NICMF Earnings

Operator: Thank you for standing by, and welcome to the Nickel Industries Limited September quarter activities webcast. [Operator Instructions] Finally, I would like to advise all participants that this call is being recorded. I'd now like to welcome Justin Werner, Managing Director, to begin the conference. Justin, over to you. Justin Werner: Thank you, and welcome, everyone, to the Nickel Industries September Quarterly Activities results call. If I could just ask the moderator to move to the next slide, please. Kicking off with safety. 12-month LTIFR 0.06. Unfortunately, there was a lost time incident recorded during the quarter. An operator took a fall, but they thankfully have recovered. And so no significant injuries. That takes our 12-month TRIFR to 0.67 and 17.8 million safe man hours have been worked. In terms of some of the quarterly milestones on the ESG. We are part of the top 20 of Asia Pacific metals and mining peers as externally audited by S&P. And so I think that's a tremendous achievement from a recognized independent third party. We received recognition from the Indonesian mines department for our disaster response and we ran a tsunami preparedness drill in one of the local villages. We planted over 1,000 mangrove seedlings on World Mangrove Day with the local community. And the Hengjaya Mine won gold at the INTECH Southeast Asian 2026 for waste and coastal conservation education. And finally, we continue to expand our scholarships with over 30 students in various disciplines across 2 universities in Indonesia, and we're seeing some very good results from our students in the universities where they're currently studying. If we could just go to the next slide, please. USD 125.9 million adjusted EBITDA with record ore sales and EBITDA at the Hengjaya Mine. Also another tremendous -- some tremendous milestones during the quarter with first MHP, nickel and cobalt cathode from ENC. The USD 125.9 million of adjusted EBITDA was up on the June quarter. Record ore sales of 4.5 million tonnes. And as I've mentioned, we were externally benchmarked by S&P under the Global Corporate Sustainability Assessment, and we ranked in the top 20 amongst our APAC peers. On the mining side, record EBITDA USD 76.9 million, up 68% on the June quarter, and that's reflective of the Indonesian government's revised HPM pricing. 4.5 million tonnes of ore sales. That's also a new record, up 56% on the June quarter. And our EBITDA per wet metric tonne margin was also up 8% to a little over USD 17 wet metric tonne. At our RKEF operations, EBITDA was down 30% to USD 40.7 million. Really, the key driver there is obviously is the increase in ore costs. So we've sort of seen margin moving from the RKEF into the mining business. Sales were pretty stable, 26,800 tonnes, down slightly. And pleasingly, the NPI price is holding. So we averaged $14,408 a tonne over the quarter, down slightly on the previous quarter. But as I said, it's very encouraging that the NPI price was sort of $10,000 a tonne last year, and it's now held consistently for the majority of this year at around that $14,000 per tonne mark. On the HPAL side of the business, USD 8.4 million adjusted EBITDA from HNC. That was down on the June quarter and really driven by higher costs, which is higher sulfur prices. Pleasingly, HNC continues to make distributions to NIC, and there was USD 13 million distributed during the quarter, which is up sort of 271% on the distributions that were made in June. And at ENC, as I said, a couple of tremendous milestones. First, MHP and first nickel and cobalt cathode production. If we could just go to the next slide, please. Mining operations, I mentioned a record 4.5 million tonnes of sales. The average realized sale price was down slightly. The reason for that was just due to a higher proportion of limonite sales. The EBITDA per wet metric tonne up almost 10%, $17 and what we are starting to see there is given that we're now hauling limonite only a couple of kilometers to the slurry plant to feed ENC rather than sort of 20 kilometers to third-party HPALs, we're starting to see that in a reduction in operating costs and an improvement in our EBITDA per wet metric tonnes. So all in all, great result from the mine side, up 68% on the previous quarter and USD 76.9 million. So, moving forward, you can see that the Hengjaya Mine, it's just itself is going to be a significant EBITDA contributor to Nickel Industries moving forward. And obviously, it -- these sort of numbers augur very well for the development of the Sampala Project. We continue to work through our RKAB increase. We've been through several revisions. We are hopeful of receiving some sort of outcome relatively soon and we'll obviously update the market once we get some final feedback. If we could just go to the next slide, please. Sampala development continues. The key really to Sampala is development of the 24 kilometers of haul road. You can see the photo on the top right there. That's sort of part of the first 8 kilometers that's already been built. We are preparing to build another to add another 2.2 kilometer section. And then the remaining section, which is about another sort of 14 kilometers. We're just pending a forestry approval from the government, and then we'll be able to start work on that section of the road. Both ANN and ETL are well advanced in having the feasibility study approved. Once that's approved, we will then look to get the environmental studies approved and they're also well advanced, and then we can make an RKAB application for both of those IUPs. At Siduarsi Project, the feasibility study still remains under review by the Indonesian government. If we could just go to the next slide, please. ENC commissioning started off very well. We were at 50% of nameplate capacity within a number of weeks. So performing extremely well. Unfortunately, due to the El Niño conditions that Indonesia is currently experiencing and you would have seen in the quarterly results across September, October, we've received only 7 millimeters of rainfall when typically over those 2 months, you would see around sort of close to 0.5 meter. That has meant that we have had to reduce back the production coming out of ENC. But so far for the quarter, we produced 4,840 tonnes of nickel and 494 tonnes of cobalt in MHP. And the quality of that MHP is excellent. The cash costs, and this is still at a commissioning phase, so not fully ramped up, was $13,943 a tonne. That's actually lower than HNC, and we're not fully ramped. So that's very encouraging. And our cathode conversion cost currently around $3,888 a tonne. We are looking to bring that down as we get that up to full capacity to sort of somewhere in the range of about $2,500 a tonne. The cathode quality is also excellent. We've commenced the LME registration process. And so far, it's progressing very well given the very high quality of the cathode that's being produced. We also announced subsequent to the quarter USD 245 million OCBC-led project financing, and that will allow us to dividend recap some money back to the ENC shareholders. The other key milestone that was received during the quarter was an exemption to be able to sell our MHP, which -- there's a number of other HPAL producers that actually don't have that exemption as yet. So I think it places us very well. And the IUI for full sales is progressing very well. So we're expecting to receive that this quarter, and then we'll be able to realize first sales from ENC of the products that we've already produced. At HNC, I mentioned EBITDA at $8.4 million, down 42%. 1.9 thousand tonnes of nickel sales, HNC attributable and EBITDA per tonne is down from about 8,000 last quarter to 4,400. So look, still holding a strong margin despite the significant pressure from sulfur. Pleasingly, sulfur prices have sort of come off the highs of sort of 1,100 to 1,200 and currently at the moment, they're sitting around 800. So HNC is still delivering $4,500 a tonne margin is still a very good margin. And as I said, we continue to receive ongoing distributions from HNC. If we could just go to the next slide, please. This is just some photos of the HPAL operations. So the top left photo is the slurry plant, which is located within the Hengjaya mining concession, and so limonite is delivered there and then sent via a slurry pipeline down to the ENC HPAL plant. That's 2 there on the left. And actually, within that photo there, there is also CNE and TMI. So that photo, that whole complex is actually ENC, CNE and TMI. And unfortunately, it doesn't really give you a feel for the scale. There is a video there that you can watch. There's a link up there in the top right-hand side. The bottom left photo, number 3 is the sulfate and cathode refinery. And then the final photo #4, you can see there some of the final products. So we've got the MHP, which looks like the green wasabi there. And then we've got some of the nickel cathode there, and you can see a branded PT Fajar. If we could just move to the next slide, please. RKEF operations. 27,822 tonnes for the quarter. So sort of staying pretty consistent. We're expecting to complete the rebuild of one of the HNI lines in the middle of November. Once that's completed, we expect it to go back to about sort of 20% above nameplate capacity. Once that line is completed, we will then start doing the second line at HNI, and there will be an ongoing program to effectively rebuild the kiln and furnaces across the 4 lines at HNI and RNI over the coming months. Cash costs of USD 13,054 and that really, as I mentioned, is just the increase in the nickel price and a sale price of USD 14,408. So as I said earlier, pleasingly, the NPI price is remaining quite robust. And so we've seen a reduction in EBITDA per tonne, and that's really been driven by increase in ore pricing, and obviously, that's coming through in our mining numbers. So it's really just a transfer of margin from the RKEF back to the mining business. If we could just go to the next slide and the cash flow overview. I'll hand over to Chris to talk through this slide. Christopher Shepherd: Thanks, Justin. Good morning, everybody. As Justin mentioned, we had another exceptional quarter with our EBITDA of $126 million. However, this obviously hasn't translated into cash flow this quarter, with cash actually falling from $268 million at the end of June to $146 million at the end of September. As you can see on that slide, $50 million of this was what we classify as growth spend, which is predominantly the ENC working capital loan. So funding the commissioning of ENC. Sampala development CapEx, approximately $12 million for the quarter, and this was somewhat offset by the repayment by Tsingshan of the $15 million nickel matte converter option that we received during the quarter. Another $43 million was spent in debt servicing costs, which was -- which is obviously on our bonds and our bank loans. Then we come to the cash flow before growth in debt of negative $12 million. That was predominantly driven by working capital as the slide says. We've set this out in this quarter, and we intend to do this going forward in a table on the bottom there, for clarity for all of you. The key items in that were an increase in mining inventories, which have obviously increased stockpiles. So cash has been spent, but it's in the EBITDA. $28 million in HPAL. $12 million of this was the customer advance received in Q2, but applied to an August shipment, and $16 million was for the HNC product prepayment -- for an HNC product prepayment, so purchasing our share of the products out of HNC in July and August. However, with MHP payability is falling throughout the quarter, we've elected not to -- we didn't elect to sell as much in the quarter. Receivables are the other large items. Hengjaya Mine was up $43 million and the RKEF was up $34 million. Of that $34 million, $29 million of it was at ONI and RNI with other receivables making up the balance. So just under $6 million. We expect all of this to unwind in Q4. Payables was another timing item, which we expect to unwind in Q4 as well. $24 million of suppliers were paid call it paid down from the prior quarter, predominantly at HNI and ANI RKEF projects. So all in all, it's been a tough operating environment through the quarter with much lower-than-expected cash conversion. And as I mentioned earlier, we expect a lot of this to unwind in Q4. Finally, as Justin has mentioned and as we announced to the ASX yesterday, we have executed a USD 245 million asset level debt at ENC on extremely attractive terms. So it's nonrecourse, 7-year debt at SOFR plus 2%, which at current SOFR rates equates to 5.9%, obviously, compared to our existing bond at 9%. This facility or this loan will give a working capital buffer at ENC as we ramp up to nameplate. And then as operations hit nameplate in coming months as we expect to hit in coming months and the market stabilizes, we will then look to dividend this up to the shareholders. Nickel Industries would receive its 46% share of any distributions to shareholders. OCBC led the transaction, and I'd like to thank them for their support in this tough environment being obviously throughout the year the sulfur effects of the Iran war. And now obviously, the El Niño drought effects with the water restrictions that we're seeing across the region. We could have actually executed a much higher number, likely north of $500 million, but this would have come at a higher interest cost or higher margin. And as we feel we have sufficient liquidity at the moment, we elected for the USD 245 million now. Thanks, Justin. Back to you. Justin Werner: Thanks, Chris. If we could just move to the next slide, please. progress against our FY '26 guidance. So in terms of the mine, we're at 10.4 million sales at the end of September of our 14.3 million RKAB. So we're on track to meet that for the year. And as I mentioned earlier, we are awaiting the outcome of an increase. And hopefully, we should hear some positive news on that relatively soon. In terms of RKEF sales, 85,000 tonnes for the year of roughly target of about 100,000 to 110,000 and that's been lowered slightly because of the kiln rebuild at HNI, which I touched on earlier. There is a temporary reduction, which started in October to about 75% of nameplate capacity, and that's really just due to the shortage of water. [Technical Difficulty] Operator: Ladies and gentlemen, we'll just go on to a brief music hold. Thank you for standing by and we will now resume. Christopher Shepherd: Yes. Thank you, everybody. Justin is having problems getting back into the line. So I'll continue on this guidance slide. Obviously, as everyone is aware, we haven't provided guidance in the past, but we've been getting a lot of questions and a lot of requests from both the research community and also the investor community. So -- as you can see on the slide, we set out a total CapEx for 2026. We are a long way through that having spent $51 million to date to the end of September, and we expect another -- we expect to reach $66 million to $73 million by the end of the year. FY '27 numbers will be provided early next year once we've completed our budget process, and the Board has signed off on all of that. Mine consolidated sales. As you can see, we are expecting -- we will hit our 14.3 million tonnes at Hengjaya Mine, which is our existing 2026 RKAB. Should we receive an increase in Hengjaya Mine's RnKAB in the coming months, well, then that number may increase. At the RKEF operations, we've -- we're at 85,000 tonnes of nickel sales by the end of September, and we're expecting that to reach 100,000 to 110,000 by the end of the year. And then HPAL attributable sales at 5.8 currently, and we're expecting 10 kt to 11 kt by the end of kt the year. Obviously, the processing sales numbers are very much El Niño or water dependent over the coming months. With that, I will hand over to questions, please. Operator: [Operator Instructions] Your first question comes from the line of Austin Yun of Macquarie. Austin Yun: Yes, just keen to get an update on the current weather conditions, as you mentioned in the note, the release, there has been extreme dry conditions limiting the production rate of RKEF lines. We also note there have been some media reports saying your peers in the region may consider a similar move. Could you please provide some color on the broader market in the region outside of your 4 RKEF facilities in terms of the impact? And should we see a more coordinated production cuts across the whole sector? Justin Werner: Yes. Thanks, Austin. So yes, we are -- as of October, we've reduced the RKEF capacity to about 75%. We've really focused on ensuring that ANI is actually running at 128% of capacity. And so our 2 strongest RKEF, ANI and ONI are still performing well. But look, there will be coordinated cuts across all of the operations within the IMIP. IWIP at this stage is unaffected from any water shortages. But look, yes, you can expect some of these coordinated cuts. And certainly, what we're seeing is the nonintegrated producers, again, are the ones that are going to suffer the hardest here. So just again highlights the advantages that we have over our peers. And look, typically, December mark sort of the start of the wet season. So, look, we're hopeful of starting to see some meaningful rainfall hopefully sometime in the next couple of weeks. Austin Yun: Okay. Justin, just a quick follow-up. How should I think about the cost between variable and fixed given that the production rate is coming down? Justin Werner: Yes. Look, the cost of the RKEF is predominantly variable. 70% of the cost base is nickel ore and power. It's probably only 10% that's fixed. So not a big impact, probably even less than that. Operator: Your next question is from the line of Richard Knights of Barrenjoey. Richard Knights: Thanks for the table, in particular that sort of breaks down the EBITDA to cash flow from operations. I think that's particularly helpful just to see the receivables and payables movement between the assets. So thanks for that. So, a couple of questions. Well, 1 main 1 actually. In terms of the remaining 4 million tonnes that you've got in your RKAB for Hengjaya, can you give us an idea of what the saprolite limonite mix is going to be there? I mean, obviously, given where the HPM pricing is you're making tremendous margins on the saprolite sales. Is there a sort of view given the pressures on the downstream business in terms of high sulfur prices and potential production cards. Is there a view to sort of try and maximize revenue with the mining assets through all saprolite sales? Justin Werner: Look, where we can, we will most certainly try and do that. Obviously, we're prioritizing limonite for ENC. We do have the benefit of third-party producers that are buying limonite. So there's the opportunity there to sell additional tonnes, which is really what we did this quarter. And then for -- yes, for saprolite, look, where we can. We -- and obviously, it's driven partly by the mining plan and sequence and sort of saprolite to limonite ratio, but where we can, we'll certainly try and maximize saprolite sales given the very strong margins. Richard Knights: And can you give us a flavor of what that split is going to look like roughly over the next sort of 3 months? Justin Werner: For this quarter, it's a little bit challenging because we're still just trying to finalize the ENC limonite requirements and third-party limonite requirements. And so that then really drives what saprolite we can do. One of the things that we don't want to be doing is mining limonite to get to saprolite and just creating more limonite stockpiles. So we're just -- it's just balancing that mining sequence with demand. Richard Knights: Yes. Yes. Fair enough. And then just on price realizations for MHP, I mean you mentioned that they've pulled back a little bit. And obviously, Austin alluded to potential coordinated HPAL cuts in the space. I mean, can you give us an idea of sort of to what extent those MHP price realizations have pulled back versus the nickel price? And have they -- does it feel like they've sort of found a floor? Justin Werner: Yes. Look, it's back to about 84 for nickel and back to sort of a little over 50 for Cobalt. Cobalt was in the high 80s previously. And MHP was sort of over the 90s. So I think we have found a floor. I mean, interestingly, what a pullback in the MHP payabilities does is it obviously opens up the opportunity for stronger margins at the cathode side of the business given that you're capturing the gap between the sort of 84% and the 100% payability. Richard Knights: Yes. Yes, that makes sense. Just need higher cathode prices, that would be helpful. Justin Werner: Yes. Well, I think obviously, the nickel price was up, I think, 3% overnight. So certainly there been a response to some of these cuts. So, yes. Operator: Your next question is from the line of Jit Ming Tan of Barclays Bank. Jit Ming Tan: One question for me on the $245 million bank facility at ENC. Just curious to understand the use of proceeds and if part of that is going to be used to repay that $50 million loan that NIC provided to ENC. Justin Werner: Thanks, Jit Ming. As I mentioned, we -- that facility in there for -- initially for working capital to ensure that as, let's just call it, as ENC is well capitalized as we're commissioning up to nameplate and obviously, as market conditions stabilize. As soon as we can, we will be sending the majority of that, that will leave us a very small amount as working capital, but over 90% of that will be distributed to shareholders. So we've obviously -- we've got shareholder loans in there. Any distribution, NIC will receive its 46% share. So you might -- we might be looking up around $100 million distributed to NIC. And that has always been the intention of this facility as we've been working through it over the last year or so. We obviously haven't needed traditional project finance per se because the entire thing was funded on equity, and it has been funded as equity to date. So it can just really be looked at as a is what I'd call a dividend recap to the shareholders. Operator: Your next question is from the line of Hamish Wiltshire of Jefferies. Hamish Wiltshire: Just a quick question on the saprolite sales split, again. Related with the 75%, so 25% production cut out of the RKEF. Should we expect to see a similar movement in kind of the attributable saprolite volumes heading towards those plants? Justin Werner: Look, our saprolite supply, we're currently about 60% self-sufficient. So cutting it down to about 75%, it will just mean we'll stop any third-party ore purchases and probably move to 100% of saprolite for our RKEFs coming from the Hengjaya Mine rather than having what we typically have is we do have a top-up from other third-party suppliers. Operator: Your next question comes from the line of David Coates of Bell Potter Securities. David Coates: Look, just a couple of quick ones. I'm sorry if I missed the IUI sales permit. Just your best guess on timing on that and then assuming once that, that comes through, the stocks that are built up will be sort of able to be sold immediately? Justin Werner: Yes. Look, that's right, David. So we've had the sort of final inspection. We've obviously received the MHP exemption. So assumes that IUI comes through then that will allow us to sort of immediately trigger sales of the product that we've currently built up. David Coates: Cool. And the -- you mentioned ANI is running well above nameplate. Is that -- typically, is it -- how sort of sustainable is that what kind of capacity that have run those RKEFs that sort of level above nameplate? And I guess, I don't know what are the constraints on doing that? Justin Werner: Yes. So I mean, it's a number of different factors that go into being able to run it above nameplate. It's sort of furnace conditions. It's grade of ore. So there is a number of variables. It's also the quality of the ore. ANI is in a good position because it's sourcing a lot of third-party at good grades, and it has an ability to sort of blend to get the best sort of ore mix that it can, which then allows obviously better performance through the furnace, better recoveries, and that's where we're seeing some of this outperformance come from. So, ANI is certainly helping to reduce the impact of the reductions of some of the RKEFS at IMIP. David Coates: All right. Nice one. And finally, any additional update on Sampala permitting and schedule, I suppose? Justin Werner: No. Look, just still waiting on approval of feasibility study and of the forestry permit. We are hopeful to receiving those before the end of this year. And then as I mentioned, we will be starting work very shortly on a 2.2 kilometer section of the haul road. And so we'll be back at work on the haul road and hopefully with the forestry permit coming through soon. That should allow us to get back into building the remaining haul mode sort of hopefully early in the new year. David Coates: Okay. Cool. Good to see your nickel price responding a bit to the production impact. So, yes. Justin Werner: I think -- and I think the other thing is, obviously, NPI prices held firm for the -- throughout the year. And so we think that's a positive as well. Operator: Your next question comes from the line of [ Kay Hatanto ] of Indo Premier Securities. Unknown Analyst: I just have a quick question. Just want to know the feasibility on becoming HPAL projects like TMI and CNE considering that sulfur costs are pretty expensive and elevated right now and unfavorable supply/demand dynamics in HPAL. Justin Werner: Yes. So TMI and CNE are all part of the same ENC complex. So that aerial photo that we looked at earlier in the presentation, that's effectively what you're seeing there is CNE, TMI and ENC are forming part of the 1 big HPAL facility. HNC is obviously our proxy into the impact of sulfur prices. And you saw this quarter that margin is still at $4,500 a tonne. So that's still very healthy. And I guess, pleasingly, we've certainly seen sulfur come down from sort of its highs of 1,100 to 1,200 to, today, it's sitting at 800. So based on HNC as a proxy, margins are still good. And then pleasingly, the very -- the limited commissioning that we've done at ENC, and we only hit 50% capacity, but the costs that we were operating at were lower than HMC. So it sort of just -- it reinforces our belief that these HPALs, ENC, CNE and TMI will all operate sort of in the lowest quarter. Operator: Your next question comes from the line of [ Ebrahim ] [indiscernible] from Deutsche Bank. Unknown Analyst: Congratulations on a good set of numbers. Can I just ask very quickly on the details of the of intercompany loan that has been reported in the cash flow waterfall, what are terms? Who this is to? What would be the use of proceeds? Christopher Shepherd: Yes. Thanks, [ Ebrahim ]. Sorry, I should have mentioned that. It's the loan to ENC. So it's a working capital line. It's a shareholder loan into ENC but for the -- as we commission the working capital. Unknown Analyst: Got it. And are there in terms of repayment of this? I know you're expecting potential dividend recap from the project financing that you're doing there. But any terms of these repayment here for this working capital facility as the project comes online? Christopher Shepherd: We'll be getting the cash out of the company as soon as we possibly can. But we haven't -- the terms are confidential. But as soon as we can, we're going to be taking as much cash out of PTFMI/ENC up to all 3 shareholders. Operator: Your next question comes from the line of Aman Aggarwal of JPMorgan. Aman Aggarwal: I had a few questions. Firstly, given the cash balance we have as of end third quarter subsequent production cuts, how do you plan to meet the HPAL payments coming up in November? Do you have any plans to draw down on the Tsingshan facility? Christopher Shepherd: Thanks for the question, Aman. I think when we announced at the end of August in our half yearly, we -- I said there were no plans to draw down on that facility. We are reassessing that at the moment. Obviously, it's not a great environment at the moment. It depends -- it will very much, I think, depend on when we actually draw down on the OCBC facility, whilst we've executed the facility agreements, we will be looking to drill down on that within the next week or so. And then we will quite a long discussion with Tsingshan regarding how much, if anything, of the cash we can -- of that cash that goes into ENC, we can distribute up to shareholders. Should we not distribute anything to shareholders, we will likely draw down on that facility to the extent, obviously, given what I've just said about ENC and I can't say how much of that facility will draw down. We do not need to draw down on the entire amount in 1 drawdown. We can draw down as many times as we like over the course of the next 15 months. So it's really -- unfortunately, I can't give you an exact number now, but we will work through that. And obviously, as and when we draw down, we will inform the market. We -- the follow-on question that you should have or others may have is then we've got a final payment, for Sampala in April of $144 million due. I previously told all the investors that previously I was intending to not draw down on the Tsingshan facility and use the Tsingshan facility, if needed, for the April payment. So whether or not we -- how we deal with that April payment will be very much dependent on how we -- what we -- whether or not we draw down now on the Tsingshan facility, the $169 million. We have just as, I guess, as a precaution, whilst that's 6 months out, we have had discussions with our local partner, who is the vendor of the Sampala project, and we feel quite confident that should we need to push back that payment, we will have the ability to do so. Aman Aggarwal: That is the April payment, right? Christopher Shepherd: What, sorry? Aman Aggarwal: You mean you can push back the payment in April? Christopher Shepherd: Yes. Yes. The April payment. The November is -- we will not push that one back, but the April one, yes. Aman Aggarwal: Okay. And if you draw down on the Tsingshan facility, that would be on Nickel Industries' balance sheet, the one on ENC that's out of nickel industries it, that's on ENC level? Christopher Shepherd: Exactly. The $245 million we announced at ENC level or PTFMI level, and the Tsingshan facility would be the Nickel Industries' LeaseCo level. Aman Aggarwal: Okay. Understood. And secondly, on -- so I think this is a follow-up on a previous question, but you're reducing RKEF capacity. What would be the impact on Hengjaya Mine production? Will that stay as is or the third-party sales will continue there? Justin Werner: Look, we will be selling 100% of our saprolite into our RKEFs, and we do have flexibility on limonite. So there is still third-party buyers for the limonite as well as obviously supplying to ENC, which is obviously still running at the moment. Aman Aggarwal: And in third quarter, how much of your limonite sale was to ENC? Justin Werner: It was, I believe, probably roughly about 1/3. [Technical Difficulty] Are you there, Aman. We lost you. Yes, we can hear you. Aman Aggarwal: Sorry, I lost you there. So you said 1/3 of the limonite sale was to ENC, right? Justin Werner: Yes. Aman Aggarwal: Awesome. And I think just a housekeeping question. What was the NPI ASP so far in 4Q? LME prices have obviously dropped since September. So just wanted to get a sense of where we are. Justin Werner: Yes. So NPI pricing has held pretty consistently at around sort of $14,500 sort of $14,000 for the majority of this year. And so as I said, that's been positive, and we don't think there's going to be any significant movement there. In fact, I think what you may see is with a potential reduction of NPI, you could see a strengthening of the NPI price. Operator: Your next question is from the line of [ Vikash Agarwala ] from [ Primus Asset Management ]. Unknown Analyst: A couple of quick ones from my side. Firstly, on the -- just following on the pricing trend. Can I understand a little bit on the saprolite pricing trend as well? You reported realization of 3Q is still higher Q-on-Q and much higher than what you were doing in 2025? How should we think about the realizations in 4Q since we considering the nickel prices overall coming down from the highs in first half? How should we think about the realization in 4Q? Justin Werner: You're talking about how we should think about the nickel price in Q4? Christopher Shepherd: The saprolite price. Justin Werner: Saprolite? I think, look, saprolite with the strengthening of obviously, LMEs up 3% overnight. So as the -- look, if we see further increases in the LME nickel price given that the saprolite formula is linked to the LME price, then you would expect to see an increase in the saprolite price. Unknown Analyst: So then how should we think about the realizations in 2Q and 3Q when LME prices were going down? Justin Werner: The saprolite price, really why we've seen a big increase is there was a big disconnect between how the HBM for saprolite was previously calculated and what the actual market price was. There was about a $20 difference. The government then adjusted that formula to sort of bring the HBM price in line with the actual saprolite market price. So that's really why you've seen the big increase in saprolite margins and saprolite pricing. Unknown Analyst: Understand. That's helpful. And on the ENC payment, can I understand you mentioned that the working capital money will come back very soon. So hopefully, soon after the drawdown of the OCBC facility, I'm assuming? Christopher Shepherd: Vikash, I think we will wait. As I mentioned on one of the earlier questions, we're going to be working with Shanghai Decent over the course of the next month ahead of the TMI payment. And as part of that TMI payment, we'll be working on how much and when we can distribute the OCBC-led financing. I'm not going to try to predict that now when and how much we bring back. We're obviously in a very fluid market. We're in the middle of a drought, where money -- we'll leave it in there as long as we have to, to be honest. Unknown Analyst: I understand. But on a 100% basis, how should I think about the working capital requirement for ENC? Christopher Shepherd: We believe we've got -- we're fully -- with the loans that we've put in now, there's no additional working capital that will be required. If there is, we will be using the yesterday's facility, the OCBC facility for that in the first instance. But that -- yes, so we don't expect there to be any forward further requirements for injections from the shareholders. Unknown Analyst: Got it. Got it. Understand. And last question from my side is on the sulfur prices as well. You have mentioned that there was an impact from weak sulfur prices, but correct me if I'm wrong, the sulfur inventory was already good enough for the second half and the production cost probably would have -- could -- should have been lasting even beyond the 2026 year. But in case we kept independence of prices of $800-odd then where do we see the margins for it then? Justin Werner: Yes. I think -- I mean I think -- I mean we're not privy to the full information, but I do believe that this quarter at HNC is probably the first quarter where we're seeing sort of fully priced sulfur prices. And so as I said, at a $4,500 a tonne margin, still very strong. And pleasingly, sulfur has come off sort of $300 a tonne. That means a $3,000 a tonne reduction in cost. So sulfur at this point is not as critical as perhaps it was sort of 1, 2 months ago when we were up over $1,100 a tonne. And I mean what we're hearing from a lot of people is that there is -- there does appear to be quite a bit of movement through the Straits of Hormuz, and that's obviously being reflected in the pricing. Operator: [Operator Instructions] Your next question comes from the line of Love Sharma of Point72. Love Sharma: Sorry, I missed some part of the call. Just wanted to understand 1 thing. So you have these upcoming payments due one in November, and I think also in April. Any thoughts there? Are you planning to utilize the Tsingshan facility and then the cash flows later. And secondly, on the ENC project finance facility, what kind of cash release will you get, if any, at the corporate level? Christopher Shepherd: Okay. Thanks for the question, Love. As I mentioned earlier, the -- I previously guided the market guided investors that we did not believe we would have to draw down on the Tsingshan facility for the November payment. As part of that, we're expecting operating cash flows to very much fund that payment and given our existing cash as well. You can see the cash balance has come down through the quarter, very much working capital driven as I went through earlier through the presentation. There is -- depending on when we actually draw down or when we draw down distribute any funds from that OCBC facility up to shareholders will determine if and how much we draw down of the Tsingshan facility in November. Should we draw down on that Tsingshan facility in November? It is depending on, again, how cash flows are over the next 6 months. We -- that will determine how we address the Sampala payment in April, the $144 million payment. As I mentioned earlier, we very much -- we're prepared for that, and we've already had discussions with our local partner, which is the vendor. So our local partner at Hengjaya Mine is the vendor of Sampala. And we believe that should it be required, we will have the ability to push back that April payment. Does that answer your question, Love? Love Sharma: Sure. So basically, the $245 million would be fully available to you, is that right? So it pays off any kind of shareholder loans or sector you might have there. Is that right? Christopher Shepherd: The $245 million is fully available to distribute up to the shareholders depending on how the commissioning go or the -- when we ramp back up to nameplate, we will determine how much of that facility we actually distribute up to shareholders. That facility really has in this environment -- operating environment, given us a lot of breathing room to -- and we will, as I mentioned earlier, we will maximize the distributions from ENC up to the shareholders as soon -- as early as we can and as a large amount as we can. Love Sharma: And we should take it as a pro rata, right, based on your shareholding there? Christopher Shepherd: Yes. Correct. Operator: Your next question comes from the line of Xiang Gao of BofA. Xiang Gao: Just very small quick follow-up from my side. First is, what's the outstanding balance of working capital loans to ENC at this moment? And secondly, is that because you target through commissioning the CNE in mid-2027 and TMI in September '27, is this target still hold here? Christopher Shepherd: I missed the second part of the question, I'll come to that. On the working capital loans, across all shareholders north of $100 million at the moment. So we haven't disclosed the entire amount since we haven't got the approval of Tsingshan to do so as our operating partner, but it is north of $100 million. So there's a lot of working capital that we've injected into ENC, which obviously, as and when we can, we'll distribute back to shareholders. The second question you had -- sorry, we missed that. Could you repeat that, please? Xiang Gao: So previously, the CNE is targeted to commission in mid-2027 and TMI based on the slide, it's expected to reach nameplate in September 2027. So are these 2 projects still holding to the target? The commissioning and nameplate target? Justin Werner: Yes. Yes. It is processing very well. Xiang Gao: Okay. And lastly, what's the margin expectation on CNE and TMI? Will it be similar to HNC or more similar to ENC? Justin Werner: Look, we would expect the margin to be superior to HNC, given that we've already demonstrated that we can achieve lower operating costs at ENC. The biggest driver of margin will be what is the sulfur cost September of next year. And obviously, what is the nickel price and cobalt price. Operator: Your next question is from the line of Donavan Tan of BlackRock. Donavan Tan: I think I just want to check in on 1 thing given we kind of seen the headlines on the production cuts. I think 1 of them that were named was Tsingshan also regarding 50% on MHP and 23% on NPI. Could you just comment on that and whether that affects you? Justin Werner: Yes. So in the quarterly, you would have seen that in October, we've cut back NPI to 75% capacity. And we were at 50% capacity of ENC and ramping up very well. Given the shortage of water, we've moved back to about 33% capacity. But our intention will be is whilst we've cut back to 33% capacity on the MHP. We will look at potentially ramping up the nickel cathode plant to full capacity, which is about 40,000 tonnes of cathode per annum. Donavan Tan: Okay. So it's still full capacity for the MHP purchasing plants? Okay. Justin Werner: No. No. No. MHP. So ENC, we ramped it up to 50% in a number of weeks. Given the shortage of water, we had to reduce it back. So it's currently at around 33%. But the cathode refinery, we are looking to ramp that up to 100% capacity. Operator: Your next question is from the line of Bharat Shettigar of Standard Chartered Bank. Bharat Shettigar: A couple of things. Firstly, apart from the $100-odd million shareholder loan at ENC, is there any other debt at the Fajar entity or at the ENC OpCo? Christopher Shepherd: There's very shortly or very soon to be $245 million of additional debt at the ENC OpCo. So that's the amount that we announced yesterday. Other than that, there is no other debt. Bharat Shettigar: Okay. And just to be clear, once you are able to draw down the new $245 million loan, you just can immediately repay the shareholder loans, right? Christopher Shepherd: We can. Correct. That's correct. Bharat Shettigar: Right, right. And in terms of the dividend recap exercise, you mentioned earlier, it's primarily related to $100-odd million shareholder loan that will be repaid or some of the equity that you've infused in ENC will there be some kind of repayment of that as well? Christopher Shepherd: When I refer to the dividend recap, I'm effectively talking about the $245 million facility. So we've put that debt in there at the ENC project level in order to give it in the majority of it, well over 90% of it to shareholders as effectively. It's -- I shouldn't call it a dividend, it's a repayment of shareholder loans. Every -- the entire operation, the entire ENC project has been funded by equity as shareholder loans. So the money that we're putting by the OCBC-led syndicate will be distributed to shareholders via repayment of those shareholder loans. Operator: That concludes our Q&A session for today. I'll turn the call back over for closing remarks. Justin Werner: Look, thank you, everyone, again, for your attendance today. As I said, it's been a consistent 3 quarters for this year. And we have ENC first sales and ramp up still very much to look forward to. But the underlying RKEF and nickel mining businesses remain very strong. And look, once we get some rainfall, we've already seen some relief in sulfur prices. We're still very well positioned. And there's a lot of growth that we'll start to see coming through over the course of this quarter and then certainly moving into next year. So thank you again, everyone, for your time. Operator: This concludes today's conference call. Thank you all for joining us. You may now disconnect.