Nickel Mines Expects Rising Production Volumes into FY22

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Nickel Mines Expects Rising Production Volumes into FY22

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  • Half-year 2021 net profit after tax up 82 percent to US$83 million
  • Sales revenue up 27 percent to US$288.7 million
  • Strong conversion of net profit after tax to cash flow of 103 percent
  • Rising production volume into FY22 second-half on back of improving spot nickel pig iron prices

Nickel Mines (‘NIC‘ or the ‘Çompany‘) is an emerging, low cost producer of nickel pig iron which is essential for the production of stainless steel.  NIC became an ASX200 Company in March 2021.

Half-year to 30 June 2021

Nickel Mines reported a 82 percent higher net profit after tax of US$83 million, with a strong conversion of reported profit to cash flow of US$85.35 million, for the 6 months reporting period. This profit outcome is equivalent to earnings per share of 2.6 cents, compared to earnings of $56.4 million and 1.4 cents in the previous corresponding period. These earnings and cash flows were struck on the back of a 27 percent increase in sales revenue to US$288.7 million. A final dividend of 2 cents unfranked, payable 10 September, has been declared. The distribution amount is A$50.3 million.

The balance sheet is conservatively financed as at 30 June 2021. Net cash, which includes outstanding debt at 30 June 2021 of US$175 million, was US$15 million. This strong balance sheet enables the Company to comfortably finance the Angel Nickel Industry development project in Indonesia. This project will provide significant scale to NIC’s attributable nickel production capacity, once commissioned in the second half of the 2022 financial year.

During the half-year, the Company produced a combined 146,425 tonnes of nickel pig iron, containing 20,210.3 tonnes of nickel equivalent. This compares to 21,395.2 tonnes in the June 2020 half year. The slightly lower amount of production tonnes is primarily due to a marginal reduction in nickel pig iron grades from 14.4 percent to 13.8 percent.

Looking Ahead

China spot nickel pig iron prices have surged in recent months as consumption levels of stainless steel increase at the same time as supply tightens. June quarter Nickel prices have risen from US $14100/t NI to between US$15400 /t NI and US$18100/t Ni. NIC is highly leveraged to stainless steel prices and nickel market fundamentals which are building momentum into the second half year.

Production volume is set to rise, as NIC is acquiring an 80 percent interest in Angel Nickel Industry, a development project in Indonesia, at a cost of US$577.6 million. 50 percent has already been acquired and the remaining 30 percent is due for settlement before 31 December 2021. Financing is in place in the form of a US$325 million Unsecured Note issue. The project is presently on track for commissioning in the second half of FY22 and on commissioning will double the Company’s nameplate nickel production capacity. There have been no COVID-19 related disruptions to production since the onset of the pandemic in early 2020.

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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