March 2024 quarter report
NIC announced March quarter production from its Rotary Kiln Electric Furnace (RKEF) operations of 31,840t contained Ni (BPe 32,003t), with 25,472t attributable (BPe 25,602t). Production was lower qoq due to industry-wide delays to the issuance of mining permits. This impacted mining production from NIC’s Hengjaya Mine and necessitated the drawdown of higher-cost, lower-grade stockpiles at NIC’s RKEF operations. Despite this, cash costs were below our forecast at US$9,446/t (BPe US$10,942/t). In addition, Mixed Hydroxide Precipitate (MHP) production increased by 16% to 2,120t (BPe 1,935t) which ramped up towards nameplate capacity. Cash and receivables dropped to US$1,018m from US$1,303m, including cash of US$553m (from US$779m qoq). During the quarter, NIC drew down on ~US$160m debt, paid US$316m in consideration for an additional 13.75% in the Excelsior Nickel Cobalt (ENC) HPAL project and distributed US$70m in dividends.
Tailwinds into CY24
NIC reported group EBITDA of US$70.3m (down 48% from US$135.4m qoq). The result was in line with expectations (BPe US$70.9m) and guidance of US$65-US$75m which was revised lower during the quarter due to the mine permitting delays. Once resolved, performance lifted and EBITDA for the month of March of US$41M was 58% of the total quarterly EBITDA. Combined with input costs remaining low and NPI prices improving, the outlook is positive for the June quarter.
Investment thesis – Buy, TP$1.54/sh (from Buy,TP$1.50/sh)
EPS changes in this report are: CY24: +72%; CY25: +7%; and CY26: +1%. Our NPV based valuation lifts 3% to $1.54/sh on lower costs, minor production increases and a lower AUD:USD exchange rate. NIC is one of the world’s largest listed nickel producers and one of few that offers diversified exposure across a range of nickel products and markets. It continues to trade on undemanding valuation multiples, offers a supportive (unfranked) dividend and has demonstrated its ability to make money through the nickel price cycle. Retain Buy.
