Nickel Industries Limited

Thank you for standing by, and welcome to the NCIL Industries Limited March Quarter Activities Webcast. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Mr. Justin Werner, Managing Director. Please go ahead.

Thank you and thank you everyone for attending the Nuclear Industries March quarter 2025 quarterly activities update. If I could just ask the moderator to move to the next slide please. To kick off with safety and sustainability, 12 months LTIFR remains very low at 0.05. No lost time injuries reported against 4.8 million work hours for the quarter. The TRIFR also remains very low. At the end of March, that was 1.48. We continue to be recognized as an ESG leader. We were awarded our third consecutive green proper rating, and we are striving to be the first company to achieve gold in Indonesia. And we also were pleased to receive an award for outstanding corporate social responsibility in Asia. If we could just go to the next slide, please. As a strong quarter, despite again continuing soft market conditions, US$97.3 million adjusted to the DAF and operations. RKEF production was slightly lower and that was just due to a small halt in operations for a couple of days at ONI.

Pardon me, it appears we've lost connection with our speakers. Please hold while we reconnect. Ladies and gentlemen, we've reconnected with our speakers. Justin, you may begin.

Apologies, everyone. Phone line dropped out there. So I'll start again. 97.3 million U.S. have adjusted EBITDA from operations from the quarter. RKEF reduction, slightly lower, as I mentioned, due to some localized flooding from heavy rainfall. RKEF EBITDA of the U.S. 44.3 million, 5% higher than the December quarter. And EBITDA per tonne, we saw an increase from $1,309 a tonne to $1,376. Very good performance from our interest in the HNC HPAL. Again, continues to consistently perform strongly in terms of nickel tonnes produced. over 2,000 tonnes for the quarter, again, 40% above named lake capacity, and the highest amount of even delivered yet from HNC of the US, 22 million. And this obviously bodes well for the commissioning of EMC in the second half of this year. We reached agreement with Shanghai Decent to defer our two remaining EMC acquisition payments of $126.5 million on 1 July and 1 October of this year. They have been deferred by six months. I'll talk about that a little bit later on. But that is reflective of the very strong relationship that we have with Shanghai Decent. In no way is it a reflection of our confidence in the project or the market. It really is just preserving the balance sheet, particularly given the current environment in terms of global tariffs and we have just recently seen obviously a weakening sentiment in both equity and debt markets. Mine operations production was slightly lower and that was due to the changing of some pits, but all sales were slightly increased. EBITDA was lower, and that was driven predominantly by a significant reduction in the premium price that's being paid for all over and above the standard HPM price. If we could just go to the next slide, please. RKEF operations, as I mentioned, production slightly lower by about 4%. Fast costs, pleasingly, were 6.4% lower, so reduction from $10,576 to $9,896. And so that was predominantly driven by lower nickel ore costs, and that did result in improved performance versus the December quarter. We did see a reduction in the NPI contract price. averaged $11,884 in the fourth quarter of 2024. That reduced to $11,317 for the March quarter. But I would note that we did see a strong improvement in NPI pricing across the quarter. So that rose from $11,055 a tonne in January to $11,220 in February, and then finally $11,981 a tonne in March, which is actually above the Q4 average of $11,884. So we did see a strengthening of NPI pricing across the quarter, which is encouraging. And as I mentioned, pleasingly, we saw a 6% reduction in our costs. If we just go to the next slide, please. HNC, as I said, consistently producing above nameplate capacity. Costs, again, were decreased similar to our RKEF operations, driven predominantly by lower nickel ore costs across the quarter. A new quarterly attributable EBITDA record of US$22 million, and as I said, bodes well for EMC. If we could just move to the next slide, please. E&C is progressing extremely well. The top photo that you can see there is the HPAL plant. Thickness, countercurrent, decantation, storage tanks and reactors are all nearing completion. Two of the three autoclaves are now connected and they're in their pre- and post-treatment stages. And then the bottom photo there, that is the cathode and nickel sulfate plant. And you can see there that's very well advanced and we're still targeting commissioning of the cathode plant in July, which is well ahead of the October schedule. And we're still on track to deliver MHP and or commission MHP and nickel sulfate in October. We can just move to the next slide, please. Mine operations. There was a decrease in all mines, driven by a number of factors. There was high rainfall across the quarter, and I referred to some flooding earlier. There was also a pick or a movement from a lower-grade pick to a higher-grade pick. which decreased some of that mining and also saw a decrease in grade from 1.56 to 1.45. That is now being resolved. A new pit is being opened up. We are looking to increase the grades. Sales were higher in this quarter, and there was a slight increase in the limonite contract price recently. And so our adjusted EBITDA was $31 million, lower than the $36.5 in the December quarter. As I said, predominantly driven by the decrease in the premium pricing that we saw was being paid across the majority of 2024, which now appears to have subsided quite a lot. And that will simply mean that we will just see margin flowing down back into our KEF operations and our HVAL operations, which we have seen this quarter. If we could just go to the next slide, please. Corporate highlights, declaration of one and a half cents per share, final dividend and a dividend reinvestment plan. That took the full year 24 dividend to four cents. Angel Nickel received US$36.4 million of VAT refunds from 2022 and there is a remaining balance of US$110 million that is expected to be received over the next 12 months. I've touched again on the Green Plopper award and again one of only two mining companies to receive that so it is a tremendous achievement. And then finally, subsequent to the end of the quarter, we reached agreement with Shanghai Decent to defer the remaining E&C payments by six months. As you said, that removes any possible stress on the balance sheet. and is, again, really a reflection of the strong relationship that we have with Shanghai DCM and the alignment of interests that we have given their significant holding in nuclear industries. That wraps up the March quarter for 2025. With that, we'll hand over to questions.

We will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you were on a speakerphone, please pick up the handset to ask your question. The first question today comes from Richard Knight with Bear and Joey. Please go ahead.

Hi, Justin. Hi, Justin. Thanks for the call. Just a quick one on Heng Jaya volumes. Obviously, you've got the quota expansion to 19 million tonnes coming at the back end of the year. Have you stockpiled enough limonite to be able to fulfil that quota by the end of the year? That's the first question. And the second question is just on VAT rebates. If there's any update on the of timing of payments of those. I suppose I'm just thinking about in the current environment you're still pretty much cash flow break even and just thinking about what sort of delta in the current price environment could sort of lift your cash balance ahead of having to make those payments for ENC in six months' time or nine months' time.

Yeah, thanks Richard. I'm happy to take the first question. I'll hand over to Chris for the BAT. At the moment we have over 20 million tonnes of limonite currently stockpiled so that there is more than enough limonite stockpiled to meet that ramp up from 9 million to 19 million. So the H-power will consume around 11 to 12 million tonnes of oil a year. So we effectively have sort of two years of limonite stockpile there. So we're very comfortable with limonite stockpile levels. I'll let Chris talk to the VAT question.

Thanks, Justin. Thanks for the question, Richard. All we have said now is the remaining 110 that we are expecting within the next 12 months. I believe that's conservative, but given the delays we've had to date, I want to be conservative and say that. Do I expect it to happen come in 2025? I'm hopeful, but I can't guarantee that, Richard.

Yeah, okay. No worries. Thanks, guys.

Okay, thank you.

Thank you.

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

Hi, Tim. Thanks for the question. I just was hoping you could unpick the EBITDA that's being generated by TC, that $13 million within the HPL unit.

Sorry, Justin, I can take that. When you say unpick, Tim, like, What do you mean?

How's that, the extra $13 million that's being attributed to TC or SYNCREATION, how's that being generated?

So SYNCREATION is our entity. SYNCREATION owns, we own 100% of SYNCREATION and we have SYNCREATION owns 10% of HNC. We have sales. HNC makes sales to SYNCREATION and so any profit that we have there sitting in SYNCREATION on selling the product is 100% EBITDA because we can include that, we consolidate that. However, our share of the HNC sales or the HNC profit, we obviously cannot consolidate, and so we gross that up, take our share of it, and call that our attributable EBITDA, and we add that to the EBITDA from Syncreation to give you the attributable EBITDA number of 22 mil. However, because we cannot actually consolidate the HNC earnings, we have to equity account that, we back out the HNC. the item is below the EBITDA line to show an equity account of profit, and that's the number that you'd see in our accounts, in the actual half-yearly and year-end accounts.

So in the MPAT line, we're going to see that equity account of profit come through?

Yeah, and look, we deliberately show it like that. We gross up HNC because we don't want people to be looking and thinking that the margins coming out of HNC are a lot lower than what we believe the EBITDA margins is when they actually apply that, when you guys apply that to your E&C model forecasts, we obviously don't want you understating the margins there for that business.

Excellent, thanks. And just remind us on the, okay, no, I think we've got that. Excellent, thank you very much.

Thanks, Tim.

The next question comes from David Cotis with Bell Potter Securities. Please go ahead. David, your line is unmuted. You may now ask your question.

Sorry, operator, is David still on the line?

David is connected currently. Perhaps you're muted, David.

Perhaps we go to the next question and we can come back to David.

The next question comes from Jim Ariason with UBS. Please go ahead.

Thanks for the call. Maybe if you could just walk us through again, please, what is required to get that mining permit expanded? Are there any goalposts that we can look to? What does that glide path look like, potentially?

Yeah, thanks, Tim. Effectively, there's three key steps. The first step is development, submission and approval of a feasibility study, which pleasingly we had approved during the quarter. So that's a major milestone. The second step is then what's called an ANDAIL or an Environmental Impact Statement, which supports the feasibility study and outlines the environmental management and rehabilitation plan. That has been submitted and is currently in progress. There's a number of workshops, meetings, revisions, which we're working through at the moment, and that is also progressing well. Once that environmental study is approved, Basically, it's then all consolidated into a single document submitted for approval of the increase in the RKOB, and that's the final step. So we remain very confident of receiving that approval before October when we expect to start delivery of limonite oil to EMCs.

Cool, thanks. And maybe just on E&C, I guess it's great and prudent that you were given an extension with SingShine on these payments. Is there any capacity, and I guess it's not something you'd want to do, but is there any capacity to change things further, like maybe take on less ownership or... Yeah, I guess... Yeah, it may be prudent maybe to revisit the economics of this, just given the broader challenges in the commodity at the moment. But are those conversations, yeah, are you able to have those conversations at all, or is this just a strict deferral?

Look, we are able to have those conversations with GSM. But at this point in time, really, the discussion has just been around a deferment for a period of six months.

Yeah, cool. Thank you. Thanks very much, guys. Cheers. Thanks, Ed.

Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. The next question comes from Adam Baker with Macquarie. Please go ahead.

Good morning, Justin and team. Good to defer those payments for ANC. Just wondering, secondly, on the debt repayments that you've got due in the second half of this year. I think you're starting to pay off the senior unsecured notes. Can you just walk us through that, please?

Yeah, I'll take that, Adam. Thanks for the question. Yeah, we do have the senior unsecured notes. They will start amortising in October this year. And we also have amortization. We've already made some amortization payments on some of our bank loans, and they are continuing through this year. And look, that's a key factor around why we've pushed. We went to Shanghai Decent and discussed this and pushed back those E&C deferrals. We want to, as I said, I think on the last call we had, it was either last quarterly or year-end, we are continuing to assess the capital markets, the debt capital markets. I must be clear on that. We're continuing to assess the debt capital markets for refinancing of that debt. We don't think now is the right time, mainly for various reasons, but operational reasons. We have some very large catalysts coming up. We believe in the second half of this year, being the E&C commissioning, being the expected increase of the Hench Iron Mine, RCAB, and also the expected Sampala coming into production early next year. Obviously, with those three things and the effect that they will have on our EBITDA, I would much prefer to be looking to refinance our debt stack once those catalysts have happened or are much closer to happening so we can actually get credit for those. So with that, the amortization will be getting paid on the debt. reducing our debt balance, and to do that, given the current market environment and margins we've experienced, we went to our partner and requested a delay in those payments.

And the amortization coming up in October, the quantum for that is around $40 to $50 million, remember?

No, no, no. Let me just bring it up for you. Sorry, the amortization on the senior unsecured is 44, 44 mil. And that's in October 25. But there's also amortization and various quarterly amortizations on the bank loans as well. So, and they're every quarter. I'm happy to, I think we've already published those. So I'm happy to send those back through to you rather than reading out month by month amortization, Adam.

Yeah, got it. I've touched base. I'm fine. Thanks, guys.

Okay. Thanks, Adam.

Thanks, Adam.

The next question comes from David Coates with Bell Flotters. Please go ahead.

Hi, Tim. Can you hear me this time? We can. Excellent. Yeah. Look, I apologize if I missed any of this while I was dialing back in, but just... Do you have any colour on the potential block of shares that might be coming out? We saw that block trade during the month, which was interestingly handled. That's now out of escrow, I believe. Can you give us any update on that?

Yeah, as you point out, it is out of escrow. I had lunch with the principal about two weeks ago, and I think it's important to note that that block of shares was actually held across two entities. One was the publicly listed entity, which is Harwell Managing. They are a coal producer listed on the IDX, but they are transitioning into nickel, and they have a mine at Kamahera and a HPAL that is under construction. they needed to sell their balance of their shares for liquidity management and for some of the funding of some of their nickel operations. And that was driven by, unfortunately for them, coal margins had significantly decreased, sort of gone from tens of dollars down to sort of $4 to $5 a tonne. The remaining stake actually sits with the family or family offices. And they have no intention of selling. In fact, the comment to me was that they understand the catalysts that are upcoming and the growth that is effectively locked in. And the comment was that he wouldn't be considering selling anything under $1. So we don't expect to see those shares being offered anytime soon.

Excellent. Thanks, Justin. And I've got just one more on a couple of inbounds that I've had in relation to potential royalty changes, sort of, you know, royalties on oil production versus potential royalties on NPR production. Can you give us an update on that?

Yeah, Chris, do you want to take that one or not?

Yeah, sure, sure. I'll go to the second bit you said on the MPI production. I want to be very clear, we don't pay royalties on MPI production. That royalty is only for integrated operations which have in the same company, there's a couple of them, but in the same company they have an ore, a mine and an RKF operation. So there's no actual external sales of the ore, so the government doesn't capture any royalty on that. So instead, for those entities, they capture a royalty on the end product, being the NPI or whatever other product they produce. So NPI royalties are not relevant to nickel industries. On the ore, we've gone through and whilst we're still finalising, we've seen that they've been enacted, they've become legislation. There is some ambiguity, but we are taking the position that we will be paying a 14% royalty on the saprolyte and limonite. It may be less, which is what the discussions we're having, but I think at this stage it's best to assume the 14% royalty on our ore sales. For the 2024 on our sales, if this new legislation had have been in place for the whole of 2024, we estimate, and that's on the 9 million tonnes, we estimate we would have paid an additional $8 million royalty. For our estimate on 2025... With assuming we get the expanded RCAB license, so the increased sales license, we expect that that increase in royalty will increase our royalties by $12 million. So not huge numbers in the context of our operations and our cash flows, but I'm giving you those numbers just so that you can see based on our 2024 sales. It would have only been $8 million, and our estimate for this year is an additional $12 million as a result of this legislation change.

Excellent, Chris. Thanks for cleaning that up. That's helpful. Cheers.

Thanks, David.

Thanks, David.

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

Thank you everyone again for the questions. Again, look, we're really rapidly approaching. In fact, we're sort of three months away from commissioning of the nickel cathode plant and then not far away from that in October, the NHP and nickel sulfate. So, you know, that's... one of the big milestones this year, along with, obviously, the Hengzai mine ramp-up from 9 to 19 million tonnes, and we hope to be able to provide an update on that environmental study in the coming weeks. And then, finally, I haven't touched on it, but our Sampala project, good progress continues to be made there. We continue to aggressively drill that project out. And it's looking like it will host a significant ore body in close proximity to IMIP. And obviously, given the low capex and good margins from mining operations, we look forward to providing further updates on the Sandpiler project as well. So thank you, everyone, again for your time.

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