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Nickel Industries (ASX:NIC) somewhat buried a line in the company’s presentation regarding its latest quarterly numbers that were released on Thursday.
Despite clocking record nickel production, Nickel Industries has actually seen fewer sales in the December quarter. That’s because the company’s been producing so much nickel (which it can pull off thanks to major Chinese capital investor Tsingshan Holdings) that it burned through its 9M yearly sales quota early.
So now, Nickel is going to the Indonesian gov’t; asking for the right to sell 19Mtn a year.
“A record month of mining was recorded… with over seven million tonnes mined for the quarter and a record 1.3 million tonnes sold for November which delivered US$27M,” NIC MD Justin Werner told shareholders.
“EBITDA for the first two months of the quarter from Hengjaya Mine was US$42M which was unfortunately offset by a US$8.5M loss in December as only 200,000 tonnes were able to be sold … as the mine quota of nine million tonnes of ore sales for the year was reached in early December.
“The company is now in the process of seeking to increase this quota to 19 million tonnes.”
Before I go on, there’s crucial context here.
Nickel projects across WA have been collapsing, along with lithium projects, as a shock upramping of Indonesian supply in the early 2020s tanked nickel prices due to a sudden tsunami of the metal.
‘Upramping’ is the wrong word to use, actually. Indonesia is now the world’s largest nickel producer. You’re cut, BHP’s Nickel West. You’re also cut, just about everyone else.
But like Nickel (the company), major Chinese capital backing is the only reason Indonesia (the country) has been able to become a global producer.
Indonesian representatives have already clocked, here, some possibly uncomfortable connotations – according, at least, to NIC’s Justin Werner who was paraphrased in the AFR in July last year saying Indonesia was trying to ‘distance itself from China’ on that front.
It’s probably more in Justin Werner’s interest that he distances himself from China, given Nickel Industries’ success in surviving the nickel oversupply onslaught comes from the same relationships that helped create it.
Especially seeing as Canberra has been pretty keen to talk about how important domestic supply is for critical minerals.
Not that any of this matters for NIC shareholders. What few users commented on NIC’s quarterly in the HotCopper forums were more interested in how forex had affected EBITDA and what the price of Nickel Pig Iron (NPI) can divine.
But seeing as Nickel Industries is at once lifted and threatened by adding to the world’s nickel supply by an extra ten million tonnes per year, it’s an interesting strategy.
Especially seeing as Indonesia is reportedly looking to scale back sales quotas to cut down the volume of global supply, per reports from earlier this month.
NIC last traded at 78.5cps.
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