Nickel Industries has announced a significant uptick in its financial performance, with record Group EBITDA of $403 million, marking a 19% increase from the previous year. The company also reported substantial increases in gross profit, operating profit, and profit after tax.
With an 87% surge in nickel production, Nickel Industries not only saw increased profitability in its RKEF EBITDA but also in its attributable nickel figures. The company's Hengjaya Mine achieved record production and EBITDA, bolstered by the completion of a new haul road and receiving a Green PROPER rating for environmental compliance for the second year running.
Further bolstering shareholder value, Nickel Industries declared a final dividend of AUD 0.025 per share and announced an on-market share buyback program worth up to $100 million. The company is poised for a strategic pivot into the class-1 nickel space, with the fully funded Excelsior Nickel project, backed by a construction guarantee and a 15-year tax holiday from the Indonesian government.
The company's commitment to environmental, social, and governance (ESG) initiatives was also highlighted, including its participation in the COP28 Climate Summit and setting carbon reduction targets.
Key Takeaways
- Record Group EBITDA of $403 million, up 19% from the previous year.
- Significant increases in gross profit, operating profit, and profit after tax.
- Nickel production jumped 87%, with record profitability in RKEF EBITDA and attributable nickel.
- Hengjaya Mine saw record production and EBITDA, and received a Green PROPER rating.
- Declared a final dividend of AUD 0.025 per share and a $100 million share buyback program.
- Transition into the class-1 nickel space with the fully funded Excelsior Nickel project.
- ESG initiatives included a solar project lease agreement and participation in COP28.
Company Outlook
- Fully funded for transition into higher-margin, lower-carbon class-1 nickel.
- Strategic investor and off-taker sought for the ENC HPAL project.
- Share buyback under consideration pending government approval.
- Strong demand anticipated for products outside China.
- Class-1 nickel from HPAL expected to be cheaper and less carbon-intensive than nickel matte from RKEFs.
- Options for repayment of senior secured notes being analyzed.
- Confidence in strong balance sheet and cash position.
- Sale process for ENC project expected to continue throughout the year.
Bearish Highlights
- Decline in nickel prices noted, though EBITDA increased from all operations.
- Green premium for low carbon-intensive nickel units welcomed but not expected due to cost focus of EV and battery makers.
Bullish Highlights
- Record EBITDA per quarter achieved despite falling LME nickel prices.
- Syndicated bank loan improving access to capital.
- No guidance on margin per tonne, but record EBITDA per quarter reported.
Misses
- Specific details on bank covenants not disclosed, though described as standard.
Q&A Highlights
- $245 million maturity in April with options ranging from cash to bond refinancing.
- Sale process for a 20% stake to run its course over the year, commitment to a 55% stake regardless.
- Approval sought for expanded mine quota and plans for a dedicated pipeline with modest CapEx.
- Equity accounting for revenue from a 10% stake in another company.
- Caution advised against see-through analysis due to equity accounting treatment and limited operation duration.
- Strong 2024 expected as the company transitions into a major class-1 nickel producer.
Nickel Industries (ticker not provided) is navigating a dynamic market with strategic investments and a clear focus on sustainable growth. With its robust financial health and strategic initiatives, the company is gearing up for a busy year ahead, particularly in the class-1 nickel sector.
Full transcript - None (NICMF) Q4 2023:
Justin Werner: 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 2. Very pleased to report full year results of record Group EBITDA of $403 million, a 19% increase on the $339 million that was recorded for FY22. Apologies, moderator, it's the next slide, number 2. Record gross profit of $338 million, a record operating profit of $280.7 million, which translated into profit after tax of $176.2 million. We saw a significant increase in our Nickel production, up from 70,079 tonnes in FY22 to 131,126 tonnes, so 87% increase in Nickel tonnes which translated into record RKEF EBITDA of $337 million and NIC (NASDAQ:EGOV) or Nickel Industries attributable nickel of 103,364 tonnes. At the mine, excellent year. Hengjaya Mine, record production 13.4 million, up 97% on the 6.8 million for FY22, and record mine EBITDA of $87.9 million and that's been driven by completion of the Hengjaya Mine into IMIP haul road which delivered $42 million in EBITDA in the December quarter alone. And so we look forward to continued strong performance from the Hengjaya Mine. And the mine was awarded a Green PROPER rating again for the second consecutive year. These [Technical Difficulty] results translated into declaration of a final dividend of AUD 0.025 per share, full-year dividend of AUD 0.045 per share as well as an announcement of an on-market share buyback of up to $100 million over the next 12 months I think signaling to the market that financially NIC is in a very strong position and that we see at 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 $66.2 million. I think importantly, we are fully funded for our transition into the class-1 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 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 good result, and we continue to focus on leading the way in safety and continuous improvement. Slide 4, please. Just by numbers, group revenue up 54.5% $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 to 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 AUD 0.045 which is a 12.5% increase. I should note that these results have been achieved against the back of a materially lower LME Nickel price, which has declined from $25,623 to $21,487. So a 19% decrease. And we only captured Oracle (NYSE:ORCL) 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 $179.5 million. So there's certainly more upside for this year given that we will get a full year of production from Oracle Nickel. If we could just go to Slide 5, please. I mentioned that we have a very strong balance sheet, net debt of $66.2 million, and we are fully funded for our transition into the class-1 battery-grade nickel space. And again, we are taking the lead there in being the first company to develop an HPAL that will produce 3 class-1 Nickel projects. Our ability to fund throughout the year was driven by successful equity and debt raisings, which included a $185 million institutional placement, a $270 million placement to Shanghai Decent, $20 million retail share purchase plan, an AUD 943 million strategic placement to United Tractors, which was done under AUD 1.10 to a 30% premium -- more than a 30% premium to today's share price, and $400 million senior unsecured notes. We also have established $400 million maiden funding lines with Bank Negara Indonesia, one of Indonesia's largest banks. That was successfully syndicated out to an additional 8 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 in to fund an 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 HPAL 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 6. 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, 7, 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 $173 and that delivered $113.2 million in EBITDA from operations. Moving to the far right of that chart, production was up to 36,273 tonnes for the quarter, in the December quarter. Again, the white bubble chart, the LME price was down 48% to $17,288 EBITDA from operations was actually up to $135 million, up from $113 million at the beginning of the year. So I think it just highlights the robustness of the business throughout the year and as I mentioned earlier, in a challenging nickel price environment. If we could just move to Slide 8, please. The Hengjaya Mine, we're seeing very strong results coming through from the Hengjaya Mine as a result of the completion of the haul road, which has allowed us to sell significantly larger tonnes. The annual EBITDA of $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 tonnes a year. I mentioned again, fourth quarter during the December quarter, $42.5 million EBITDA from the mine alone for the single quarter. So it's performing extremely well. Slide 9, ESG. We continue to play a leadership role in sustainable mining in Indonesia. Some of the awards and accolades that were 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 [Technical Difficulty] Indonesian based metal and 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 1 of 2 mining companies in all of Indonesia to have a Green PROPER rating. And 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. So of the 3,694 companies that were audited last year, only 196 or less than 5% achieved this rating. Off the back of [Technical Difficulty] 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 ramp 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 or 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, and that gives us product diversification and the flexibility to sell into various segments of 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 $2.3 billion on a 100% basis, which includes all auxiliary facilities including tailing, sulfuric acid plant and other supporting infrastructure. It comes with a time frame guarantee of no more than 2 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 an additional 2 years at 11%. Our 55% stake in ENC, which translates to $1.265 billion, is fully funded from existing cash on the balance sheet, and that cash has been built through strong EBITDA, strong RKEF, and mine operations, but as well as the AUD 943 million Australian placement to United tractors, as I mentioned, at a AUD 1.10 at a 30% premium and partly through $400 million loan facilities from BNI which we see as a bridge to potential project financing. If we could 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 the completion of an Institutional Placement and retail SPP in the market 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 5-year $400 million senior unsecured notes and the commencement of first commercial sales from Oracle Nickel, as well as the announcement of the AUD 943 million placement to United Tractors. That allowed us to increase our interest in Oracle Nickel by 10% and move to 80%. We also completed an equity issuance to Shanghai Decent of $270 million, acquired 10% interest in HN rating HPAL, and has given us access to mix 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 Hengjaya Mine to IMIP haul road and the results of that were really delivered in the December quarter, whereas I mentioned it was $42 million in EBITDA was delivered from the Hengjaya Mine. Finally, a very busy final December quarter. Execution of the solar agreement presentation at the COP28 summit in Dubai, a positive feet for ENC, trial of the electric vehicle trucks, announcement of nickel matte sales to Glencore (OTC:GLNCY). So we announced the first sales that are outside of sales of our nickel pig iron to Tsingshan. 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 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-1 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. So we look forward to launching that process. With that we'll hand over to Q&A.
Operator: [Operator Instructions] Our first question comes from Cameron Taylor from Bank of America.
Cameron Taylor: Just a couple of questions, if I may. The first is on Indonesia's RKAB approvals. There's concerns around shortages of nickel ore, given that less than 40 miners in Indonesia had received these approvals. Obviously, it's a net benefit for Hengjaya and also NPI prices. Can you just talk a bit about that and how it impacts Nickel Industries?
Justin Werner: Yes. So, look, there has been delays in the issuance of RKAB approvals. I'm pleased to report that ours has been issued, but it certainly did take a long time to get issued. That was partly impacted as well by the elections that we had in February 14. I think what it does signal is that the Indonesian government is cracking down on the quality of mining operations and certainly, they are undergoing much tighter scrutiny. That delay in RKAB has led to a bit of a decline in NPI grades as it's taken time for mines to be issued their RKAB and then start supplying ore again. In the interim, it's meant that we've had to go into some of our lower-grade ore stockpiles for our RKEFs. But on the positive side, these new RKAB approvals are now a 3-year duration rather than historically, it was always required to be done at the beginning of every year. And unfortunately, very often there was delays. So I think with the new 3-year issuance, that will set a much clearer runway for the next 3 years and won't certainly limit the impact of delays in issuing RKAB and delays in ore supply to our RKEF operations.
Cameron Taylor: And just secondly, with respect to ENC, are you still interested in acquiring 20%? And you mentioned on the Slide 10 that the second stage is subject to funding. But would you also consider the fact that China sort of on the verge of becoming a net exporter of refined nickel? Could this put pressure on demand for ENC's products. Would that go into the consideration of approving the second stage?
Justin Werner: Yes. UT is, of course, still welcome to participate for 20%. They yet haven't made a decision. So we will be launching that strategic partnering and offtake process. We have 20 of sort of the top global EV and battery makers, and we have seen very, very strong interest with a number of them have already taken samples, conducted site visits. The process has formally kicked off. In regards to Phase 2, look, I think phase 1, obviously subject to the market, subject to funding, I think it will be too subject to the demand that we see from this strategic partnering process. I think we may see more demand than we'll actually have available simply from ENC phase 1. And then just in relation to the class-1 nickel that is coming out of China currently. Interestingly, a lot of the RKEF lines that have been producing nickel matte that's been going to China and refined into nickel sulphate are being switched back to the production of nickel pig iron. The reason for that is Tsingshan is quite bullish on stainless in China as well as they were the only profitable stainless producer last year in China, they made a net profit of about [Technical Difficulty]. And so I think they see themselves significantly increasing their market share, which will require more nickel pig iron, which means that these lines, switching back from nickel matte to nickel pig iron will reduce, hopefully, the overhang of class-1 nickel sulphate and nickel matte that currently exists in China. And look, at the end of the day, class-1 nickel from HPAL will always be cheaper than the nickel matte from RKEFs and have a significantly lower carbon intensity. And so we're targeting North American, European, Japanese, Korean customers rather than basically everything ex-China for our ENC products.
Cameron Taylor: Okay. And just a follow-on. How does that play into your decisions around transferring or turning the Angel lines into matte and this also maybe swapping back Hengjaya?
Justin Werner: That's something that we're analyzing at the moment and looking at our strategy for matte or nickel pig iron.
Operator: Our next question comes from Mitch Ryan from Jefferies.
Mitch Ryan: The first one is just back onto the stockpiles. Just can you give any color on current stockpile levels at IMIP and IWIP? And do you control your own stockpiles or are they blended stockpile arrangement?
Justin Werner: Yes. Look, I can't give you specific numbers on the stockpile. They are obviously -- we have a blended -- our stockpiles have a blended mix, and we feed all of the ore from our Hengjaya Mine directly into our own RKEF operations and we then supplement that with additional ore as required. Our RKAB, we are looking in the second half of this year to increase our quota up to 22 million tonnes per annum with a view of getting to the point where all of our IMIP RKEF operations, there would be self-sufficiency from our Hengjaya Mine if required.
Mitch Ryan: Sorry, you called out that you were using some lower-grade stockpiles. Is that ongoing? And does that lower grade lead to a lower NPI grade or just a higher RKEF cost? How does that sort of express itself?
Justin Werner: Yes. So there has been a decline in ore grades that have been going into the RKEF. That does translate into lower NPI grades and as a result, lower nickel tonnes that are produced at the back-end. But what we are seeing is that given the very depressed LME price, ore prices are actually quite low and coal prices have also decreased somewhat. So we have seen a reduction in power costs as well.
Mitch Ryan: And just changing tack a little bit to the buyback. Obviously, you announced that with your quarterly. I'm assuming that you were in a blackout until the release of these results. With the release of these results, should we start to see potentially Nickel Industries in the market for its own shares?
Justin Werner: There is just one condition that we have to fulfill before we can start that. And because UT is at 19.9%, we're in the process of just seeking further approval. And as soon as we have that, then yes, we will be in the market looking.
Mitch Ryan: Sorry, I'd forgotten that condition. Do you have an expectation of when you expect that to be resolved or you're in the hands of the government at this point in time?
Justin Werner: Yes. In the hands of the government. But look, I don't foresee any issues. Look, hopefully, it will happen sooner rather than later.
Operator: Our next question comes from Adam Baker from Macquarie.
Adam Baker: Just maybe one on the balance sheet. Cash flows moving forward. I did notice you did start to draw down on the PT Bank facility before the end of the year. Just wondering the mechanisms moving forward. This quarter, I know you've got the senior secured notes due in April. I guess, when can we expect to see the remaining drawdown of the PT Bank facility? And how you're thinking about the repayment of the senior secured notes? Is that likely to be a drawdown of cash or drawdown of the remaining PT Bank facility?
Christopher Shepherd: Adam, it's Chris Shepherd. Current expectation is that we will draw down the remainder of that BNI facility in this coming month. We've got a payment due to Shanghai Decent at the end of March. And if you recall, that BNI facility was earmarked for the ENC project funding. So I currently expect that we will draw down on the remainder. So by the end of the quarter, we'll be sitting there with $400 million of the syndicated bank loan. In terms of the options that we've got available, yes, we've got a $245 million maturity in April. We're currently analyzing that, the team, the management team and with our bankers and investors. And the options range from, as I mentioned before, at the one end, one book end, we've got enough cash on the balance sheet that gives us a lot of flexibility over the next few months. Towards the other end, there's obviously, we could do bond refinancing, whether that be a new bond or a tap, interestingly or not interestingly but you've seen, we've syndicated out that bank loan on top of BNI, which I think has only further improved our access to bank capital as well, for this purpose. So I can't give you any more color than that. We are working through all our options, but I feel very comfortable with the balance sheet, where it is in terms of the cash there, that we will make the most opportune decision for capital structure over the next month or 2.
Adam Baker: And the reason for the term deposit, the $490 million term deposit, was that more to make the Indonesian lenders comfortable or is that something Nickel Industries side? Yes, just wondering why you decided to go.
Christopher Shepherd: That is just better interest rate. By putting a certain amount into the term deposits, that allows us just to access higher rates, which gives us, obviously, income.
Adam Baker: Makes sense. And just one final one. BNI, a bit of a year-on-year uplift. What can we forecast moving forward? Are we expecting to sit around these levels?
Christopher Shepherd: Yes. I think where we're at now is -- it looks probably like the right number. We put all the assets now on the balance sheet. And obviously, as we've made very clear, we see no new deals coming on of any size. I think the current level is pretty appropriate.
Operator: [Operator Instructions] And our next question comes from David Coates from Bell Potter Securities.
David Coates: Most of my questions have been covered. Well, first of all, the sale process for the ENC, 20%. I talked about it earlier. I don't think you mentioned anything about timing. You're able to give us any indication on the duration of that process?
Justin Werner: Look, I think it will probably run its course for most of this year. We are just finalizing with our bankers what the ideal time frame should be. Given the diverse mix of groups across a number of different countries, we've identified some will move quickly, some not so quickly. And so that's just something that we're working through now in terms of what sort of a time frame do we give to people for them to [Technical Difficulty]
Christopher Shepherd: If I can just add to it. Our 55% is fixed. It's whether or not the process goes forward, we're committed to 55%. Any seal down will come from Shanghai Decent's 45% stake.
David Coates: And, Justin, maybe a bit of a philosophical question, if you like, on the markets. But there's been some views expressed that we -- similarly to, I guess, the bifurcation of class-1 and class-2 nickel markets is a view that maybe we need to see bifurcation of sort of more ESG compliant in some people's view, nickel versus less ESG compliant, or nickel -- what's your view on that? Do you sort of see how that sort of mile or doesn't play out?
Justin Werner: I mean, we would absolutely welcome a green premium. Our ENC HPAL, well, we're targeting it to be the lowest carbon-intensive nickel unit globally. And that's through a mix of solar, through our electric vehicle truck fleet, through the fact that more than 60% of the power is generated from a sulfuric acid plant or from the heat generated from that sulfuric acid plant. Our mine, as you've seen, which will supply the ore is an ESG leader in Indonesia. So we would absolutely welcome it. But will it come to fruition? I think not. We've been engaging with a number of EV and battery makers, and they're just interested in cost. That's purely all they're focused on. And we're seeing EV penetration rates stalling. And so these guys are under pressure to bring costs down. So not one of the ones that we've spoken to. They're comfortable with ESG credentials of Indonesia. I mean, you only have to look at the names that are invested already in the country. You've got Ford (NYSE:F), you've got BASF, you've got Hyundai (OTC:HYMTF), you've got LG, Volkswagen (ETR:VOWG_p). So I think this concept of green premium, really, there actually isn't going to be that any difference between nickel mined in Australia and Nickel mined for HPALs in Indonesia? And so this whole concept of a green premium, I think it's not going to come to fruition. And as I said, importantly, it's the end customer who is the one that's saying they would be unwilling to pay it.
Operator: Our next question comes from Tim Zhao from Lazard (NYSE:LAZ) Asset Management.
Tim Zhao: I've got a couple of questions here. Firstly, I don't know if you guys can provide us any sort of guidance, look for the margin per tonnes for each of your [indiscernible] for the next couple of quarters of the year. I'm assuming if the nickel price data at current levels.
Justin Werner: Chris, do you want to talk to guidance?
Christopher Shepherd: Yes. You cut out probably for, I think, the last 10 seconds there, Tim, where you said, assuming if the nickel price?
Tim Zhao: Stay at current levels.
Christopher Shepherd: Yes. Look, I think everyone's well aware of our position. We do not provide guidance. And it's difficult because we've got commodities on the revenue side and commodities on the cost side. So I can't provide guidance. But all I would highlight is what Justin, when he went through in the presentation and he showed the fall in the LME price, the average LME price on a quarter by quarter, and yet, due to the volume of nickel units that we've been bringing on the EBITDA and still through the cycle if we believe the price is at a low level, the LME price is at a low level, we're still making record EBITDA per quarter. I can't give you any more than that, Tim.
Tim Zhao: Maybe I'll give it another go. I mean in terms of your input cost. Obviously, coal price is coming off a bit. I mean, as you mentioned, LME nickel price is coming off a bit. How much do you think has been reflected into your latest quarter cost, or how much is yet to come, I guess in this quarter?
Christopher Shepherd: Again, that all goes down to our stockpiles, which we -- unfortunately, you guys want color on it, but we just don't provide stockpile information.
Tim Zhao: Right. Okay, that's fine. Second one is, I think, on the debt facility, I mean can you talk about your bank covenant? I know it's probably got a lot of cash in there. Can you talk about bank covenants on those different debt instruments? And also is there any restrictions on dividends or buybacks that are attached to any of that sort of instrument?
Christopher Shepherd: Yes, sure. Look, I won't disclose the actual covenants under the bank facilities. We've gone through that with KPMG and it's not required. They're very standard. Part of our audit work in the last week or 2 has been providing fulsome covenant calculations for both our senior secured notes and also the BNI loan or the syndicated loan. Obviously, when BNI syndicates out a loan, all of the new banks coming in are testing the covenants and obviously, getting very comfortable there or they wouldn't be doing it. So when we pay our dividends for the trustee on the senior unsecured bonds, we obviously send through calculations there as well around the dividend. And also assuming United Tractors gets its further approval, and then assuming we execute on the share buyback, which as Justin has explained, we will obviously have calculations there under both of the bank facility and the bond facilities.
Tim Zhao: Okay. If I can just nick a last one. I think I heard that Justin mentioned about seeking approval for 20 million tonnes from the Hengjaya Mine. Did I hear you…
Justin Werner: Yes, that's correct, Tim.
Tim Zhao: And what's the timeline? And also I understand the haulage road obviously, probably you can't take the 422 million tonnes. So what is the solution there?
Justin Werner: That expanded RKAB quota is in development with the ENC HPAL Project. So as part of the ENC HPAL Project, we will be building a 11 million tonne dedicated [indiscernible] pipeline. So that's predominantly what that RKAB will allow us to do.
Tim Zhao: And roughly, what's the CapEx on the [slurry] line? Can I get a sense?
Christopher Shepherd: We haven't disclosed.
Justin Werner: Yes, it's not large. It's tens of millions. It's not a big CapEx item.
Operator: Now we have a question from Kate McCutcheon from Citi.
Kate McCutcheon: Just a quick one for you, Chris. In your reported revenue, just confirming, are there MH but the MHP cells are in that number and that's your share of HNC. Hello?
Christopher Shepherd: Sorry, Kate. I've been sitting on mute. I'm sorry, I've been talking to myself.
Kate McCutcheon: Okay. No problem, Chris. You can talk again.
Christopher Shepherd: Apologies for that. I just want to backtrack a little bit on HNC and give people a little bit of color. Obviously, we're a 10% shareholder there only, and it's not usual to be considering yourself having significant influence in equity accounting. However, given our minority protections, our shareholders agreements, we have determined with the auditors that we will be equity accounting everything here, and hence, that's just a bit of color for the analysts. Well, for yourself and others, why we're actually going down this path. I did cut out earlier, though. Can I get the other -- the bit of the question?
Kate McCutcheon: I think that was my question. Just confirming that those MHP cells went through the revenue line and that was your share of the HNC revenue. And then moving forward, what part should we account for through your P&L?
Christopher Shepherd: Yes. Look, there's 2 sides to HNC. And you'll see that in the notes in Note 17. We've obviously got our share of HNC being our 10% numbers, and then we've also got through our right, the entity which owns the 10% stake in HNC is in Tsing Creation and we own 100% of Tsing Creation and Tsing Creation has offtake rights to 10.3% of the product. So when you look at HNC, if you're trying to get a look through about MHP margins and what MHP looks like, you need to look at those in totality. Where it becomes a little bit difficult, obviously, from the equity accounting side, HNC makes greater EBITDA. It makes EBITDA of larger than the numbers you'll see in the presentation and in the results. But we cannot account for that full 10% because we're equity accounting. We're actually having to take the profit and loss, which therefore includes all the financial expenses of HNC and includes depreciation, et cetera. So what I would caution is to try to add those 2 up and get a see-through on HNC numbers. The further little bit of complication in all of this is, it's 4.5 months' worth of operations. So you don't even have 2 quarters worth of numbers there to really get any sort of see-through analysis.
Kate McCutcheon: Okay, got it. I might follow up with you after, Chris.
Christopher Shepherd: 100%. And we're speaking with KPMG, and we knew the ENC -- sorry, the HNC numbers would be of interest to the likes of yourself and other investors. So happy to.
Operator: And there are no further questions at this time. So I will now hand the call back over to Mr. Werner for closing remarks.
Justin Werner: Thank you, everyone, again, for your attendance. And looking forward to another strong 2024 as we transition the company into a major producer of class-1 nickel. So thank you everyone again, for your time.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.