Nickel Industries Limited

Thank you and thank you everyone for joining the Nickel Industries full year results call. Could I please ask the slide moderator to move the slides to page two. I'm very pleased to report full year results of record group EBITDA of US $403 million, a 19% increase on the $339 million that was recorded for FY22. Policies moderator, it's the next slide, number two. Record gross profit of US $338 million. Record operating profit of US $280.7 million, which translated into profit after tax of US $176.2. We saw a significant increase in our nickel production, up from 70,079 tons in FY22 to 131.26 tonnes, so an 87% increase in nickel tonnes, which translated into record RKEF EBITDA of US$337 million and NIC, or Nickel Industries Attributable Nickel, of $103,364. At the mine, excellent year at the Heng Jaya mine. Record production, $13.4 million, up 97% on the $6.8 million for FY22. And record mine EBITDA of US $87.9 million. And that's been driven by completion of the HMI to IMIP haul road, which delivered US $42 million in EBITDA in the December quarter alone. And so we look forward to continued strong performance from the Hang Jaya mine. And the mine was awarded a green proper rating again for the second consecutive year. These very substantial results translated into declaration of a final dividend of Australian 2.5 cents per share, a four-year dividend of 4.5 cents per share, as well as announcement of a non-market share buyback of up to US$100 million. over the next 12 months I think signalling to the market that financially NIC is in a very strong position and that we see the current share price that in our view that the share price is very undervalued. We have a very strong balance sheet, net debt of US$66.2 million. I think importantly we are fully funded for our transition into the class one nickel space On the ESG side, a number of important milestones, including execution of an operational lease agreement for Indonesia's largest 200-megawatt peak solar project, as well as electric vehicle trucks, and completion of a AUD$943 million placement to United Tractors and invitation to present at the COP28 climate summit in Dubai where we unveiled our carbon targets of 50% reduction by 2035 and net zero by 2050. Next slide, please. Safety. Excellent year for safety. 16.7 million LTI-free man-hours were worked across all of NIC operations in 2023, which is a very, very good result. We continue to focus on leading the way in safety and continuous improvement. Slide four, please. Just by numbers, group revenue 4.5% to $1.8 billion. Gross profit up 15% to $338 million. Operating profit $280 million, up 8%. Profit after tax was down to $176 million. And I'll let Chris touch on that later on when we get to Q&A, but driven by some finance and interest expenses. Profit attributable NIC of $121 million. Group EBITDA of $403 million, as I mentioned, up 19%. EBITDA from RKEF operations, $337 million, up 13%. EBITDA from mine, $87.9 million, up 63%. And we expect that EBITDA from mine operations to continue to grow. Off the back of these strong results, there was an increase in the full-year dividend. which brought the final result to 4.5 cents, which is a 12.5% increase. I should note that these results have been achieved against the back of the materially lower LME nickel price, which has declined from 25,623 to 21,487, so a 19% decrease. And we only... captured oracle nickel production in Q3 of last year. And if you look at how our newer oracle and angel nickel RKEF assets are performing, they're performing very well. So oracle delivered 82.5 million of EBITDA and angel nickel, which is fully ramped up for the year, delivered US 179.5. So there's certainly more upside for this year, given that we now have, we will get a full year of production from Olical Nickel. If we could just go to slide five, please. I mentioned that we have a very strong balance sheet, net debt of US $66.2 million. and we are fully funded for our transition into the Class 1 battery grade nickel space and again we're taking the lead there in being the first company to develop an HPAL that will produce three Class 1 nickel projects. Our ability to fund throughout the year was driven by successful equity and debt raisings which included $185 million institutional placement, $270 million placement to Shanghai Decent, $20 million retail share purchase plan, a $943 million Australian strategic placement to United Tractors, which was done at $1.10. That's a 30% premium, more than a 30% premium to today's share price. And the US $400 million senior unsecured notes We also have established a US $400 million maiden funding lines with Bank Negara Indonesia, one of Indonesia's largest banks, that was successfully syndicated out to an additional eight banks. with a strong mix of Asian, European and global banking institutions involved. And as I said, that's the first time an Indonesian bank has come into funds in HPAL. And that's really off the back of the very strong ESG credentials of nickel industries and our operations. Collectively, these initiatives have allowed us during the year to acquire an additional 10% in the ONI RKEF project, acquire an initial 10% interest in the HNC HPOWER project, and secured an option to invest in a nickel-matte converter for our ONI RKEF project. It also means that it's allowed us to take a final investment decision for a 55% interest in the ENC HPAL project. If we could just move to slide six, you can just see here the EBITDA reconciliation. And you can see there on the table on the right, those interest and expense amounts, some are financial. that impacted on our EBITDA as well as some withholding tax for FY23. Just move to slide seven, please. You can see throughout the year the strong ramp-up quarter on quarter. Starting March 23, we delivered 27,398 tonnes. You can see in the white bubble chart for the quarter the average LME price was and that delivered 113.2 million US in EBITDA from operations. Moving to the far right of that chart, production was up to 36,273 for the quarter, the December quarter. Again, the white bubble chart, the LME price was down 48% to 17,288. yet our EBITDA from operations was actually up to $135 US, up from $113 million at the beginning of the year. So I think it just highlights the robustness of the business throughout the year, as I mentioned earlier, in a challenging nickel price environment. If we could just move to slide eight, please. The anxiety of mine, we're seeing very strong results coming through from the Heng Jaya mine as a result of completion of the haul road which has allowed us to sell significantly larger tons. The annual EBITDA of US$87.9 million up 63% on FY22 and we expect as well to capture a full year now of this steady run rate of sales of about 10 million tons a year. I mentioned again Fourth quarter, during the December quarter, 42.5 million U.S. EBITDA from the mine alone for a single quarter. So it's performing extremely well. Slide nine. ESG. We continue to play a leadership role in sustainable mining in Indonesia. Some of the awards and accolades that we received throughout the year The S&P, we're in the second top quartile worldwide of ESG performers as ranked by S&P. We have the highest MSCI ESG, any Indonesian-based metal mining company. Below that, you can see from a number of different groups, a number of different awards, gold awards. Moving over to the next column, award of our second consecutive green proper rating, again, only one of two mining companies in all of Indonesia to have a green proper rating. We are striving to hopefully be the first company to achieve gold. To put it into some sort of perspective, this rating which is undertaken by the Indonesian Ministry of Environment and Forestry is A number of different companies are audited. This isn't just mining companies, this is agricultural companies, shipping companies. Of the 3,694 companies that were audited last year, only 196 or less than 5% achieved this rating. Off the back of the work that we've been doing, we were invited to present at the COP28 climate summit in Dubai. And it was there that we unveiled our net zero targets of a 50% reduction by 2035 and net zero by 2050. And other ESG initiatives that we undertook during the year was the first successful trial of electric vehicle trucks in Indonesia. And we will be looking to wrap those numbers up towards the end of this year. And as I mentioned earlier, a binding agreement to become the sole off-taker of Indonesia's largest solar project, which is 200-megawatt peak plus 20-megawatt-hour battery energy storage system. If we could just move to slide 10. The company is now diversifying its production into Class 1 nickel space in a large and meaningful way, and that will be through the Excelsior ENC nickel project. Again, it will be built with our partners Shanghai Decent. It will have 72,000 tonnes of capacity. It will be the first project globally that will have the capability to produce MHP, nickel sulphate and nickel cathode. That gives us product diversification and the flexibility to sell into various segments of the Class 1 nickel market where we may see superior margin opportunities. NIC will own 55%. As with all of our other projects, it comes with a construction guarantee, and the capex is US$2.3 billion on a 100% basis, which includes all auxiliary facilities, including tailings, sulfuric acid plant, and other supporting infrastructure. It comes with a timeframe guarantee of no more than two years and also a nameplate guarantee. been successfully awarded a 15-year tax holiday from the Indonesian government so ENC will pay zero tax for 15 years and then another additional two years at 11%. Our 55% stake in ENC which translates to US $1.265 billion is fully funded from existing cash on the balance sheet And that cash has been built through the strong EBITDA, strong RKEF and mine operations, but as well as the $943 million Australian placement to United Tractors, as I mentioned, at $1.10 at a 30% premium, and partly through $400 million US loan facilities from BNI, which we see as a bridge to potential project financing. We can just go to slide 11. This is just really the milestones across the various quarters for 2023. Again, another very busy and productive year. Started with completion of the institutional placement and retail SPP in the March quarter and the execution of the electric vehicle battery supply chain framework. So that was sort of that signaled our intention to move into the Class 1 market in a big way. In the June quarter, completion of five-year US $400 million senior unsecured notes and the commencement of first commercial sales from Oracle Nickel, as well as the announcement of the $943 million placement to United Trackers. That allowed us to... to increase our interest in Oracle Nickel by 10% and moved to 80%. We also completed an equity issuance to Shanghai Decent for 270 million US, acquired 10% interest in HN, trading HPAL. and has given us access to mixed hydroxide precipitate that we can market to potential new customers. And we've already sent some samples to some customers, and we're in negotiations as to sales of that MHP. In the September quarter, we also completed the Hengzai Mine to IMIP haul road, And the results of that were really delivered in the December quarter, whereas I mentioned it was 42 million US in EBITDA was delivered from the Hangzhou mine. Finally, a very busy final December quarter, execution of the solar agreement, presentation at the COP28 summit in Dubai, a positive fit for EMC, trial of the electric vehicle trucks, announcement of nickel match sales to Glencore, so the first sales that are outside of sales of our nickel pig iron to Chingsan. We acquired our initial 13.75% in ENC, and construction there is progressing very well. And subsequent to year-end announcement of a capital management framework, with an increased final dividend and an on-market share buyback. So in summary, it's been, despite a significant decline in nickel price over 2023, we've seen an increase in EBITDA from all of our operations, which are performing very well. We are fully funded for our transition into higher margin, lower carbon intensity, class one nickel, which will bring us a diversified customer base. And we are launching very shortly a process to look to attract a strategic investor and off-taker into the ENC HPAL project. And we've seen very strong interest to date. And so we look forward to that. for launching that process. With that, I will hand over to Q&A.

Thank you very much. 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 are on a speakerphone, please pick up your handset before asking the question. Our first question comes from Cameron Taylor from Bank of America. Cameron, please go ahead.

Good morning, Justin. Well done on the results. Just a couple of questions, if I may. The first is on Indonesia's RKAB approvals. There's concerns around shortages of nickel oil, given that less than 40 miners in Indonesia had received these approvals. Obviously, it's a net benefit for Heng Jaya and also NPI prices. Can you just talk a bit about that and how it impacts nickel industries?