Foreign Exchange Losses Temper Nickel Industries’ Record Quarterly Earnings

Operational Highlights and Financial Performance

Nickel Industries has reported a robust quarter ending December 2024, posting a record EBITDA of US$72.4 million from its operations. This performance was underpinned by strong production outputs across its portfolio, notably a record 7.19 million wet metric tonnes (wmt) of ore mined at the Hengjaya Mine and a new quarterly high of 12,362 tonnes of nickel in nickel pig iron (NPI) produced at the Oracle Nickel (ONI) rotary kiln electric furnace (RKEF) operation.

Despite these operational successes, the company faced a significant US$20 million foreign exchange loss due to the appreciation of the US dollar against the Indonesian Rupiah. This currency movement reversed previous gains and reduced reported EBITDA margins by approximately US$622 per tonne of nickel sold. When adjusted for these FX effects, underlying EBITDA per tonne improved by 14.3% quarter-on-quarter, reflecting higher realised contract prices and lower operating costs.

Strategic Project Developments

The company’s strategic investments continue to bear fruit. The Sampala Project, a recent acquisition, has demonstrated exceptional exploration results with high-grade nickel and cobalt intercepts, including peak grades of 7.41% nickel and 1.37% cobalt. The project’s exploration target ranges between 350 million to 700 million dry metric tonnes, positioning it as potentially one of the largest nickel deposits globally. Mine planning and infrastructure development are advancing, with a planned haul road connecting Sampala to the Indonesia Morowali Industrial Park (IMIP) and an initial production target of 6 million wmt per annum, scaling up to 20 million wmt.

Meanwhile, construction at the Excelsior Nickel Cobalt (ENC) High-Pressure Acid Leach (HPAL) project is progressing ahead of schedule. All three autoclaves and key infrastructure components are now on site, with commissioning activities expected to commence in the first half of 2025. This project is critical for Nickel Industries’ transition into higher-value nickel products and aligns with global demand for battery-grade materials.

Sustainability and Operational Efficiency

Nickel Industries continues to prioritize sustainability, evidenced by its recent awards for climate reporting and sustainable performance. Notably, the ONI RKEF operation trialed substituting smelting coal with coke-oven gas, achieving a significant reduction in coal consumption and associated carbon emissions. The company’s Hengjaya Mine remains on track for a third consecutive year as a Green PROPER recipient, highlighting its commitment to environmental stewardship.

Operational cash costs decreased by approximately 2.8% quarter-on-quarter, driven by higher production volumes and lower smelting coal prices. These efficiencies, combined with stable nickel prices, have bolstered the company’s margin profile despite the FX headwinds.

Outlook and Market Positioning

Nickel Industries is actively pursuing an increase in its annual mining quota at Hengjaya from 9 million to 19 million wmt, with regulatory approvals anticipated in the second half of 2025. This expansion, coupled with the ramp-up of the Sampala Project and ENC HPAL commissioning, positions the company for substantial growth in nickel supply capacity.

However, the pronounced impact of foreign exchange volatility on earnings underscores a key risk factor for investors. The company’s exposure to IDR-denominated working capital and VAT receivables remains a financial sensitivity that will require ongoing management.