Nickel Industries Limited

Thank you and welcome everyone to the Nickel Industries June quarter activities presentation. If I could ask the moderator just to move to the next slide please. Safety and sustainability, no LTIs were recorded during the quarter against 2.18 million man hours that were worked. The company-wide 12 months rolling total recordable injury rate as of the end of June was 1.89 and this is significantly below. the world steel benchmark. We're proud to release our 2023 sustainability report during the quarter. This marks our third sustainability report and really showcases the company's achievements and the role that we are playing in being a responsible and sustainable mining leader in Indonesia. We're also very proud to announce the establishment of a university scholarship program. for 10 local indigenous students per year to attend a university in Sulawesi across fields of metallurgical engineering, environmental engineering, and mining engineering. And we're very pleased to have a role and provide support for future Indonesian leaders. The Heng Jaya Mine participated in the World Environmental Day campaign in various activities, such as tree planting, beach cleanups, and also showcasing its proposed biodiversity conservation area. And we also received the top CSR award and the Indonesian Social Responsibility Award. So again, more accolades during the quarter and reflective of nickel industry's recognized role as leading ESG and responsible miner in Indonesia. We could just move to the next slide, please. We've had a challenging first half due to factors outside of our control, but pleasingly our operations have remained robust. US$79.5 million EBITDA from operations and nickel metal production was slightly higher than the March quarter. Our RKEF EBITDA was slightly down on the March quarter and it came in at US$41.8 million. Unfortunately, that was a result of unseasonably high rainfall, which I'll touch on a little bit later on. That meant that we had to continue to draw down on lower grade ore stockpiles. We also did see a bit of a bump in nickel ore pricing, which led to slightly higher costs. And that was a result of the higher LME price that we saw during the quarter when LME briefly sort of spiked back up over $17,000 a tonne. Pleasingly, Hangzai and mine made a very good recovery from the slow start to the March quarter, with EBITDA coming in at US$24.6 million, which is 63% higher than the March quarter, which was impacted by the delayed issuance of RKAB licenses. So in the March quarter, we only really saw production starting at the end of February. I've touched on the higher than average rainfall, but it was 1,373 metres, so over a metre for the quarter, and that was 48% and 91% higher than the prior corresponding periods in 2022 and 2023. So you can see a significant amount of rainfall, which has had an impact on our operations, but as I said, still, the numbers are very robust. We're pleased to announce the increase in equity in our ENC HPAL project and progress is going very well there. And along with that, we announced the expected expedited commissioning of ENC of our cathode and sulfate plants, which will bring forward cash flows from that project. We announced the establishment of a US $250 million bank facility. and repayment of the maturing US$245 million April 2024 notes. Finally, I'm pleased to announce the appointment of an independent non-executive director, Emma Hall, who brings a wealth of global bachelor medals experience with players such as Tianqi Lithium, and we warmly welcome her to the Nickel Industries Board. If we could just go to the next slide, please. You can see here NPI pricing up slightly from the March quarter. NPI has recovered from its lows and we believe we're seeing it stabilize and you can see it's sort of reflective in the numbers or the average contract price for the June quarter. If we could just... sorry, the RKEF production remains stable across our operations, despite the impact from RKAB licenses and the impact of the unseasonably high rainfall. And you can see that reflected in those charts there. If we could just go to the next slide, please. Sorry, I've got ahead of myself here. I've touched on the NPI pricing. But as I mentioned, we've seen it stabilize from the recent lows. And our view is looking forward that we expect the NPI price to remain stable with more upside than downside. If we could just go to the next slide, please. E&C construction progress, you can see from the aerial photo there that all of the earthworks and footings are now complete. You can see in the foreground there that we've completed construction of all of the office and staff quarters. Long lead items, critical items continue to be fabricated in China and progressively delivered to site. With the earthworks and footings now complete, we're ready to start pouring concrete and putting in the slabs. As I mentioned earlier, we increased, we acquired an additional 30.25% equity, taking our interest to 44%. And that has allowed us to hopefully bring forward the production or commissioning of nickel cathode and sulphate plants ahead of the contracted October 2025 date. We believe timing-wise that bodes well given that we experienced increased margins from the March to June quarter at our 10% interest in the HNC HPAL. And so we've seen a strong increase in margins and we believe being able to bring forward the ENC production bodes well into hopefully a high margin environment. If we could just move to the next slide, please. The Hang Jaya mine, as I mentioned, stronger performance despite the challenging rainfall. Quarterly EBITDA of US$24.6 million. We are at a near record for July. And August is historically the start of the dry season and actually historically the driest month. So we're looking forward to now entering the dry season and really focused on continuing to ramp up the Hengjia mine production and also EBITDA. If we could just move to the next slide, please. On the corporate front, I've touched on the increase in equity in ENC to 44%. and that was secured through two payments totaling US $695.8 million. The US $250 term loan facility was executed and that was jointly provided by two tier one banks, PT Bank Negara Indonesia. So this is the second facility that we've done with them and DBS. And then finally, the appointment of independent non-executive director, Emma Hall, as I mentioned, over 10 years experience in the global battery metals industry and wide-ranging commercial technical engagements with global manufacturers and OEMs across North America, Europe and Asia. So in summary, despite facing some challenges again this quarter, again to reiterate, our operations performed robustly. Again, the backdrop of continued production cuts elsewhere, and that was obviously reflective of the announced closure by BHP of its Nickel West operation. So whilst other producers continue to be loss-making or others are closing, we're still recording, as I said, very robust and solid EBITDA. We believe that these production cuts and closures will continue. We think that we may see higher-cost NPI producers potentially coming out of the market and additional global producers. And so the current number of at-risk or closed nickel producers currently sits at about 450,000 tonnes per annum. If you look at actual new Class I projects in Indonesia, There's currently only three projects that are actually funded and under construction, and one of those is ENC. And that only amounts to about 300,000 tonnes. So it's obviously 150,000 tonnes less than the global closures. And look, we think in Indonesia, potential further growth is probably limited. I think that was reflective of the scrapping of the planned BASF Eremet HBAL plant. So I think it's a sign that any additional Indonesian HPAL capacity may be challenging to fund. So I think we're extremely well placed, being fully funded for ENC. Construction progressing very well. Now we're expecting expedited cathode and sulfate production. And as I touched on, growing margins, which are being evidenced through increased EBITDA from our 10% holding in So as we move into the second half of the year, with the commencement of the dry season, we're now very focused on delivering a strong second half to the year. With that, I'll now hand 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 speaker phone, please pick up the handset to ask your question. Your first question comes from Kate McCutcheon with Citi. Please go ahead.

Hi, good morning, Justin and Chris. At the RKEF, it's a good print from ANA and ONA, but production looks a bit softer at the first gens and they operated at a modest loss. What levers do you pull to get those first gen RKEFs back on track and how do you think about output versus market conditions from those? and then just are those NPI volumes take or pay, or I guess is there any risk if we don't see pricing improve from those two assets?

Yeah, so there is no take or pay on those RKEFs. The levers that we can pull, which is what we are currently looking at at the moment, is basically looking to provide 100% of the ore supply, of the high-grade saprolite ore supply from the Hengjia mine, That will allow us to feed a higher grade ore with a better silica to magnesia ratio and lower iron units. So that's a lever that we're currently looking at at the moment and we're sort of focused on being able to deliver that production directly from our hang giant mine into those first gen RKEF operations. which will negate the impact of low-grade ore that's currently being fed through those operations. But I think, just to touch on those first-generation RKEF lines, there is still a lot of them in Indonesia and outside of Indonesia. As you pointed out, very small losses, but we believe that we may see some NPI production coming out of the market from from other competitors that don't have the same cost base as us. And so we remain sort of, I think our view on NPIs that prices have stabilized and that margins are still robust in our ANI and ONI operations. And we are focused now on how we can improve margins at HNI and RNI.

Okay, that makes sense. And then just on the mine, it looks like we've got guidance of 12 million tonnes for the seaway. Your permit is now for 22 million tonnes, I think. What does that ramp-up profile look like and what's the split of saprolite versus laminate?

Yeah, so we are currently under application for moving to 22 million. In terms of achieving that ramp-up, that will probably occur... in sync with ENC coming online. So our target is that the additional 11 million tonnes of limonite, which will come solely from our mine to the ENC HPAL, we're targeting that ramp up to tie in with the commissioning of ENC. So it'll be in the second half of next year that we'll be looking to move to that rate.

Okay, and then if I can just sneak in a quick one for Chris, what is that total drawn debt number and the 358 million cash, is any of that still in a term deposit or what will you report at your cash flow line?

Yeah, thanks Kate. Yeah, we are constantly moving amounts in and out of term deposits. I'm continually rolling them just to get better rates. The 350 facility and the 50 mil from the from the first Indonesian bank lines. That has all been fully drawn. So the revolver is now drawn as well. And then the 250 mil new facilities that we entered into in last quarter, we drew that down in early July. So that has been drawn down. The entire 650 from those two bank facilities have been drawn.

Okay.

Thanks, Kate.

Your next question comes from Tim Hoff with Canaccord. Please go ahead.

Hey, guys. The other question I had was, it's a bit of a housekeeping one here, which is, your March tons at the Heng Jai mine are different reported this quarter versus last. I don't suppose you could point us in the direction of which one's the right number?

Yeah, let me come back to you on that one, Tim, and... Yeah. So it's the Autons mine, is it? Yeah. Okay. Let me come back to you on that one.

Sorry, Tim. We picked that up. Thanks for the question. It is the current one. The June quarter is the correct number.

Excellent. Excellent. Thank you very much. No worries.

Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Your next question comes from Cameron Taylor with Bank of America. Please go ahead.

Good morning, Justin and Chris. My question is around the offtake for the new NCHPL plant. You mentioned in some previous quarterlies that you were in discussions with or looking for Western OEMs to have an offtake. Any update on there? I was just curious whether Ching Chen would be on board with, you know, selling HPL nickel to Western OEMs?

Yeah, we're making good progress there. So we've been in close dialogue with a number of Western OEM and battery makers. We have received some indicative bids for octane, and so we're just working through those at the moment. In terms of the... I mean, the... Qingshan's focus is very much aligned with ours in that they're looking for ENC to be a supplier of, in our view, the best quality nickel from Indonesia to everyone ex-China. And so that's still very much our focus and we are progressing those offtake discussions.

Okay, thank you. And just on the negative side, sort of EBITDA per tonne for Hengjia and Ranger. You mentioned levers. You did mention mat. Is mat still on the cards? If they were still producing mat, would you see positive EBITDA margins or is it much of a muchness between the two products?

Look, at the moment, our view is that mat, if it's not loss-making at the moment, given that there is a large supply of new supply coming on, that it potentially will move into loss-making territory. So yeah, there's no plans to go back into MAT again at this point in time. And really, we're looking for our Class 1 and battery exposure to come through HPAL rather than MAT. A number of reasons for that. HPAL has significantly higher margins and a much lower carbon intensity.

Yeah, understood. I agree with that. So does that mean the A&I plans for Matt are also sort of on ice at this stage?

At the moment, yeah. There's no plans to convert that to nickel Matt at this stage.

Okay. Thanks, Justin. Thanks, Chris. Thank you.

Your next question comes from Dim Arya-Singer with UBS. Please go ahead.

Thanks, Chris. Just two for me. So first one... There were a bunch of news reports out last week. I think Word has had an article about Indonesia potentially trying to limit further investment or Chinese investment in Indonesian nickel capacity. I'm just wondering if you've seen the article, what your view is. Is it a threat or a potential opportunity? Yeah, just maybe expand on that, please.

No, thanks, Tim. Yeah, we have seen the articles. And we believe we're an extremely well-placed thing. We are the only majority-owned Western HPAL in Indonesia. And, you know, we are looking at getting sort of Gingsan down to a level of around 25% to 20% ownership. But regardless of that, you know, we will be at 55%. They will be a minority. From our perspective, as I said, we're the only HPAL... Currently in Indonesia, that's majority Western-owned. We're really the only one that is sort of Western-facing as well in terms of engagement with Western OEMs and battery makers. And so that's been very positively viewed by the Indonesian government.

Yep, yep, awesome. Okay, cool, thanks. And then just one, if you just remind us, latest guidance on the buyback, what would you say?

Yeah, we're... So, look, as released in our company update on the 4th of July, you know, we obviously are now coming out of a blackout period, but, you know, the number of shares, you know, will be contingent or the buyback will be contingent on, you know, the prevailing share price and market conditions, you know, which we'll be monitoring on a daily basis.

OK, cool. Thanks. Cool.

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

OK, look, thanks, everyone, again, for your time. As stated, we look forward, given the impending dry season now starting, and are very focused on delivering, hopefully, a strong second half to the year. So thank you, everyone, again, for your time, and we'll talk again soon. Thank you. Thanks, all.