Earnings call transcript: Nordic Mining Q1 2025 sees cash flow boost

Nordic Mining ASA (market cap: $25.11M) reported its financial results for the first quarter of 2025, highlighting a significant increase in net cash flow and strategic advances in product shipments. The company’s stock saw a slight decline, trading at $10.68, down 1.84% from the previous close. Despite production delays affecting cash flow, the company remains optimistic about becoming cash flow positive by 2026. According to InvestingPro analysis, the company faces challenges with cash burn and profitability, with 6 additional key insights available to subscribers.

Key Takeaways

• Nordic Mining’s net cash flow increased by SEK169 million.
• The company raised SEK349 million through a TAP bond issue in March.
• The first shipment of garnet, totaling 569 tonnes, was sent to Rotterdam.
• Rutile production is set to begin by the end of the month.
• Nordic Mining aims to reach full plant capacity by year-end.

Company Performance

Nordic Mining showcased resilience in the face of production delays, managing to increase its net cash flow significantly. With a current ratio of 1.29, the company maintains sufficient liquidity to meet its short-term obligations. The company is focused on ramping up production and expects to become cash flow positive by 2026, though InvestingPro data shows revenue of $1.95M in the last twelve months with a 4.52% growth rate. The ongoing redesign of the pump circuit and other operational improvements are expected to enhance efficiency and output.

Financial Highlights

• Cash position: $636,000 (including restricted cash)
• Net cash flow: Increased by SEK169 million
• TAP bond issue: Raised SEK349 million
• Garnet shipment: 569 tonnes to Rotterdam
• Rutile production: To commence by the end of the month

Market Reaction

Nordic Mining’s stock price performance reflects market caution, with a year-to-date return of -8.07% but a positive one-year return of 12.91%. The stock currently trades at $10.68, between its 52-week range of $9.63 to $12.25, reflecting cautious investor sentiment amid production delays and a slow rutile market. With a beta of 0.41, the stock shows lower volatility compared to the broader market. Get comprehensive valuation analysis and more detailed insights with a InvestingPro subscription.

Outlook & Guidance

The company is optimistic about reaching its design plant capacity by the end of the year. A strategic review process is underway, with further communication expected in fall 2024. The appointment of a new Chief Commercial Officer in July is anticipated to strengthen the company’s commercial strategies.

Executive Commentary

• "We will become cash flow positive in 2026," stated CEO Finn Marham, emphasizing the company’s long-term financial health.
• Managing Director Kenneth Nachenangedal noted, "Our experience is outpacing our production," highlighting the company’s proactive approach to overcoming technical challenges.

Risks and Challenges

• Production delays could continue to impact cash flow and operational efficiency.
• The slow rutile market may affect revenue from this segment.
• Construction market sluggishness could impact demand for garnet.
• Technical challenges in the pump circuit redesign may delay production targets.
• Economic fluctuations could affect bond market conditions and future financing.

Nordic Mining’s first quarter of 2025 reflects a period of strategic development and operational adjustments, with a clear focus on becoming cash flow positive and reaching full production capacity. The company’s proactive measures and strategic leadership changes are expected to bolster its competitive position in the industry. Access Nordic Mining’s complete financial health analysis, including detailed ProTips and comprehensive research reports, through InvestingPro.

Full transcript - Nordic Mining ASA (NOM) Q1 2025:

Finn Marham, CEO, Nordic Mining: Good morning, and welcome to Nordic Mining’s first quarter presentation. My name is Finn Marham, and I’m the new CEO of Nordic Mining. I’m joined here today by Tod Meelling, who’s our CFO, and Kennett Nachenangedal, who’s the Managing Director at ENGIEBER. Following my introduction, Kennett will cover operational status at ENGIEBER, and then Tord will go through the financial status, and then we’ll end off with a q and a session. We keep a strong focus on health and environment and safety at Nordic Mining, building on the solid track record that was created during the construction phase.

During the first quarter, we had one minor lost time injury. However small, it’s one too many. The first quarter marked the transition from construction to production ramp up. Our progress was hampered by issues related to plant design. Consequently, volumes have been lower than what we would have wanted.

As Kenneth pointed out in the fourth quarter presentation, production ramp up is the riskiest phase, riskier than construction. We have a new process plant in a unique combination with our mineral ore. In addition, we have a new organization. In the first quarter, our focus was on building experience and debugging the process plant while focusing on producing Garnet only. During March, we made a $33,000,000 tap issue of our high yield bond in response to bondholders’ offer.

This allowed us to create more runway as well as to make more optimal long term decisions during the ramp up. Later in March, we found that the fix for the slurry pumps that we reported on provided by the EPC contractor was not working. We decided to carry out the third party review of the pump pumping circuits. The review revealed that the pumps had insufficient capacity, which was consistent with what we observed, during running the, plant. The pump capacity is being upgraded as we speak, and early indications is that the new design is working well.

Given the nature of the issue that we experienced, we decided to mandate a third party review of the other parts of the plant as well to proactively uncover any other issues that could hamper our production ramp up, with a view to using the planned downtime in July to fix any outstanding issues. In May, we did make the first shipment of Garnett to the Barton Group’s Rotterdam facility, and this allowed us to test the value and logistics chain from the mine on the mountain through the process plant to our end customer in Continental Europe. Although the cargo was small, it marks a significant milestone for Nordic mining. Looking ahead, we will commence production of rutile later this month with a plan to make the first shipment in the third quarter of this year. Coming in as the new CEO of Nordic Mining, my primary focus is first and foremost to get the Engiebe plant up and running safely and quickly.

In my view, we’re making good progress in that regard. However, we are behind what we signaled to you at the beginning of the year. Nevertheless, we remain committed to reaching design capacity for the plant at year end. My second area of focus is to take our board through a strategy process, answering the question of where we want to be with Nordic mining in a five to ten year perspective. We will become cash flow positive in 2026, which will create a foundation for future opportunities.

As part of the strategy process, I will engage with various stakeholders, including our investors, customers as well as environmental groups to solicit their input on the process. The strategy will be concluded and communicated sometime this fall. Finally, we have hired a new Chief Commercial Officer to assist in the strategy process as well as to allow us to be more proactive in our new business development. He starts in July. With that, I would like to hand over to Kennett to take us through the operational status at Engieberg.

Kenneth Nachenangedal, Managing Director, ENGIEBER: Thank you, Vin. At Engieberg, we are now including our Mining Alliance partner, 110 employees. So looking over Engieberg, looking into the plant and seeing what we experienced in the last months shows that since we get into our operating shifts in October 2024, we have experienced a significant growth in the organization. We have been building our team from October until now and are still continuing to build. We have new hires coming in, in the summer and also in the autumn.

We are happy to say that some of our trainees that have been with us in the past months and years have committed also to stay on board in the future. We have been building our experience through the construction and the ramp up phase. And this unique experience has been gained as we have been in the front seat through both commissioning and now the ramp up. In many ways, you can say that what we are doing right now, starting, stopping a plant, adjusting within the frames we have is the most difficult part of what we do. So to conclude, you can also say that our experience is outpacing our production.

Going a bit into details on the mining side, we are well advanced and progressing in the pit. We have, through the last months, gained significant access to high grade ore that we will use in the future. We are ahead of schedule in the mining. The mining operations has, in the first quarter moved 570,000 tonnes of rock and to date, we have moved close to 1,000,000 tonnes of rock and deposited in our area behind the pit. What we are focusing now coming into the end of the second quarter and into the second half of twenty twenty five is to focus on utilization of our machinery, making sure that we have efficient operations in a pit until we are going into full production in the process plant.

As Fenima mentioned, we are happy to announce that our first commercial shipment of five sixty nine tonnes of Garnet has been dispatched to Rotterdam. It shows that we are capable of producing high quality according to strict regulations from our customers. It’s also very important to be able to test the equipment from our product silos, onboard a boat, send it and ship it to Rotterdam and to unload it into the packing system at Barton’s facilities. We made steady production in the first quarter and have seen a growth and increase in production also in second quarter, which allows us to send out the ship of five sixty nine tonnes. Most outstanding items in and outside of the process plant has been finalized and closed out together with our APCs.

As mentioned by Finuval, we have not achieved our internal ramp up plan for the first quarter. We have installed a Remodel solution for the pump circuits in March, which did not have the expected effect. Together with the external party, we have now remodeled and recalculated all slurry pumps in our process plant. And the Priority Pump has been modified together with our EPC contractor, which has shown good effort into supporting us in making this happen. The initial data shows that the performance of the prioritized pumps is according with our expectations.

The performance indications from the initial and prioritized pumps lets us now start to continue of our ramp up. The production of rutile will restart and commence at the end of this month. We will look into further modifications of the pumps in the planned maintenance modification stop in July. We remain steady on our targets for full production at the end of the year. We have, as mentioned, focused always on maintaining the quality of our products, and it shows that focusing on quality gives benefits down the line in terms of volumes.

The first shipment of Garnet has been sent, and the first shipment of rutile is planned in the third quarter. And long term production levels remains unchanged with around 35,000 tonnes of rutile a year and 200,000 tonnes of Garnet a year after a slow ramp up in the initial five to six years. We are proud of the work we do within sustainability and environment. We now have a seven member team focusing on meeting all regulatory requirements and monitoring our environmental performance. When we are producing, we are depositing our tailings and have continuous monitoring of this twenty four hours a day.

We have not had any deviations or breach of permits as long as we have been operating for the last six months. As mentioned earlier, we have done a significant update to the baseline studies of our environment around us, both on land and in the fjord. And these results have been communicated with the regulatory bodies and our local community. For full transparency, these reports have also been put in our Norwegian project website for everybody to understand and read through. Now that we are finished with construction, our environmental monitoring goes into a new phase with the annual reporting of findings and reporting to the Norwegian Environmental Agency every year.

We have also done a significant effort to lift the reporting towards sustainable mining from the Norwegian Mining Association. Then I leave the word to Tort.

Tod Meelling, CFO, Nordic Mining: Thank you, Kenneth. I want to start off with the cash position. Cash flow in the period was a net increase of SEK169 million, which was of course impacted by the TAP issue in early March with a net proceed of SEK349 million. As announced in our fourth quarter presentation, we saw that we were not going to be able to obtain the liquidity buffer that we had earlier planned for and by that having limited resources available to handle any unforeseen events in the ramp up. That was the background for why we wanted to increase the existing bond.

Today, we see that this was fortunate because of the pump issues that have evolved into second quarter. The tap issue allows us to plan the ramp up in the most optimal manner, taking into account the issues that we are facing. The delays are hitting the cash flow negatively as we had planned for revenues in the end of first quarter increasing into the second quarter. This is now being postponed. The cash flow from investment was hundred and 10,000,000, which include capitalized costs up until January.

The CapEx from construction project is coming to an end, but it remains some end discussions and holdbacks from the EPC to conclude the investments in the plant. The strengthening of the NOK is affecting the cash held in US dollar and had a negative impact of 16,000,000 in this first quarter. We are exiting the quarter with $636,000,000 in cash, including restricted cash, which will be sufficient to take us to a positive cash flow operation. Moving over to the P and L, there are some changes here to focus on. We have done a reclassification of the mine under construction in February, meaning that the operating cost and payroll at Engerberg has been capitalized in January.

And after that, the main part of the total operating costs of SEK56 million excluding the depreciation relates to February and March. As you will see, the depreciation has also increased and this is because we have started to depreciate the mine and the process plant. The production expenses are impacted by high activity in the pit throughout the quarter. More than 570,000 ton of rock has been blasted and hauled in the period and the main part of this is waste rock that we need to move in order to get access to the high grade ore. This work, as Ken said, is ahead of the schedule and something we have to do we have done now that we would have had to do later if they’re not done now.

Furthermore, we have a full setup in the operation and the plant has been running with while we are testing and ramping up the production, lots of starting and stopping, unfortunately, without producing end products of high volumes. Not running the plant in an optimal way is costly, but also an important step on the way to steady production. Direct costs related to the issue that we are facing with the pumps are mainly overtime payment to key resources and hired consultants to help us with the finding to help us finding the best solutions. Going forward, the main focus is to get the production up and running with a target of reaching steady design capacity by the end of this year. So with that, we can go over to the Q and A.

Moderator/Analyst: Yes. Thank you, Toit. I think we’ll start with Kenneth here. There are just a few questions here. To you, Kenneth, we’ll start with, can you clarify who is bearing the cost of the additional work related to the redesign of the production line and the replacement of the Schlaurie pumps?

Are the contracts with the subcontractors structured in a way that they cover cost up to the delivery of a finished product, or will Nordic mining need to absorb those expenses?

Kenneth Nachenangedal, Managing Director, ENGIEBER: I think the main point now is that we are collaborating together with the EPC contractors to finalize and fix this issue we have with the pumps. That said, it is of course built around our NS8407 contracts where we are paying for a certain capacity and solution finalized in our plant.

Moderator/Analyst: And a question about the Garnet. What were the customers’ feedback from the quality of first ship Garnet product? Are you, in Nordic Mining, happy with the quality of the product you made? And is it the same as planned in the DFS?

Kenneth Nachenangedal, Managing Director, ENGIEBER: The quality of the product is in accordance with or in exceedance of the expectations in the DFS. We have had our customer visiting us several times during the last months to just oversee and look into the quality of the products, and we have not received any remarks on quality at this point.

Moderator/Analyst: Is the facility reliable now, after those, challenges that you have experienced?

Kenneth Nachenangedal, Managing Director, ENGIEBER: We have found a steady state solution to have a reliable plant at this point in time. When we are now upgrading the pumps, we are also needing to find new steady states and we are continuing our ramp up, meaning we are adding more volumes and increasing the density of our wet processing plants. This is still in a ramp up phase and we must assume that we will meet challenges going forward, but we are ready and prepared to solving this as they might come up.

Moderator/Analyst: Have you started to deficit mining waste?

Kenneth Nachenangedal, Managing Director, ENGIEBER: We have started our tailing solution in November. So in correlation with our first mineral concentrate and first ore to mill in November, we started, depositing the tailings and have, as we have been running the plant, doing tests, continuously depositing according to our permit.

Moderator/Analyst: When will you deliver rutile products and is the rutile quality as good as planned?

Kenneth Nachenangedal, Managing Director, ENGIEBER: As mentioned, we plan to ship the first rutile shipment in third quarter and there has not seen any reason not to have a full good quality in a lot of volumes also in rutile. We have done small batches of production, but now that we restart up the rutile production, we will see and learn more. But as said before, our focus is always to maintain quality and then increase the volume.

Moderator/Analyst: What what do you think the biggest challenges for the operation the next two years will be?

Kenneth Nachenangedal, Managing Director, ENGIEBER: I think, as mentioned also in previous quarterly report presentation and also mentioned by Todd, the phase we are in now has and will always be the most risky phase in terms of uncertainty. It means that we might meet challenges, but we are have been good at meeting and solving most of them along the way. So in terms of our one to two year prospect, we need to first and foremost deliver as promised on design capacity by the end of the year and then is to maintain and focus on both quality and volume for the next coming years.

Moderator/Analyst: And perhaps a question for Todd. What what is could you comment on the observed rutile garnet prices on the market?

Tod Meelling, CFO, Nordic Mining: Yeah. We have we have seen it’s a quite slow market on the rutile with not much to update about since last quarter. For the garnet price, it’s it’s not a big market where we can observe market prices. The drivers here are our construction market, which is in somewhat a slow period. But for the garnet, have a fixed price for the next five years, so so we are covered there.

Moderator/Analyst: Thank you. And, Kenneth, what are realistic garnet sales volumes for second quarter in 2025?

Kenneth Nachenangedal, Managing Director, ENGIEBER: It’s a little bit early to start predicting volumes at this point, but we are now ramping up as planned and following the plan until the end of the year.

Moderator/Analyst: Finn, could you tell us, is there any news about the quartz project?

Finn Marham, CEO, Nordic Mining: So we are advancing, two projects that, that, were started earlier. One is, to look at downstream, processing of our, rutile, in Norway. And the other project is the one that you’re asking about, this quartz project. I think we reported earlier that we’ve taken out, 10 tons of, of minerals, from, the mountain, and we’ve shipped that to Germany for processing. And we’re still waiting for the results.

Early indications are quite positive, but, the the final results will be available to us this fall.

Moderator/Analyst: Thank you. And, we have one last question to Finiwad. Is there any change to the strategic direction?

Finn Marham, CEO, Nordic Mining: Not yet. We maintain the strategy that was, was communicated by, Ivan, my my predecessor. And as I just mentioned, the two projects are being advanced, under the current strategy. But, as as I mentioned earlier, we are, in this new strategy process, which will conclude this this fall and communicate to the market. And for seeing any changes to that, I think it’s too early.

We need to take our board through it yet, but that will yield some answers that I know our investors are eager to ask such as what will our dividend policy be, etcetera. So so these are things that will revert to this fall.

Moderator/Analyst: Then I would thank everybody for for persist participating in this webcast, and we’ll see you back in three months.

Finn Marham, CEO, Nordic Mining: Thank you.

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