA and EBITDA per tonne upside at our oracle nickel operations. I mentioned ANI was still very strong. The margin was $2,754 for the quarter and that delivered 75% of our June quarter EBITDA which was $33.2 million from Angel Nickel alone. The ONI EBITDA per tonne margin was $744 a tonne and that was about delivered $7.5 million US of EBITDA or 17% of the total number. So combined our two ANI and ONI operations delivered about 93% of the RKEF EBITDA for the quarter. As I've mentioned we expect now with the Oracle power plant commissioning EBITDA per tonne margins to replicate those of Angel Nickels. So further not just production upside but also EBITDA upside. We have experienced a softening of LME and nickel pig iron pricing across the quarter. That declined about 17% compared to the March quarter. But we are also seeing a corresponding decline in OPEX costs, not at the same speed. But we do believe that those OPEX cost reductions will continue across the September quarter. If we look at ANI, we saw an 8% reduction from 11,800 in March to about 10,900 in the June quarter. And these reductions are being driven primarily by lower oil costs. and lower power costs. To give you some idea at ANI our power was down from 6.2 cents a kilowatt hour to 5.2 cents a kilowatt hour across the quarter. To give you some idea of that upside that exists at Oracle Nickel our cost for the quarter for 8.2 cents a kilowatt hour If they come down to match the 5.2 kilowatt hour of angel nickel, as I said, we see strong EBITDA and margin upside at Oracle across the September quarter. All costs were down about 10% and that's been reflected in from the results from our Hangia mine where we saw about a 10% reduction in the average saprolyte price received. If we could just move to slide six, please, or page six, sorry. As I mentioned, record month in terms of production, 2.7 million tonnes. The average price received for saprolite, as I mentioned, was down. It was $44 in the March quarter, down to about $40 in the June quarter. And so there may be some further changes decreases in that price received but that will flow into upside on our RKEF costs. Limonite production continues to remain strong and you can see the very strong margins there. Average price received actually increased from the March quarter from $18 to $20 and we had a reduction in the cost of production of our limonite from $3.60 to $3.11. If we could just move to page 7 please. Pleased to announce that the opening of the Hengjia mine to the IMIP haul road is imminent. We expect the opening of that haul road very soon. That once open will allow us to ramp up our production from $3.5 million last year. to an annualised rate of around 10 million tonnes which will comprise about 6.5 million tonnes of limonite and 3.5 million tonnes of saprolite. So we can expect to see almost a tripling in our mine EBITDA over the coming months as we ramp up production and so we see a strong upside there from our our Hengjia Mine operations as well and we look forward to reporting the opening of the haul road very shortly. The haul road also will make us one of the largest ore suppliers to the IMIP and so obviously just underscores the significant strategic value of the Hengjia Mine to our operations and to the IMIP. If we could just move to page eight please. We announced during the quarter conditional share placement and collaboration agreement with UT Tractors for Australian $943 million at an issue price of Australian $1.10 per share, which at the time of the announcement was a 27.2% premium to the last traded price on the 8th of June, which was 87 cents Australian. That premium has grown since that point. Those shares issued would represent 19.9% of the company's issued capital and along with that a conditional collaboration agreement for UT to acquire a direct 20% equity interest in the ENC HPAL project at a valuation of US$500 million for their 20% which translates into a US$2.5 billion project valuation. which is higher than the actual project valuation of US$2.3 billion, which we also recently announced and pleased to announce a reduction. So since the announcement of the ANCH power, we've seen a 20% increase in the capacity from 60,000 tonnes to 72,000 tonnes. and a 10% decrease in the cost from $2.5 billion to $2.3 billion. Again, those numbers come with the CapEx guarantee and I can only remind people of how strong and the value of that CapEx guarantee given I'm sure we're all familiar of the recent write-down of a significant Western Australian nickel asset In terms of who UT are, they're one of Indonesia's largest listed conglomerates. FY22 revenue of US $8.3 billion, 33,000 employees, very strong balance sheet, US $2.3 billion in cash. The ultimate beneficial owner is Jardine Matheson, a global diversified Fortune 500 company, very strong presence across Asia in automotive, mining, mine services, property retail. finance, over 425,000 employees and FY22 revenue of US$87.7 billion. We believe that UT is one of Indonesia's best blue chip investors and partners and obviously subject to shareholder approval. We do look forward to welcoming them as an investor into NIC. That investment obviously then means that we are pretty much fully funded for the ENC HPAL project for our percentage of that and it was announced that with them taking 20%, Tsing San holding 25%, that NIC's ownership in that would be around 55%. Pleased to announce the FIRB approval for the placement to Shanghai Decent for the acquisition of 10% in the HNC HPAL which was executed at $1.02. There was also strong support from members of the NIC Board with shares issued to Mark Lochtenberg and to Shanghai Wanlu. The HNC HPAL has the world record for the fastest build and ramp-up, one of the lowest global OPEXs and lowest carbon intensities. It will give us immediate access to 6,000 tonnes of marketable MHP, which we can diversify this further into the EV battery market. And it also gives a see-through into what a successfully operated HPAL looks like. ENC will effectively be a replica of HNC but as Ching San does do it will have some improvements and ENC will also further diversify to producing not just but also go further to nickel sulfate and to nickel cathode, providing product diversity and therefore allowing us to maximise margin opportunities where they exist in different parts of the nickel market. If we could just move to page 8 please. The ENC project I've just touched on. Feasibility is well advanced. We expect to make a final investment decision sometime in the September quarter. To reiterate, production has gone up from $60,000 to $72,000, a 20% increase, and the capex guarantee is actually reduced from US$2.5 billion to US$2.3 million. I've touched on the shareholding. subject again to a positive FID being taken by the Nickel Industries Board. We then would expect construction to commence in Q4 of FY23 and the capex guarantee comes also with a timing guarantee of the project's commencing commissioning within 24 months of commencing construction. If we could just turn to Slide, page 10 please. The placement to UT and the collaboration agreement for them to potentially participate for 20% in stage one of ENC also flows through into their potential participation into 20% of stage two. which would effectively just be a doubling of the project from 72,000 to 144,000 tonnes. I should add that the FID that will be taken in September is purely on Stage 1. Stage 2, that decision will be taken over time, depending on a number of factors. As I've touched on, we... commissioned the Oracle Nickel power plant and we expect that to deliver upside of 20% on our production from Oracle Nickel. We also expect a 36% reduction in costs, assuming that Oracle will mimic A&I's performance. So we also see EBITDA upside across the quarter and from our oracle nickel operations. Finally, as I said, I'm pleased to announce an interim dividend of Australian two cents per share. So in summary, we look forward to another busy and productive September quarter. As I mentioned, we expect further ramp-ups from ONI and further EBITDA growth from our ONI operations. We look forward to the opening of the Hangia Mine to IMIP haul road and the ramping up of production from our HM mine. We look forward to the 10% of the acquisition of the HNC HPAL. and also a final investment decision for the ENC HPAL project. I should just quickly touch that we are also working on a maiden JORC resource for our Pseudo-RC nickel cobalt project. So in summary we believe that we've seen the bottom of the soft pricing environment and we have seen an uptick in both MPI and NME pricing more recently. We still do have cost decreases to flow through and we believe that we still have further OPEX cost reductions from all which we should start to realise in July and in power in August. So with over 100,000 tonnes of attributable nickel metal production we remain very well positioned to take advantage of any upside in pricing and strengthening of the nickel market. And I think that that was reflected in our March quarter where we were able to report record EBITDA margins. With that, that concludes the presentation and now hand over for Q&A.

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 your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Michael Dodamo from Canaccord. Please go ahead.

Hi, guys. Just a couple of quick questions. Firstly, thanks for the call. The mat grade, why is there such a decrease on last quarter's mat grades?