Nickel Industries Limited

Thank you for standing by and welcome to the Nickel Industries Limited September quarter activities webcast. 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 Q&A time, simply press star followed by the number one on your telephone keypad. And to withdraw your question, press the star one again. For operator assistance throughout the call, please press star zero. And finally, I would like to advise all participants that this call is being recorded. I'd now like to welcome Justin Warner, Managing Director, to begin the conference. Justin, over to you.

Thank you and welcome everyone to the Nickel Industries September quarterly activities results call. If I could just ask the moderator to move to the next slide, please, kicking off with safety. 12-month LTIFR 0.06. Unfortunately, there was a lost time incident recorded during the quarter. An operator took a fall. but they thankfully have recovered and so no significant injuries. That takes our 12-month TRIFR to 0.67 and 17.8 million safe man hours have been worked. In terms of some of the quarterly milestones on the ESG, we are part of the top 20 Asia-Pacific metals and mining peers as externally audited by S&P. and so I think that's a tremendous achievement from a recognised independent third party. We received recognition from the Indonesian Mines Department for our disaster response and we ran a tsunami preparedness drill in one of the local villages. We planted over a thousand mangrove seedlings on World Mangrove Day with the local community and the Hang Jaya Mine won gold at the INTEC Southeast Asian 2026 for waste and coastal conservation education. And finally, we continue to expand our scholarships with over 30 students in various disciplines across two universities in Indonesia. And we're seeing some very good results from our students in the universities where they're currently studying. If we could just go to the next slide, please. US $125.9 million adjusted EBITDA with record all sales and EBITDA at the Hang Jaya mine. Also, some tremendous milestones during the quarter with first MHP nickel and cobalt CAFO from ENC. The US $125.9 million of adjusted EBITDA is up on the June quarter. record all sales of 4.5 million tonnes. And as I'd mentioned, we were externally benchmarked by S&P under the Global Corporate Sustainability Assessment and we ranked in the top 20 amongst our APAC peers. On the mining side, record EBITDA, US$76.9 million, up 68% on the June quarter. and that's reflective of the Indonesian government's revised HBM pricing. Four and a half million tons of oil sales, that's also a new record, up 56% on the June quarter and our EBITDA wet metric ton margin was also up 8% to a little over $17 US a wet metric ton. At our RKEF operations, EBITDA was down 30% to US 40.7. Really the key driver there is the increase in ore costs. So we've sort of seen margin moving from the RKEFs into the mining business. Sales were pretty stable, 26,800 tonnes down slightly. And pleasingly, the NPI price is holding. So we averaged $14,408 a tonne. over the quarter, down slightly on the previous quarter, but as I said, it's very encouraging that the NPI price was sort of $10,000 a tonne last year, and it's now held consistently for the majority of this year at around that $14,000 a tonne mark. On the HPAL side of the business, $8.4 million US adjusted EBITDA from HNC. That was down on the June quarter, and really driven by higher costs, which is higher sulfur prices. Pleasingly, H&C continues to make distributions to Nick and there was 13 million US distributed during the quarter, which is up sort of 271% on the distributions that were made in June. And at E&C, as I said, a couple of tremendous milestones, first MHP and first nickel and cobalt cathode production. If we could just go to the next slide, please. Mining operations, I mentioned a record 4.5 million tonnes of sales. The average realised sale price was down slightly. The reason for that was just due to a higher proportion of limonite sales. The EBITDA wet metric tonne up almost 10%, $17. And what we are starting to see there is given that we're now hauling limonite only a couple of kilometres to the slurry plant to feed ENC rather than sort of 20 kilometres to third-party HPALs. We're starting to see that in a reduction in operating costs and an improvement in our EBITDA per metric tonnes. So all in all, great result from the mine. It set up 68% on the previous quarter and US$76.9 million. Moving forward, you can see that the Hang Jaya mine itself is going to be a significant EBITDA contributor to nickel industries moving forward. And obviously these sort of numbers augur very well for the development of the Sampala project. We continue to work through our RKOB increase. We've been through several revisions. we are hopeful of receiving some sort of outcome relatively soon and we'll obviously update the market once we get some final feedback. If we could just go to the next slide please. Sampala development continues. The key really to Sampala is development of the 24 kilometres of haul road. You can see the photo on the top right there. That's sort of part of the first eight kilometres that's already been built. We are preparing to build another, to add another 2.2 kilometre section and then the remaining section, which is about another sort of 14 kilometres, we're just pending a forestry approval from the government and then we'll be able to start work on that section of the road. Both ANN and ETL are well advanced in having their feasibility study approved. Once that's approved, we will then look to get the environmental studies approved, and they're also well advanced, and then we can make an RKAB application for both of those IUPs. At the Sidoasi project, the feasibility study still remains under review by the Indonesian government. If we could just go to the next slide, please. ENC commissioning started off very well. We were at 50% of nameplate capacity within a number of weeks, so performing extremely well. Unfortunately, due to the El Nino conditions that Indonesia is currently experiencing and you would have seen in the quarterly results across Indonesia, September October we've received only seven millimeters of rainfall when typically over those two months you would see around sort of close to half a meter that has meant that we have had to reduce back the production coming out of ENC but so far for the quarter we produced 4840 tons of nickel and 494 tons of cobalt in MHP and the quality of that MHP is excellent. The cash costs, and this is still at a commissioning phase, so not fully ramped up, was $13,943 a tonne. That's actually lower than HNC and we're not fully ramped, so that's very encouraging. And our cathode conversion cost, currently around $3,888 a tonne. We are looking to bring that down as we get that up to full capacity to sort of somewhere in the range of about $2,500 a tonne. The cathode quality is also excellent. We've commenced the LME registration process and so far it's progressing very well given the very high quality of the cathode that's being produced. We also announced subsequent to the quarter a US$245 million OCBC-led project financing, and that will allow us to dividend recap some money back to the E&C shareholders. The other key milestone that was received during the quarter was an exemption to be able to sell our MHP, which there's a number of other HPL producers that actually don't have that exemption as yet, so I think it places us very well. and the IUI for full sales is progressing very well. So we're expecting to receive that this quarter and then we'll be able to realise first sales from ANC of the products that we've already produced. At HNC, I mentioned EBITDA 8.4 million down 42%. 1.9 thousand tonnes of nickel sales, HNC attributable. and EBITDA per tonne is down from about 8,000 last quarter to 4,400. So look, still holding a strong margin despite the significant pressure from sulphur. Pleasingly, sulphur prices have sort of come off the highs of sort of 11 to 1,200 and currently at the moment they're sitting around 800. So HNC is still delivering, you know, $4,500 return margin is still a very good margin. And as I said, we continue to receive ongoing distributions from HNC. If we could just go to the next slide, please. This is just some photos of the HPAL operations. So the top left Photo 1 is the slurry plant which is located within the Hengjia Mining Concession and so limonite is delivered there and then sent via a slurry pipeline down to the ENC HPAL plant. That's photo 2 there on the left and actually within that photo there, there is also CNE and TMI. So that photo, that whole complex is actually ENC, CNE and TMI and Unfortunately, it doesn't really give you a feel for the scale. There is a video there that you can watch. There's a link up there in the top right-hand side. The bottom left photo, number three, is the sulfate and cathode refinery, and then the final photo, number four, you can see there some of the final products. So we've got the MHP, which looks like the green wasabi there, and then we've got some of the nickel cathode there, and you can see it branded PT Fudger, If we could just move to the next slide, please. RKEF operations, 27,822 tons for the quarter, so sort of staying pretty consistent. We're expecting to complete the rebuild of one of the HNI lines in the middle of November. Once that's completed, we expect it to go back to about sort of 20% above nameplate capacity. Once that line is completed, we will then start doing the second line at HNI and there will be an ongoing program to effectively rebuild the kiln and furnaces across the four lines at HNI and RNI over the coming months. Cash costs of $13,054. and that really as I mentioned is just the increase in the nickel price and a sale price of $14,408 so as I said earlier you know pleasingly the MPI prices is remaining quite robust and so you know we've seen a reduction in EBITDA per tonne and that's really been driven by increase in ore pricing and obviously that's coming through in our mining numbers. So it's really just a transfer of margin from the RKEFs back to the mining business. If we could just go to the next slide and the cash flow overview, I'll hand over to Chris to talk through this slide.

Thanks Justin. Good morning, everybody. As Justin mentioned, we have another exceptional quarter with our EBITDA of $126 million. However, this obviously hasn't translated into cash flow this quarter, with cash actually falling from $268 million at the end of June to $146 million at the end of September. As you can see on that slide, $50 million of this was what we classify as growth spend, which is predominantly the E&C working capital loan, so funding the commissioning of E&C. Sampala Development CapEx, approximately $12 million for the quarter, and this was somewhat offset by the repayment by SingSharn of the $15 million nickel MAC converter option that we received through the quarter. Another $43 million was spent in debt servicing costs, which is obviously on our bonds and our bank loans. Then we come to the cash flow before growth in debt of negative $12 million. That was predominantly driven by working capital, as the slide says. We've set this out in this quarter and we intended this going forward in a table on the bottom there for clarity for all of you. The key items in that were an increase in mining inventories, which have obviously increased stockpiles, so cash has been spent, but it's not in the EBITDA. $28 million in HPAL. 12 of this was the customer advance received in Q2, but applied to an August shipment. And $16 million was for the H&C product prepayment, for an H&C product prepayment, so purchasing our share of the products out of H&C in July and August. However, with MHP payabilities falling throughout the quarter, we did elect not to sell as much in the quarter. Receivables are the other large items. Henjaya Mine was up $43 million and the RKF was up $34 million. Of that $34 million, $29 million of it was at ONI and RNI with other receivables making up the balance, so just under $6 million. We expect all of this to unwind in Q4. Payables was another timing item, which we expect to unwind in Q4 as well. $24 million of supplies were paid, let's call it paid down from the prior quarter, predominantly at H&I and ANI RKF projects. So all in all, it's been a tough operating environment through the quarter with much lower than expected cash conversion. And as I mentioned earlier, we expect a lot of this to unwind in Q4. Finally, as Justin's mentioned, and as we announced to the ASX yesterday, we have executed a US $245 million asset level debt at E&C on extremely attractive terms. So it's non-recourse, seven-year debt at SOFA plus 2%, which at current SOFA rates equates to 5.9%, obviously compared to our existing bond at 9%. This facility or this loan will give a working capital buffer at EMC as we ramp up to nameplate and then as operations hit nameplate in coming months or as we expect to hit in coming months and the market stabilises, we will then look to dividend this up to the shareholders so Nickel Industries would receive its 46% share of any distributions to shareholders. OCBC led the transaction and I'd like to thank them for their support in this tough environment, being obviously throughout the year the sulfur effects of the Iran war and now obviously the El Nino drought effects with the water restrictions that we're seeing across the region. we could have actually executed a much higher number likely north of 500 million dollars but this would have come at a higher higher interest cost or a higher margin and as we feel we have sufficient liquidity at the moment we elected for the us 245 million now thanks justin back to you yeah thanks chris um if we could just move to the uh to the next slide please um progress against uh fy 26 guidance so in terms of mine