Earnings call transcript: Nickel Mines reports steady Q3 2025 performance

Nickel Mines Ltd (NIC), with a market capitalization of $1.84 billion, reported its Q3 2025 earnings, showcasing a consistent financial performance with an adjusted EBITDA of $87 million. Despite challenges in the mining sector, the company’s integrated operations and strategic initiatives have positioned it for future growth. The stock saw a decline of 3.04%, closing at $0.74. According to InvestingPro analysis, the company appears undervalued based on its Fair Value calculation, with analysts setting price targets between $135 and $161.

Key Takeaways

• Nickel Mines reported an adjusted EBITDA of $87 million for Q3 2025.
• The company raised $800 million in new bonds with a 9% coupon.
• Record mining ore sales were achieved in July and August.
• The ENC project is progressing, with commissioning targeted for early 2026.
• The stock declined by 3.04% following the earnings announcement.

Company Performance

Nickel Mines demonstrated robust performance in Q3 2025, with its adjusted EBITDA reaching $87 million. The company has maintained a consistent quarterly performance, hovering around $90 million in EBITDA. The RKEF and HPAL segments saw significant quarter-on-quarter growth, with EBITDA increases of 20% and 21%, respectively. Despite regulatory challenges in Indonesia, the company continues to leverage its integrated operations to sustain competitive advantages.

Financial Highlights

• Adjusted EBITDA: $87 million
• RKEF EBITDA: Up 20% quarter-on-quarter
• HPAL EBITDA: Up 21% quarter-on-quarter
• Mine EBITDA: $32.8 million
• New bonds issued: $800 million at a 9% coupon

Outlook & Guidance

Nickel Mines is optimistic about receiving a revised RKAB mining quota approval in the coming weeks, which could significantly enhance its mining capacity. The company has stockpiled nearly 2 million tonnes of ore, ready for sale, and anticipates exceeding $50 million in monthly mine EBITDA. The ENC project is on track for commissioning in early 2026, aiming to become the lowest cost, lowest carbon-intensive HPAL globally.

Executive Commentary

Justin Werner, Managing Director, expressed confidence in obtaining the revised RKAB approval, stating, "We remain very confident of receiving a revised RKAB." He also highlighted operational efficiencies, saying, "We’re seeing better efficiencies and that’s flowing through into decreased electricity costs."

Risks and Challenges

• Indonesian government regulations pose potential challenges to mining operations.
• Market saturation and ore tightness could impact pricing and profitability.
• Environmental considerations and approval processes may delay project timelines.
• Currency fluctuations could affect financial performance due to international operations.
• Interest rate hikes might increase borrowing costs, affecting financial flexibility.

Q&A

During the earnings call, analysts inquired about the challenges related to mining licenses and the details of the recent bond issuance. The company clarified its contingency plans for RKAB approval and emphasized its commitment to environmental considerations in the approval process.

Full transcript - Nickel Mines Ltd (NIC) Q3 2025:

Justin Werner, Managing Director, Nickel Industries: Thank you. And thank you everyone for joining the Nickel Industries September quarterly results. Call moderator, if you could please move to the next slide. Start with safety and sustainability. We’re very proud to announce that we’ve achieved a 12-month LTIFR of zero, tremendous achievement. We’ve worked 18.5 million safe man hours over the past 12 months with no LTIs recorded. That’s a tremendous achievement. The TRIFR rate also is very low, sits at about 0.92. On the sustainability front, we received the Gold Award for Biodiversity Management at the Indonesia Sustainable Responsible Awards (ISRA), and we also received a further two Platinum, two Gold, and three Silver awards at that event. Another great achievement, and also received national recognition from an event held at Hasanuddin University. If we could just go to the next slide, please. $87 million in adjusted EBITDA from operations.

We’ve been quite consistent over the course of this year in terms of delivering around that $90 million EBITDA mark. Pleasingly, RKEF EBITDA was up 20% compared to the June quarter, and HPAL EBITDA was also up 21%. I will talk to those in more detail a bit later on in the presentation. We were able to achieve record mining ore sales despite very limited sales in September. We set two new records of 1.4 million tonnes in July and then a further 1.5 million tonnes in August. Unfortunately, due to reaching the end of our RKAB quota, we had to reduce mining and we were only able to produce 200,000 tonnes of ore or sell 200,000 tonnes of ore in September. I’ll update on the increase in the RKAB a little later in the call, but it is still making good progress and we are still very confident.

Chris Shepherd, CFO or Executive, Nickel Industries: Of.

Justin Werner, Managing Director, Nickel Industries: That approval being issued imminently. So EBITDA from the mine was $32.8 million. Overall, strong consistent quarter across all fronts. If we could just go to the next slide, please. RKEF, I mentioned a 20% increase in EBITDA versus the previous quarter. Costs were 5% lower, which was very pleasing. We benefited from higher production and that decrease in costs predominantly driven by decreased electricity costs. That has also been a factor of the maintenance work that was undertaken at both the ANI and ONI power plants. We are seeing better efficiencies and that’s flowing through into decreased electricity costs. The MPI contract pricing was slightly down, although pricing has remained pretty consistent across the course of this year. The other thing that I would add here is we possibly could have achieved a margin improvement from $1,107 in the June quarter to $1,324 in the September quarter.

We possibly could have achieved a better margin than that, again, had we not had the impact of the reduced sales from the Hengjaya Mine in September. I think we probably could have seen further cost reductions and probably slightly better EBITDA per tonne margins through more Hengjaya Mine ore being sold into the RKEF operations. Despite that, pleasing results to see costs coming down and margins increasing at the RKEF operations across the quarter. If we could just go to the next slide, please. HPAL operations, I mentioned again attributable EBITDA of 21% from the June quarter, partly driven by a bit of a catch up in sales. Material that had been stockpiled for commissioning of the cathode plant was progressively sold during the quarter. Pleasingly, margins remain quite strong and stable. Average EBITDA margin for September was $5,681 per tonne.

HNC continues to operate well above nameplate capacity, so 44% for this quarter, and costs remain very low. We saw costs decrease 3% and that’s $7,610. That’s before any cobalt credits, so that number comes down again once you add cobalt credits. Interestingly, given where the cobalt price is sitting at the moment, that’s also contributing to a strong EBITDA per tonne margin from our HPAL operations. If we could just go to the next slide, please. ENC, you can see from the photos there on the right, progressing very well. The integrated cathode and sulfate refinery are basically complete and ready for commissioning. The HPAL smelter, the bottom photo there, you can see that it’s also very well progressed. Apologies, could you just. We haven’t moved to the next slide yet. It’s progressing very well.

Still targeting a commissioning early in 2026 and we’re now starting to connect up key components of the smelter, including electricity, the acid plant, which is close to be ready for commissioning as well. As said, ENC is traveling well. If we just go to the next slide, please. Mine operations. I mentioned record ore sales in July and August and unfortunately decreased sales in September. Despite that, still a record quarter in terms of sale. We were able to deliver $32.8 million in EBITDA, $36.3 million of that came in July and August and we actually did experience a small $3.7 million loss in September given the reduced tonnes that were sold. Had we not had to cut back sales, I think we could have quite easily surpassed $50 million in EBITDA from the Hengjaya Mine for the first time in its history.

We look forward to once that increased RKAB is issued. We have almost 2 million tonnes of ore stockpiled ready to immediately go onto barges or actually the barges are already loaded, they’re sitting in barges. We have stockpiles ready to load up trucks and we’ll be back into full production again. If we could just go to the next slide, please. Sand Parlor project continued to make strong progress there as well. Majority of the activities across the quarter were focused on infield drilling, completion of mine feasibility studies and construction of the first eight kilometers of the required 22 km of haul road. That first eight kilometers is progressing well. We’re over 60% complete for the haul road and there’s a 60 meter span bridge that is also currently under construction. These construction activities have resulted in the creation of approximately 800 new jobs for the local community.

As I said, progressing very well and we are working towards achieving approval of a feasibility study for our ETL IUP in the coming weeks. If we could just go to the next slide, please. On the corporate front, we raised $800 million from a new bond issuance at a 9% coupon that was used to fully repay $400 million of senior unsecured notes that had 11.25% coupon and it was also used to repay $150 million of bank facilities with $25 million allocated to the secured tranches. We did go out initially to raise $500 million. The book was very well bid, and as a result we upsized the bond. What this has allowed us to achieve is an extended tenor on our debt. It’s allowed us to significantly optimize our amortization profile, and it’s given us a lower cost of funding.

If you look at the charts there on the right, you can see that this new bond removes about $88 million in annual note amortization and about $31 million in annual bank loan amortization. It really has optimized the debt stack. In summary for the quarter, another busy and productive quarter, another strong quarter. I think again it’s highlighted just the diversified operations and what that means for our cash flows. I think we could have had a significantly higher EBITDA this quarter had we not had to slow down sales at the Hengjaya Mine in September. I think $100 million certainly plus would have been achievable just on the RKAB. As I mentioned, everything has been completed, we’ve received all recommendations. The full Amdal document is basically sitting on a desk awaiting a signature.

Unfortunately, I’m not very good, and I don’t know anyone that is, at predicting government efficiency. We are still confident that signing of that Amdal will be imminent. What has taken the time is that this is the first Amdal in Indonesia that incorporates a slurry pipeline to return HPAL tailings to mined out pits, to recontour them, and then to allow that to be revegetated. Obviously, a lot of detailed work has been undertaken. Given that this is the first time with hazardous materials and water management and things like that, the Indonesian government has been progressing correctly, ensuring that they’re 100% comfortable with what’s being proposed. As I said, we’re confident of receiving that approval imminently. Finally, we are very happy with the results of the bond issuance. As I said, very well bid.

We also managed to diversify our bond holders, so we saw very good demand out of North America and Europe, which is pleasing given that historically most of our bond participants have been Asian. We’ve now diversified that book significantly, and we’re building a track record in the bond market. With that, I’ll hand over to Q and A.

Call Moderator: Thank you, Justin. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Richard Knights, Barenjoey. Please go ahead.

Oh, hi Justin, thanks for the call. If you could perhaps talk to us a bit more about what the status of the mining operations is at Hengjaya. Are you mining any material at the moment, and what does the cash burn look like there over the next three months if you do not receive the license for 19 million tonnes?

Justin Werner, Managing Director, Nickel Industries: Yes. We were still selling over the course of September and most of October, but selling at a reduced rate of about 6,000 tonnes a day. At the same time, we were still mining and stockpiling. We have now stopped selling and we are at the point where we will probably stop stockpiling in the next week or so. That means that our contractors will be placed on standby. There is a small standby rate, and in terms of what that means, we’re probably looking at something similar to what the cost was in September, so probably about $5 million a month. Is that standby rate?

Yep.

Chris Shepherd, CFO or Executive, Nickel Industries: Okay, thanks.

That makes sense. Maybe while I’ve got you, just one more on perhaps the broader state of the industry in Indonesia. We saw during the quarter there was a cancellation of a number of mining licenses, I think some of which were related to nickel laterite production. Are you seeing any pressure on mining of nickel laterite in the country and also margin pressure of your peers that’s going to potentially result in reduced production?

Justin Werner, Managing Director, Nickel Industries: Yeah, certainly on the mining side. I think it’s being reflected probably in the timing that it’s taken for our environmental approval to be approved as well. It’s being reflected in actions in terms of, as you just raised, cancellation of IUPs. The government really is having a big crackdown on mining practices and particularly, you know, environmental practices. What that means though is, as you know, as IUPs are, either, you know, those that are not performing or not meeting their obligations are at risk of coming out of the market, it will continue to provide ore tightness, which is really driving up a premium for ore prices. That bodes well obviously for our mine operations, but also the fact that we are integrated, it bodes well for Sand Parlor coming online next year and allowing us to become self-sufficient.

What we are seeing, and we’re seeing it in RKEF operations, but as well as that, we’re seeing it in HPAL operations. HPAL operations that aren’t integrated with mines with limonite feed are operating at a significantly higher cost than HPALs that are fully integrated. I think given the integrated nature of our operations and the fact that, you know, we’re targeting ENC to be the lowest cost and lowest carbon intensive, one of the lowest cost and lowest carbon intensive HPALs globally, I think we’re well positioned versus our peers that aren’t integrated. Yep.

Okay.

Thanks very much. Cheers.

Thanks.

Call Moderator: Richard, your next question comes from the line of Adam Baker of Macquarie. Your line is open.

Thanks Justin, for the call. Just maybe staying on Hengjaya. An increase 9 to 19 million tonnes. If you do get it granted over the next couple of months, just wondering how many years that RKAB will be valid for the 19 million tonne run rate.

Chris Shepherd, CFO or Executive, Nickel Industries: Sorry, Adam, it’s Chris Shepherd here. It looks like I can see that Justin has dropped off the call. He’ll be dialing back in, but we’re expecting that to then be for the remainder of the three years. We’ve currently got a three year license now and we’d expect that to continue, so another two years.

Okay, thank you. CY26, CY27 and what? Okay, thank you. While I’ve got you, just one on the bond issuance. Just looking to that waterfall chart that’s in the back of the quarterly where you can see the notes issuance of about $100 million. Just wondering what’s the timing? The repayments of the $400 million unsecured notes and the $150 million of bank facilities. I guess that happens post quarter end, is that right?

Yeah, post quarter end that has happened. We have reduced that, so the $400 million is now gone. As the presentation said, we’ve reduced $150 million of the outstanding bank loans. However, we obviously still got more that we’re looking at. I’m really sitting watching the timing of the RKAB and the commissioning of ENC before we make any further repayments.

That’s great. All right, thank you, thanks for stepping in.

I can see Justin’s back online now.

Justin Werner, Managing Director, Nickel Industries: Sorry guys, that phone line just dropped out.

Call Moderator: Your next question comes from the line of David Coates of Bell Potter Securities.

Justin Werner, Managing Director, Nickel Industries: Please go ahead.

G’day, Justin. G’day, Chris. Thanks for your time this morning. Well done on resulting kind of quarter. I guess towards the end there just. Again, no surprise, just questions on the RKAB and mine. A couple of questions already been answered. Just wondering what contingency plans you guys have in front of you, depending on how it all pans out, what options you’re considering.

Yeah, thanks, David. I said we remain very confident of receiving a revised RKAB. Very worst case, if we for whatever reason weren’t to get it this year, there is basically an automatic reset for $9 million starting next year. Worst case, we’re looking at October, November, December. Not ideal, but as I said, I don’t think that will happen. That’s the downside. We obviously still have our RKEF operations and HPAL operations that are unaffected by this.

Okay, so when does that roll over? Is it calendar year or is it October calendar?

Yeah. The Indonesian government has introduced, and look, that’s part of the challenge, as they’ve now sort of changed the RKAB again, unfortunately, but in an effort to streamline it, the new process from submission, when you make your final submission, there will now be, if there’s no feedback within a period of about 13 days, I think it is, then there’s just deemed acceptance. It’s automatically approved to remove some of the delays that have been experienced in the past. There are steps being made to try and streamline it. As I said, what’s taken time here is really the environmental study and the fact that we’re doing something that someone hasn’t done before. We think it will deliver a much better result, but given it is the first time and tailings is a very sensitive issue, it’s just something that’s taken some time.

That sounds like a positive cause, actually, once it comes into effect.

Yes. Yeah. Now look, they are certainly trying to improve it so that, you know. One thing I should add is on the Amdal, once we receive approval for that, that approval lasts for five years. The future RKAB process, we won’t have to do a feasibility, which we had to do in this case. We won’t have to redo an Amdal. We just simply make an RKAB application using all of the data from our existing approved feasibility in Amdal. This is just sort of the initial hill to get up and then once we’re over, it should be a much simpler and straightforward process in the future.

Okay, cool. Thanks, Justin. Just moving on to the RKEF. Did you say something about the power becoming cheaper?

Yeah, we undertook some maintenance work at both our ANI and ONI power plants that’s resulted in better efficiency and generation. We’re seeing that in reduced power costs, which is pleasing.

Excellent. Okay, Chris Shepherd has answered the question on the debt stack, which all sounds pretty good. Results. Thanks very much.

Chris Shepherd, CFO or Executive, Nickel Industries: Cheers.

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

Call Moderator: A final call for any questions. If you would like to join the queue, please press star 1 on your telephone keypad to raise your hand and join the queue. That is star 1 to raise your hand. We’ll pause for a minute, please, for any final questions. There are no further questions at this time. I will turn the call back over to Managing Director Justin Werner for closing remarks.

Justin Werner, Managing Director, Nickel Industries: Thanks, everyone. Clearly the company’s focus is steadfast on receiving this Amdal approval and, as I said, we’re very optimistic of that happening over the coming days or certainly imminently, in the next one to two weeks, and we’ll update the market as soon as that is received. I think that’s a big catalyst for the company. Obviously gives certainty around increased ore sales and certainty around increased ore sales for the commissioning of ENC. With that, thank you all for your attendance.

Call Moderator: This does conclude today’s call. Thank you all for joining us. You may now disconnect.

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