Nickel Industries Limited

Good day and welcome to the Nickel Industries Limited 2025 four-year results. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. For operator assistance throughout the call, please press star zero. And finally, I would like to advise all participants this call is being recorded. Thank you. I'd now like to welcome Justin Werner, Managing Director, to be in the conference. Justin, over to you.

Thank you very much. If I could ask the moderator to please turn to page three. Welcome everyone to the Nickel Industries annual results presentation. I'd like to start off firstly with safety. 17.8 million safe man hours worked at significant increase on the man hours worked in 2024 and over 26.1 million man hours have been worked since our last reported LTI back in 2021. So you can see our LTIFR and TRIFR significantly below the world steel average. In terms of ESG, we continue to be a leader in Indonesia. You can see a number of awards there including awards from prestigious companies such as CNBC and improving scores as judged by S&P and other third party groups and the best community award at the global CSR and ESG summit in Vietnam. So the company continues to perform very well on the safety and ESG metrics. If we could just go to slide four, please. Despite a challenging year, which saw the LME price down another 10% versus the 2024 average, we were still able to deliver a robust EBITDA, pleasingly with a number of records set, including record nickel and cobalt tonnes of HNC, record NPI tonnes of 1,055,000, and record mine production of 19.2 wet metric tonnes million with sales of 9.9 million wet metric tonnes. By the numbers, revenue of 1.65 billion, adjusted EBITDA of US$282.8 million. I should note that on the 2024 numbers, at the end of last year, Q4, there was some challenges due to... using up the full RKAV for last year. That resulted in 21.5 million US of standby costs to mine contractors. And it reduced our Q4 EBITDA to 37.5 million versus the 87 million that was delivered in the third quarter. So about a US 50 million delta. Had that not occurred, if you add the US 50 million onto the 282 million that delivered, that we delivered, that gives you about $332 million, which is in line with our 2024 result of about US$326 million. In 2025, we paid a dividend of one and a half cents per share, and currently net debt sits at $861.8 million. In terms of our processing operations, US$207.7 million of adjusted EBITDA, $13,000 or 13.3 thousand tonnes of nickel produced and ENC HPAL construction schedule is progressing very well and scheduled for commissioning in the first half of this year. Another busy year on the corporate front, we had a very successful bond refinancing We raised $800 million, five-year bullet, senior unsecured notes. We were able to reduce the coupon from 11.25% to 9%. We also disremoved the amortization. We did go out initially to raise US $500 million. We had about US $6 billion of orders. So it was very well supported and pleasingly The mix of investors was about a third North America, a third Europe and a third Asia where typically we've seen a majority of investors come out of Asia. We had approval just last week of increased RKAV sales quarter which is a very positive result given the significant cuts that have been occurring in country and I'll talk about that a little bit later on. We announced the sale of a 10% interest in the ENC project to a strategic partner, Sphere, who is the super alloy supplier to SpaceX. And again, we see that as a very strong endorsement of the quality of the ENC project. We also announced the signing of an MOU for supply of up to 14 million wet metric tonnes of ore from our Sandpiler project where development is progressing very well. On the mining front, we delivered 91.6 million US in EBITDA from mine operations, and I mentioned the record nickel ore sales of 9.9 million, and we've been able to successfully increase that from 9 million last year to 14.3 million this year, so almost 60% increase. If we could just go to the next slide, please. What this slide shows is the robustness of our business through the cycle and we believe that we've come out of cyclical lows which we experienced in 2025. If you look at the EBITDA number across the top there, you can see in 2022 it was US$339 million, US$403 million in 2023, US$326 million in 2024 and US$283 million in 2025. That's despite the nickel price going from almost $30,000 in early 2024 to lows of $14,000 in 2025. We've been able to maintain a strong dividend over that period of time and really how we've been able to maintain this strong EBITDA profile when a lot of other businesses have actually gone out of, have left the market. is the growth through the cycle. So you can see in 2022, our processed nickel tons were 70,000. Last year in 2025, it was 134,000. That is set to grow this year with the commissioning of ENC, which will bring another 72 to 80,000 tons of new nickel units at a very high margin. And our mine ore sales, which have increased from 3.5 million in 2022 to $9.9 million in 2025 and we now have approval to go to $14.3 million in 2026. If you could just go to the next slide please. In terms of revenue, you can see they're down slightly to about $1.65 billion. Gross profit also down and operating profit. have been there was a decrease in the MPI price versus 2024 of 2.8% and the LME nickel price was also down 9.8% versus 2024. I mentioned at the start of the call the RKAB licence did significantly impact the profit and EBITDA for this year and did also have an impact on grade and production volumes. Pleasingly, though, in the things that we can control, HNC production increased by 6.3%. HM sales increased 10%, as I mentioned, with potential for another 60% this year. And RKEF cash costs decreased 1.8%. So that, in summary, delivered about US$283 million in adjusted EBITDA for 2025. If we could just go to the next slide. In terms of the balance sheet, it's a very robust balance sheet. Despite margin compression across 2025, as of 31st December, cash US$357 million, debt of US$1.2 billion, so net debt of US$866 million. That debt comprises US$800 million of unsecured notes maturing September 2030. and US $423 million of syndicated bank loan facilities with ranging maturities, with an additional undrawn US $50 million. There was an impairment charge of US $8.1 million, and that was in relation to writing down of some of the limonite in inventory, and that's unfortunately inventory that was sterilised for the construction of the E&C tailings facility. If we go to the next slide please, here you have the reconciliations by waterfall. I won't talk through the numbers but you can see that there and if there's any questions in relation to the waterfall, happy to answer those at the end of the call. If we could just go to the next slide please. In terms of our RKEF operations, I mentioned at the start of the call record MPI production of 1,055,658 tonnes. Sorry moderator, next slide please. Cash costs were 1.8% and that was driven by lower nickel ore price given that it is linked to the LME price and lower power costs. The contracted price of $11,187 a tonne was lower than 2024. And so that resulted in a decline in adjusted EBITDA. And we saw about a $261 a tonne reduction in adjusted EBITDA per tonne. So it was down about 22% on the previous year. The good news is, and I'll touch on that later in this call, is that we are seeing it, We've seen a significant increase in the NPI price, and it's already more than two times what our average EBITDA per tonne price was for 2025. If we could just go to the next slide, please. Our HPAL operations performing very strongly. Again, another record, 8,500. of attributable nickel tonnes to NIC and 802 of attributable cobalt tonnes. HNC continues to operate well above nameplate capacity at around 40% above nameplate capacity. Cash costs increased slightly, mostly attributed to higher sulphur raw costs. MHP contract prices increased by 8%. to around US$14,990 a tonne. And the margins, EBITDA per tonne margins were higher in 2025 versus 2024 of around 6,677. We've seen a very strong increase as well in EBITDA per tonne margins, particularly in January where we're over US$10,000 a tonne. ENC update. Progressing very well. The integrated nickel refinery for both the cathode and the nickel and cobalt sulphate plants is complete and you can see that in the photos in the top there. The H-PAL smelter itself is also nearing completion. We're starting to buy some of the consumables and outlaying working capital. Mechanical tests have commenced on key pieces of equipment such as the CCD circuit, thickeners, precipitation tanks, slurry storage tanks, reagent tanks and things like that. And there's been a reallocation of additional resources to ensuring the timely completion of the EMC plant. If we could just go to the next slide, please. We were delighted to announce the acquisition of 10% interest in the ENC project at a US $2.4 billion valuation on 100%, which is above the US $2.3 billion that Nickel Industries invested at. That investment was made by Sphere, COSDAC-listed premium alloy supplier. They're one of only five accredited SpaceX suppliers. and they're the only one that has a 10-year supply contract. So they supply all of the superalloy products, which are particularly nickel-intense, to the SpaceX rocket program. We see this as a huge endorsement of the quality of the E&C project, and what it will also do is it opens up the potential for E&C product to go into other sectors or other players within that industry aerospace and aeronautical industry which is a growing industry. If we could just go to the next slide please. There is a short video here which moderator are you able to click on that link? If it doesn't work we can just bypass this page. If you're not able to open it, look, I would encourage everyone to visit this link and to open it. It will give you, it's a very short video and it shows the size and the scale and the tremendous progress that has been made at the ANC project. If we could go to the next slide, please. Mining operations, I mentioned another record year of production, 19.2 million wet metric tonnes and sales of 9.9 million wet metric tonnes. Despite the limonite nickel grade decreasing, the limonite contract price increased 31%. That's related to increased demand for limonite ore for Indonesian HPAL projects that are non-integrated that we've been selling to. Again, this bodes extremely well for ENC, which will be fully integrated. So we will have a significant limonite cost advantage to... HPAL producers that aren't integrated with their mine. And I mentioned at the start of the call, unfortunately, there was about 21.3 million in standby charges in the December quarter related to the RKAB extension. But pleasingly, we were able to, we've been able to recently increase that to US, to 14.3 million wet metric tonnes for 2026. Unfortunately, that delay in the RKAV did see our adjusted EBITDA versus 2024 down slightly. Could you just go to the next slide, please? The Stamfala project is progressing very well. Of the required 24 kilometres of haul road that's required to link up the project with the IMIP, We are about 90% through completion of that first eight kilometres. We've also been progressing the permitting. We've submitted feasibility studies for both the ANN and the ETL projects and we're expecting approval of the feasibility study in the coming weeks. And for the ANN project, we've incorporated a slurry plant for an expansion of the ENC project, which is related to the MOU that was signed for the supply of 14 million tonnes of limonite a year for Sao Paulo. So that will allow us to monetise the very significant limonite resources that we have at Sao Paulo. We've been very aggressively drilling the project through the course of 2025, over 100,000 metres. And we're very confident of a resource of over a billion wet metric tonnes, which taking today's margin of around $12 a tonne, you can see the value of the Sampala project. And we have about US$20 million, $30 million of capex left to bring that project into production. So it's a world-class all-body, and we're making good progress there in the development of that project. We could just move to the next slide please. There's three big catalysts that we've been telling people that we're aiming to deliver for 2026. The first of those is the increase in the Hangia Mine RKAB. Whilst it was short of the $19 million that we were seeking, I think the loss of 4 to 5 million tonnes which equates to sort of 50 to 60 million US in EBITDA has been more than outweighed in the significant increase that we've seen in the NPI and LME nickel price and I'll talk about what that has done to our January results and what it means for us looking forward. To date, we are the only company that has achieved an increase, with larger companies being cut by almost two-thirds from their 2025 quota. So we think, again, strong endorsement of Hengjia Mine's environmental and ESG track record. The additional $5.3 million will obviously should increase the EBITDA for the Hang Jaya mine for 2026. The second catalyst is the commissioning of ENC, and as you've just seen, that's progressing extremely well. And we've reported HPAL margins of over $10,000 a tonne in January at 72,000 tonnes of nameplate capacity, but remembering that HNC is running at about 40% above nameplate, It's not unreasonable to think that there will be some outperformance at E&C as well. So we look forward to the commissioning and ramp up of E&C over the course of this year and then first full year of production in 2027. And then finally, the Sampala mine, as I've just touched on, progressing well in terms of development and that'll add a significant additional EBITDA as well. particularly given that we already have an MOU for 14 million tonnes of limonite on an annual basis. If we could just go to the next page please. So the closing share price of 101 as of last week and a market capitalisation of around US $3.1 billion. We think we are very undervalued if you look forward for what we can deliver in 2026 and in 2027. The broker consensus forecast gives us an EV EBITDA multiple of about 7.1 times, but that's on about a 500 million EBITDA estimate for 2026. I would note that from our NPI, well in January we delivered US $50 million in EBITDA and that consisted of NPI margins. jumping over around 150% from about $1,114 a tonne for the December quarter of last year to $2,800 a tonne. In January, we haven't yet captured that full NPI increase. So if you take our annualised NPI production of over 130,000 tonnes of nickel in NPI and apply a $3,000 a tonne margin, You can see that there's potential for close to 400 million US in EBITDA just to be delivered this year, assuming pricing stays the same from our NPI business. We then have the HPAL margins at above $10,000 a tonne, taking a conservative number of 20,000 to 30,000 tonnes for ENC for this year. There is another 200 to 300 million US in EBITDA, so we're already well past that 500 million broker consensus number. And then taking the 14.3 million RKAV and applying a $12 return margin, that's another 170 million US for calendar year 2026. So that puts us up around US 700 to 800 million. significantly reduces that EBITDA multiple back to sort of, you know, four times. So again, we think that the significant growth that we're looking forward to in 2026 is not yet priced into the stock. And as I said, looking forward into 2027, we'll have the first full year of ENC, as well as hopefully the commissioning of the Sandpiler mine, which will... deliver again more incremental EBITDA. The final point, we're extremely well leveraged to any change in the nickel price given our significant volume and I've just touched on the volumes for 2026 and additional volume growth coming in 2027. All of this growth is fully funded, requires minimal sustaining capex. We're the beneficiary of significant tax holidays, and any improvement in the nickel price offers significant EBITDA upside, and I think that's been strongly evidenced in our January results alone. And so looking forward to 2026, assuming no change from where we sit now, and that price increase has been driven by the significant RKAB quota cuts We're looking forward to a very strong 2026. With that, hand over to questions.

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