Nickel Industries Limited

Thank you and thank you everyone for your attendance at this quarterly results call. Once again, pleased to report record production and which underpin record either DARPA operations of US $120.7 million. We're now seeing the full impact of a fully ramped up polychromickel as well as a significant decrease in operating costs. We're also pleased to have our first contribution from the HNC HPAL, and that delivered 1,410 tonnes of nickel in mixed hydroxide precipitate for just the two months that we held that 10% interest. That implies an annualised run rate of in excess of 70,000 tonnes from the HNC HPAL, so it's performing very well. Those numbers, the RKEF EBITDA of $97.6 million in the US was 117% higher than the June quarter, despite a small decrease in the weighted average contract pricing. As I mentioned, there was a decrease in operations between 13% to 22%, primarily driven by lower electricity prices, coal and nickel oil prices. And we saw a significant increase in the EBITDA per tonne sold. That was up 85.8% from 1,500 in the June quarter to 2,849 in the September quarter. ANI and ONI continue to drive our production and EBITDA, and they experience margins in excess of 3,247 tonnes and 3,502 tonnes respectively. Pleasingly, we also had record mine production, 3.7 million wet metric tonnes. That was a 33% increase on the 2.7 million tonnes in the June quarter. That flowed through into record mine EBITDA of US 23.1 million, a 93.6% increase on the June quarter of US 12 million, and we're already starting to see the results of the recently opened haul road. If I could just ask you to turn to Slide three, please. Here in the table, you can see a summary of all of the key numbers. As I said, record production, 33,852. That puts us on an annualised run rate of well in excess of 120,000 tonnes of nickel, well above BHP, who sits at about 83,000 a year. They've been operating in Western Australia since 1966. The next largest is Independence Group with 36,000 tonnes, so that's 33,852 tonnes of nickel for the quarter, which includes the HNC production. It's a new record for nickel industry's production. I don't know if other people are having trouble, but the presenters there, but it appears like the pages haven't moved. If you can please move it to presentation slide three. Pleasingly, if you look at the bottom of the table on page three, we have 827 million US of cash, and we'll touch on that a little bit later on and what that means for our EMC HVAL aspirations. Turning to page four of the presentation, you can see here the clear and consistent ramp-up quarter on quarter. September 22, we were at 20,275 tonnes. September of 23, we're now at 33,852. We did also acquire an additional 10% interest in the ONI, which we also completed during the quarter. Moving to slide five, please, as I said, a record quarter of production at the Hang Jaya mine. 2.7 million tons of ore was mined. The significant EBITDA increase was driven predominantly by an increase in saccharite. Last quarter, we sold 227 tons of saccharite. This quarter, that was one million. The opening of the haul road has allowed us to push all of our saccharite sales through the jetty and all of our limonite sales down the haul road. And moving to the next slide, slide six, which is the opening of the haul road. You can see last year we did 3.5 million tonnes of ore. We sold for an EBITDA of US$54 million. We're now looking at ramping that up and well on track to achieving 10 million tonnes per annum. So assuming a similar margin, you could expect a tripling of that EBITDA number. And we're starting to see that come through already in this quarter with US$23 million 0.1 million, which is 50% that in one quarter, it's 50% of the full year result for 2022. So we're really starting to see dividends from the opening of that holiday. Moving to page seven, we were pleased to announce post the quarterly period, a positive final investment decision for the E&C HPAL. NIC will own 55% of that. It has a capex guarantee of US $2.3 billion. It will be the first parent globally to produce the three key class one nickel products being NHP, nickel cathode and nickel sulfate. If you look over at the table on page seven there, you can see that in terms of capital intensity, it's still lower than most of our Indonesian peers who don't have a capex guarantee and then significantly lower than all of our Western peers. Not only is Cymru the capex guarantee, it also has a timeframe guarantee, a mainplate guarantee and a 15-year tax holiday. I'll let Chris touch a little later on the funding of ENT, but we're now fully funded given the recent placement by UT of Australia $943 million at $1.10, which is a 30% premium to where we're trading today. and the recently announced $400 million loan facility from BNI, one of Indonesia's largest banks. Slide 8, you can see on the far left there the average that NIC has paid across all of our projects for our nickel units, and that's US$19,650 a tonne. On the right there, you can see a number of projects, battery and nickel, that have all demonstrated significant capex blowouts over a period of time. Some of these projects have been continually increasing capex since as early as 2008 and still there's yet anything to be built. I think this just sort of highlights the strength of the capex guarantee and the timeframe guarantee. This slide clearly demonstrates that and you can see the capital intensity there on the One of the recent Australian companies has come out with a nickel equivalent capex intensity of almost $120,000 a tonne. So you have to think theoretically that that's never going to get built. Slide 9, I'll hand over to Chris just to touch on the balance sheet and how we see the funding of the EMC HVAL project over the next two years.

Thanks, Justin. Since announcing our potential involvement in the E&C transaction in January, we've faced questions for most of 2023 on how we're going to fund our 55% interest. We've always been very comfortable with that interest and it's one of the reasons why we paid our option to be able to take a positive FID later in the year once we were confident that we could comfortably fund the project. We thought it would be useful after feedback from investors, both debt and equity, over the last few months to set out an illustrative overview for you over the next two years. In our announcement a few weeks ago, we set out the exact payment schedule on what our funding obligations are for the $1.265 billion. But over and above that, there's some other key items, being the April 2024 bonds of 245 mil, the debt servicing of our existing bonds, as well as, as you can see there in the footnotes, assuming a bond refinancing, potential interest on new bonds, our NIC dividends, and critically with that number, important to note that We've only assumed the current dividend level to continue going forward. That's not to say if margins continue to improve like they have in this quarter, that's not to say that those dividends won't increase. But for illustrative purposes, we've just left them at the current level. You can see our NIC dividend policy in our ASX release in July 2021 for further information. And critically, it is all dependent on future margins. The funding sources, now Justin's touched on post-UT transaction. We've got a significant cash balance. On a 100% basis, it's nearly $830 million. On an attributable basis, which takes into account our 80% interest in our Indonesian projects, it's just over $800 million US. We've assumed interest on attributable cash, which is in line with what we're currently receiving. We've got B&I loan facilities at $400 million, which we announced and secured earlier this month. An assumption around a bond refinancing in April 2024 of the $245 million of our existing bonds. Again, that's an illustrative example, and it will purely depend on what the prevailing market conditions are at the time. If, for example, if margins continue to improve and cash flow continues to improve, but we'll assess it at the time. And what that basically leaves us with is our required cash flow from existing operations over the next eight quarters to fund the Excelsior Nickel Cobalt project. So you can see there, highlighted in the blue, it's 550 million US. And then on the right-hand side, you can see what our existing operations are. That equates to US $69 million a quarter. We've obviously just announced a U.S. $120 million quarter and our operations, the 12 RKF lines, which are now operating at steady-state production, and you can see the margin where they were at just over $2,800 a ton, which we don't believe on a historical basis. That is not an aggressive number at all. You've got your Henjiah mine, which just contributed $23.1 million for the September quarter. And as Justin noted, we've only just commenced trucking on the haul road. So there's potential for that number to increase going forward as well as we increase from the 3.5 million tonnes to 10 million tonnes per annum. And then finally, our final element of our existing operations is the HNC interest. For the September quarter, we announced 1,400 tons of attributable nickel, which critically was just for two months since acquisition. Importantly, there is no financial contribution of that production in our September quarter financials. And the reason for that is we are still working through that with our auditors and our major shareholders at the project level, being YU Cobalt and CMOC Group, which are both public companies. So I guess the message from this page is investors and investors, analysts need to just take a view on whether when we just put out a quarter of $120 million for the quarter, we need $550 million for the next eight quarters to be considered fully funded. Dustin, back to you.

Thanks, Chris. If we could just move to page 10. On the corporate front, I'm pleased to complete the placement to UT Tractors for Australian $943 million. As I mentioned, $1.10 a share, 30% premium to where they're currently trading. As part of that, UT had the right to appoint a member to the board, and that appointed Mr. Muriarty Sutiot. He's been appointed as a non-exec director. He brings a lot of diversified experience, and we welcome him to the board. We completed during the quarter the 10% of the H&C HPAL acquisition, and as we've touched on, that delivered 1,410 tonnes of nickel in MHP for the two months that we had that 10%. The payment for that 10% predominantly shares, which is issued to Shanghai Decents, so we see that as a strong positive. And then we also moved to 10% interest of ONI. for the same amount that we originally paid when we first invested into the project. So there was no markup, even though the project is fully wrapped up and delivering very strong margins. Again, strong reflection of the good relationship that we had with Shanghai Decent or Ching San. Slide 11, we've touched on the $400 million loan facility with Bank Negara Indonesia. The facility is split into two tranches, $200 million secured, which is secured against the company's angel nickel project, and $150 million unsecured with a further $50 million revolving credit facility. Chris has just touched on these funds along with the recent placement and with the very strong EBITDA that's been generated on a quarterly basis. It leads the company to position the fund at share. It's 55% share of the EMC HPAL project. over the next two years. On an ESG front, pleased to announce that we recently awarded a BBB rating from MCSI, which is the highest ESG rating given to an Indonesian-based metals and mining company. We were also upgraded by S&P Global from $53 6th percentile to the 69th percentile on our ESG scores. We won a Tren Asia, which is a local award from local industry leaders and consultants for ESG excellence in the nickel sector. We're once again shortlisted to be one of only two nickel mining operations in all of Indonesia to have a green proper rating, the other being Valo. And then finally on slide 12, we were... Pleased to announce execution of the binding agreement for a 200 megawatt peak solar plus 20 megawatt hour battery energy storage system project within the IMIP. That is Indonesia's largest solar project. To give you some idea, the installed capacity in Indonesia at the moment is about 269 megawatt peak. This project's 200 megawatt peak, so almost doubles that. We're not required to outlay any capital. We're simply entering into a 25-year offtake agreement at very competitive pricing. What is attractive is that that pricing is fixed for the next 25 years with no inflation escalation. But more importantly, this solar project, it's intended that it will supply energy to the ENCH pile, and we believe the ENCH pile will be one of the lowest carbon-intensive nickel producers globally not only one of the lowest carbon intensive but the only diversified class 1 nickel producer and off the back of that we've started a process to engage with tier 1 global EV and battery makers and so far we have a list of about 20 of the top names that are all showing strong interest and engaging with us and so over the coming months we hope to be able to provide more details on any potential offtake from one or a number of those groups and perhaps even a small minority investment if that's something that they're looking to entertain. With that, that ends the presentation. I'm so happy to turn over to 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. We will now pause momentarily to allow questioners to enter the queue. Once again, if you wish to ask a question, please press star 1 on your telephone. Your first question comes from Neil Botha with 91. Please go ahead.

Hi, guys. Thank you very much for the presentation and the update. We appreciate it. It's pretty late in Oz. So maybe just a few questions from my side. Firstly, you did mention on the agency project that you're still trying to figure out how to treat that in your sort of accounts. sort of as an indication of, you know, what the best way would be. And then maybe sort of indication of the asset itself. I mean, like currently sort of what margins are you seeing at that asset? And sort of what level of, you know, earnings could that contribute? Just to sort of get a better sense.

Yeah. Hi, Neil. I'll take the first bit. Look, it's partly just the accounting. We're working out to find equity accounting and investment associates. Obviously, we're not consolidating the number. at a 10% interest but that also flows into the disclosure and I'll let Justin talk about margins but it goes into disclosure and what we can and can't disclose. We had a call this morning and similar questions are coming up from our earlier call. We are still, we're a 10% minority interest with two very large shareholders or very large public company shareholders, which don't have to disclose the numbers specifically on HNC. So we're just trying to work through with them what we are able to disclose and when we can disclose it, such that we're not prematurely disclosing what they don't want us to. We're not about to enter into a project, into a partnership, a long-term partnership with two other public companies, and then suddenly step off on the wrong foot. So we're working through on that with them. So it is difficult to get more colour and I know everyone's trying to get more colour around where the HPL will be. I guess the one bit of additional information that's coming your way is the independent expert as part of our EGM, the upcoming EGM, and I expect a notice of that to go out probably within the next week. there'll be an independent experts report attached to that and there'll be a little bit more colour around HSC on that for investors and analysts. Justin, do you want to add anything there?

Yeah, thanks Chris. I think Chris has covered off on it but typically what we see is the newer RKEF lines delivering sort of margins from $3,000 to $5,000 a tonne, HPAL delivering margins sort of $7,000 to to $10,000 a tonne, so typically superior margins, far superior margins from the HPL. As Chris said, we're just still working through how we possibly report or present that. But I think, as Chris also alluded to, there'll certainly be a lot more detail and clarity in the independent experts report, which will be based off the feasibility study

and and some of the actual uh operating numbers that we're seeing in country okay perfect um that's very clear um thanks very much on that and then maybe um just one on the cost side um i mean given sort of you know um goals increased recently um sort of when do you expect that to flow through on the cost side and to sort of impact cost um is that sort of a quarter delay or sort of how long do you generally generally take to see that?

We are still optimistic of the containing the coal and power costs. We're yet to see any flow through on that as yet and in fact we have seen obviously a significant decrease in costs this quarter and that hasn't just purely been driven by input costs. It's also been driven by some optimization across a number of the plants. So we aren't anticipating in the near term any significant increases in our power prices for now.

Perfect. Thank you very much. And then just a final one from us, if I may. On the solar project binding agreement you signed, When is it expected to be operational and is that off-take for the entire park and you only get a portion of that or is it an entire off-take from that project for your use?

It's 100% for NIC. The timing will coincide, it should coincide with the commissioning of EMC, so those two line up very well. and we would anticipate 100% of the power going into EMC. Should the solar project come online earlier, which I doubt, but if that's the case, then it'll simply be diverted into our existing RKEF operations until the EMC HPAL is ready and able to take it.

Great, and so that is about what percentage of the overall power needs of the plant?

Yes, HPAL has power requirements compared to RKF. For example, our HMC plant, 60% of the power actually comes from the sulfuric acid plant. In the manufacture of sulfuric acid, a significant amount of heat is generated and that's converted into energy. The HNC HPAL has a path to net zero by 2030, which they're working towards. We're yet to develop a similar pathway, but that's obviously something that we would be looking to follow. So this size solar project will provide the bulk of the power behind the sulfuric acid plant, which will provide 60% of the power. So it will leave very little left over that would be coal-fired power. And that's really more just a reliability issue. Obviously, solar does have limitations in regards to its ability to generate during certain times of the day or at night.

Perfect. That's very clear. Thank you very much. I'll jump back in the queue.

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

Mr Werner Thank you everyone for your attendance on today's call. Just to reiterate, I can once again record the data from operations which once again is underpinned by our mature, ramped-up RKF operations, but I think, importantly, first contribution from our Class I mixed hydroxide precipitate from the HNC HPAL, and really the next step into the full diversification into becoming a major Class I nickel supplier to the global EV and battery market through EMC, which we've touched on, we believe, is now comfortably funded. And so we look forward to providing further updates on a quarterly basis as to the progress for E&C. And as I mentioned, in regards to potential off-takers and even other minority strategic partners. So thank you, everyone, for your time this evening.