Earnings call transcript: Nickel Mines Q2 2025 sees robust EBITDA growth

Nickel Mines Ltd., with a market capitalization of $1.99 billion, reported strong financial results for the second quarter of 2025, driven by solid production and sales performance. The company’s unaudited adjusted EBITDA for the first half of the year reached $183.6 million, with $86 million generated in the June quarter alone. Despite a slight dip in stock price, Nickel Mines continues to demonstrate resilience in a challenging market environment. According to InvestingPro analysis, the company appears undervalued based on its Fair Value calculations, with analysts maintaining a positive outlook on its growth prospects.

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Key Takeaways

• Unaudited adjusted EBITDA for the first half of 2025 was $183.6 million.
• Nickel metal production reached 30,463 tonnes.
• Record ore sales from Hangjia mine exceeded 3 million wet metric tonnes.
• Stock price fell by 1.95% post-earnings announcement.

Company Performance

Nickel Mines Ltd. showcased robust operational performance in Q2 2025, with significant contributions from its RKF nickel metal production and record-breaking ore sales from the Hangjia mine. The company maintained strong EBITDA margins of over $6,000 per tonne, reflecting its competitive position in the nickel market. This performance is particularly notable given the broader market challenges and price stability in nickel.

Financial Highlights

• Unaudited adjusted EBITDA: $183.6 million for H1 2025
• Adjusted EBITDA for June quarter: $86 million
• RKF nickel metal production: 30,463 tonnes
• Hangjia mine EBITDA: $41.4 million, a 33% increase from the previous quarter

Market Reaction

Following the earnings announcement, Nickel Mines’ stock price experienced a decline of 1.95%, closing at $0.77. Despite this movement, the stock has shown impressive momentum with a 30.26% total return over the past year. Analyst consensus suggests further upside potential, with price targets ranging from $135 to $161. The company’s beta of 0.76 indicates lower volatility compared to the broader market, making it an interesting consideration for risk-aware investors.

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Outlook & Guidance

Nickel Mines remains optimistic about its future, targeting a record September quarter and expecting regulatory approval for its RKAB permit in August. The company anticipates first ore from the Sampala project in early 2024, with remaining capital expenditure estimated at $30 million. Additionally, Nickel Mines is advancing its integrated nickel refinery and HPAL smelter projects, aiming for completion by the end of 2025. The company’s strong financial health is reflected in its "GREAT" overall score from InvestingPro, supported by solid liquidity metrics and a conservative debt-to-equity ratio of 0.11.

Executive Commentary

Justin Werner, Managing Director, emphasized the company’s strong EBITDA margins, stating, "EBITDA margins remain strong at over US$6,000 per tonne margin." CFO Chris highlighted the company’s solid banking relationships, noting, "We have very good relationships with our banks and have very good support from the debt capital markets."

Risks and Challenges

• Potential regulatory delays in obtaining necessary permits.
• Fluctuations in nickel prices impacting profitability.
• Operational risks associated with ongoing project developments.
• Financing challenges related to additional debt servicing requirements.

Q&A

During the earnings call, analysts inquired about the company’s working capital build in Q2 and the deferral of E&C commissioning. Management confirmed a $33 million interest payment in July and an additional $100 million due in Q4, highlighting ongoing efforts to explore further debt financing options.

Full transcript - Nickel Mines Ltd (NIC) Q2 2025:

Conference Moderator: Thank you for standing by, and welcome to the Nickel Industries Limited June Quarter Activities Webcast. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. I would now like to hand the conference over to Mr. Justin Werner, Managing Director.

Please go ahead.

Justin Werner, Managing Director, Nickel Industries Limited: Thank you, everyone, for your attendance today, welcome to the Nickel Industries June quarter results presentation. If I could ask the moderator just to turn to the next slide please. Start with safety and sustainability. LTIFR June was 0.05 with no lost time injuries recorded during the quarter against 4,600,000 work hours registered. For the twelve months to thirty June, point 6,000,000 work hours have been registered with only a single LTI occurring.

The company wide twelve month rolling TRIFR in June was 1.29. I will pleased during the quarter to release our 2024 sustainability report as we move towards alignment with IFRS sustainability disclosure standards and the Australian Accounting Standards Board guidance. Some of the highlights from the sustainability report were the formal establishment of the Nickel Industries Foundation, which is a big milestone for the company that will allow us to further embed some of the programs that we have now engaged in, in terms of education, health, environmental conservation in and around the communities in which we operate and also the establishment of a biodiversity area. So we’re one of a very small number of mines that have successfully been able to establish a biodiversity in close proximity to our mining area. If we could just go to the next slide, please.

June, another solid quarter, 86,000,000 of adjusted EBITDA from operations. That brings our first half unaudited adjusted EBITDA to US183.6 million dollars and that’s a material outperformance versus the 2024. RKF nickel metal production was 30,463 tonnes, slightly lower than the March and EBITDA was also lower than the March and that was impacted by some realignment of some kilns and power station maintenance, which I’ll touch on later in the presentation. HPAL production from HNC was 2,075 tonnes of nickel. So it continues to operate well above nameplate capacity.

It was 38% for the June. EBITDA was down, was US10.8 million dollars So it was materially lower than the March, but there is a number of reasons for that, which we will explain further on in the presentation. The actual HNC EBITDA outside of Sing’s creation, the trading company was actually up 11% and that was due to higher MHP prices. So, payabilities for MHP are close to 90% at the moment and that offset higher operating costs due to higher input costs from sulfur. Syncreation, which is the trading division, which I mentioned, that was really where the impact on the EBITDA came from.

And that was due to a delay in sales because of the intended commissioning of the E and C cathode plant, which we made the decision not to continue with and also just some delays in final contract settlement. So we expect that to catch up over the next few months. But pleasingly, margins remain very strong over $6,000 a tonne. Pleased to report record ore sales from the Hangjai mine of over 3,000,000 wet metric tonnes and EBITDA of US41.4 million dollars So that was a material increase on the March 33% higher and much stronger EBITDA per tonne margins. So they’ve risen 25% and they’re now currently sitting at US13.7 dollars a wet metric tonne.

If we could just go to the next slide please. RKF production, as I mentioned, decreased 4% predominantly that was the realignment of two kilns at ONI and that work was completed sequentially across April and May. And then maintenance at the ANI and ONI power plants. ONI has been completed and the ANI maintenance is expected to be completed at the July. The lower production and the increased power costs as the power stations were down for maintenance led to an increase in costs.

MPI pricing remained stable $11,449 slightly higher than the previous quarter. Whilst EBITDA is down CAD10.6 million, so CAD44.3 million in the first quarter to CAD33.7 million, we actually picked that up at the Hengjia mine. So Hengjia mine EBITDA was up CAD10.4 million. And this really goes to highlighting the benefit of having an integrated operation and the movement of margins across the value chain. We could just go to the next slide please.

HNC over 20,000 tonnes of nickel was produced and at eighteen seventy seven tonnes of cobalt. So again, as I mentioned, continues to outperform versus nameplate. Operating costs did increase due to higher sulfur costs, but I mentioned payabilities for MHP also increased. In terms of the EBITDA margin that remains strong at $6,219 and at the operating entity of HNC, EBITDA per tonne margins actually increased across the quarter. So they went from $4,297 a tonne to $4,819 How we arrive at the $6,219 a tonne that includes the trading division margin, which is sync creation and that’s typically averaged around sort of $1,400 a tonne.

If we could just go to the next slide, please. E and C, we were very pleased to announce post quarter end that the integrated nickel refinery for Cathode has reached a point where we could commence commissioning. Decision was taken to defer that commissioning and that was to better align working capital requirements, but also given that the commercial sales license, which is the IUI is not anticipated to be issued until January.

Richard Knight, Analyst, Barrenechelli: This

Justin Werner, Managing Director, Nickel Industries Limited: the practice of coming into production before we have the IUI issued is what we’ve done previously at both ONI and ANI. But given the large draw that, that would take across a number of months, as I said, the decision was made to not commission at this point and to really focus on completion of the remainder of the E and C project, as you can see from the photos on the right there is progressing extremely well. We’re targeting completion of the next stage of the refinery process, which is the sulfate circuit in 2025. And then finally, the HPAL smelter itself to be complete at the end of this year with commissioning and then issuance of an IUI license early in the 2026. If we could just go to the next slide please.

Hangjia mine operations, as mentioned record sales over 3,000,000 tonnes. Pleasingly, the EBITDA per tonne margin rose from $10.9 to $13.7 And at the July sorry, July 28, pleased to report that current mine sales for the month of July sit at 1,226,540. So we’re setting ourselves up and targeting another record quarter in the September year with a slight increase in operating costs and that was just related to an increase in royalties from 10% to 14%. And we are also opening up a new pit, which will is targeted to deliver us higher saprolite grades. So again, we hope that will flow into increased EBITDA per tonne margins in September.

Also pleased to announce during the quarter approval of the feasibility study to increase the Anglia mine RKB from the current 9,000,000 tonnes to 19,000,000 tonnes. That’s the key first step in achieving that revision. We are in the over the course of the next week, we will be lodging our final Lambdao, which is our environmental impact study for approval. And we remain optimistic of receiving approval of that Amdal in August. And then we’re targeting the issuance of a revised RKAB to be completed sometime this quarter.

And given the very strong margins that we’re experiencing from the Hengjia mine, we’re looking forward to delivering a very strong second half, particularly from our Pangaea mine operations. Finally, if we could just move to the next slide and the an update on our Sampala project. That’s also progressing extremely well. We’ve lodged a feasibility study for an initial operation of 6,000,000 wet metric tonnes per annum, and we remain confident of receiving that approval in this September. We have started construction of eight kilometers of haul road and you can see in that map there, it’s the turquoise section that is predominantly with inside the three IUPs.

The green section in the middle there is a section that will then link us into an existing haul road that will take us all the way into IMIP. So eight kilometers of that required 22 kilometers is already well advanced. And we’re looking forward to completing that, if not at the end of sorry, in early in the fourth quarter. We continue to expand the resource at Sampala through a very aggressive drilling campaign. We currently have 16 drill rigs on-site and we completed over 1,000 holes for the quarter.

We remain very optimistic of Sao Paulo achieving an exploration target of in excess of 1,000,000,000 wet metric tonnes of ore. And with current margins of US13.7 dollars you can see the significant value that the Sao Paulo project will bring to nickel industries. And we continue the development continues to go extremely well as we look forward to targeting first ore. So in summary, another strong quarter despite some downtime for the kiln alignment and ANI ONI power stations, which did contribute to slightly reduced EBITDA. As I mentioned, unaudited adjusted EBITDA of US193.6 million dollars for the first half of this year is a material improvement on the first half of last year.

We have some exciting catalysts coming up for the second half of this year. We continue to push the RKAB approval. And as I mentioned, we remain very optimistic of some positive news over coming weeks and months in terms of achieving that approval. We also Sampala, which we’ve just touched on, continue to grow the resource. Mine development is continuing very well.

And then the continued delivery of the E and C project, which is tracking extremely well. And EBITDA margins remain strong at over US6000 dollars per tonne margin. So with that, I’ll hand over to Q and A.

Conference Moderator: Thank Your first question comes from Richard Knight from Barrenechelli. Please go ahead.

Richard Knight, Analyst, Barrenechelli: Hey, Justin. Thanks for the call. Just a quick one on cash flow. I mean, obviously, good quarter from an EBITDA perspective, but your cash flow from operations was broadly neutral. Can you just maybe just and it might be one for Chris, just help us out with the sort of bridge as to how we get from that EBITDA number to neutral cash flow number?

Justin Werner, Managing Director, Nickel Industries Limited: Chris, do want to take that?

Chris, CFO, Nickel Industries Limited: Yes, I’ll take that. Look, the main thing with that really is, Richard, is the working capital build. We had quite a large working capital build in the operations, particularly in the RKF operations. Singshan and I saw the opportunity to really build the nickel ore inventory and coal inventories. And so the effect there in building that is you obviously got an issue with the cash flow, reduces the cash flow through the period.

Richard Knight, Analyst, Barrenechelli: Okay. So you’d expect that’s kind of a one off for this quarter and Yes, we’d

Chris, CFO, Nickel Industries Limited: expect that to unwind, absolutely.

Richard Knight, Analyst, Barrenechelli: Yes. Okay, fine. Thanks. And just another one on MHP realizations. I mean, it seems like it’s a pretty big move up to 90% realizations from where we were not too long ago, I think probably closer to 70%.

Just wondering if you can give us any sort of flavor about what you’re seeing in the market and what’s really driving that uptick in realizations?

Justin Werner, Managing Director, Nickel Industries Limited: Yes. I think that there is some market tightness, which is being reflected in improved liabilities. And it’s also sort of offsetting a reduction in the a decrease in the LME price. So whilst we had looking back at last year, had a higher LME price, but a lower payability. It’s sort of almost kept in lockstep as the LME prices come down.

We have continued to see increased MHP payabilities, which has meant that we’ve seen margins remain pretty stable.

Richard Knight, Analyst, Barrenechelli: Yes. Okay. Brilliant. Thanks guys. I’ll hand it

Chunwei Moi, Analyst, Arkane Capital: on. Thanks, Richard.

Conference Moderator: Thank you. The next question comes from Chunwei Moi from Arkane Capital. Please go ahead.

Chunwei Moi, Analyst, Arkane Capital: Hi there. Can you hear me actually?

Justin Werner, Managing Director, Nickel Industries Limited: Hey, we can.

Chunwei Moi, Analyst, Arkane Capital: We can. Okay. So a couple of questions for me. So number one is, I guess the delaying in the commissioning of E and C. How much does that save in terms of working capital or defer?

Chris, CFO, Nickel Industries Limited: We haven’t released, obviously, numbers on that, Jim. Why? So that’s not public, but it was significant enough for us to take that decision to not build up that working capital for two, three, four months ahead of the sales license.

Chunwei Moi, Analyst, Arkane Capital: Okay. But I guess, know, relates to the last question that was asked, I guess, by the previous inquirer. That so for example, in Q2, the working capital build was a lot of that was for E and C?

Chris, CFO, Nickel Industries Limited: Yes. That was a lot more of that was working capital build at the mine for limonite inventory build. So we continue to build our limonite stockpiles, obviously, for the commissioning of E and C. What I was referring to now with Richard’s question was more around the RKF operations and the inventory that the nickel ore inventory and the coal inventory for the RKF operations. The working capital build that we’re saving, what we’re talking about for saving in delaying the commissioning of E and C and particularly the cathode circuit that we were intending for July ahead of the sales license.

That’s the usual process to take MHP or take the limonide ore, convert it to MHP and then convert it to cathode and sulfate. That’s several months of inventory buildup that we did not want to incur now in Q3, Q2, Q3 ahead of getting our sales license, which Justin has referenced in January.

Chunwei Moi, Analyst, Arkane Capital: Okay. I guess second question is, in the second half of this year, so what how much debt surface is required in terms of so interest amortization for the bond, and is there any bank debt amortization repayment

Chris, CFO, Nickel Industries Limited: requirement? So so so we have we have amortized so interest amortization payments were made in July of 33,000,000, and that’s all on the banks. The across the bond and the bank loans, there’s another $100,000,000 due in the remainder of the year across and that’s combined banks and bond interest and amortization. That’s in Q4. The numbers are obviously quite large.

It’s quite clear that cash flow is obviously tight, and we’re actively managing. And clearly, that’s one of the reasons why we’re actively managing our working capital. We also remain in active discussions on various other sources of financing if that’s required, obviously, depending on margins, what’s required. And when I say other sources of financing, I’m talking debt financing. We have very good relationships, I think, with with our banks.

And we have same we have very good support from the debt capital markets. And we do know that the debt capital markets are are extremely strong right now. So we’re absolutely managing all of that and in active discussions on all fronts, obviously excluding equity raises.

Chunwei Moi, Analyst, Arkane Capital: Okay. Sorry. So that’s 100,000,000 that includes interest, right, you said? Yes. And that’s after the $33,000,000 paid in July?

Yes. Okay. Got it. Thank you.

Chris, CFO, Nickel Industries Limited: Thanks, Shumar.

Conference Moderator: Thank you. Your next question comes from David Coates from Bell Potter Securities. Please go ahead.

David Coates, Analyst, Bell Potter Securities: Thanks, guys. Couple of my questions have already been answered, but just touching on Sao Paulo perhaps and also, well, firstly, RCAB permit. So you think that should be arriving in August and you’ll be able to sort of fully ramp up production from the Hangjia mine in the over the balance of the calendar year. Is that how we should be reading that?

Justin Werner, Managing Director, Nickel Industries Limited: Yes. We remain optimistic of getting that approval and increase in third quarter. And then we’re targeting obviously, we did $3,000,000 for the quarter. We’re at 1,200,000.0 already for July. So the low target would be 12,000,000 tonnes for the year, but we are targeting significantly above that given that there’s still another six months remaining in the year.

David Coates, Analyst, Bell Potter Securities: Excellent. Thank you. And just on Sao Paulo, so you’ve got a big drill program underway there, but, you know, you you but you’re also constructing that haul road. That haul road looks like sort of a, I guess, sort of a, yes, sort of final road, I guess, access to the IMIP. How far are you going to advance development of St.

Paul, I guess, sort of hand in hand with the resource that’s going on? And what sort of timing, I suppose, you’re looking at for commencing production from Sao Paulo with those development activities underway?

Justin Werner, Managing Director, Nickel Industries Limited: Yes. So we’re targeting completion of the first eight kilometers early in the fourth quarter of this year. The remaining 14 kilometers were well advanced in getting a forestry permit. And as soon as we receive that forestry permit, we will be in a position to complete the remaining 14 kilometers. Once that is complete, we’re then ready to pre stripping and to start mining.

Given one of the advantages of the Sampala project is we’re able to leverage the existing 33 kilometers of haul road that already exists into the IMIP. So we are looking sort of early in the second half of next year for first ore delivery. Obviously, that’s subject to permitting and receipt of approvals to be able to allow us to complete construction of the whole road and also to start mining.

David Coates, Analyst, Bell Potter Securities: Cool. And finally on that, just what does the CapEx profile look like for that over the next nine months or twelve months rather?

Justin Werner, Managing Director, Nickel Industries Limited: Looking at about sort of $30,000,000 remaining or less U. S. To commencement of production.

David Coates, Analyst, Bell Potter Securities: Excellent. Thanks,

Justin Werner, Managing Director, Nickel Industries Limited: Thanks, Dave.

Conference Moderator: Thank you. There are no further phone questions at this time. I’ll now hand back to Mr. Werner for closing remarks.

Justin Werner, Managing Director, Nickel Industries Limited: Thank you, everyone, again. And look, just to reiterate, some very big catalysts upcoming in the second half of this year. And so we look forward to updating the market as those come to end. So thank you everyone for your attendance.

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

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