Nickel Industries Limited · ASX:NIC
Nickel Industries — Merger or Acquisition (January 2023)
59 slides from Nickel Industries's merger presentation, Jan 18, 2023
Slide 1: Electric Vehicle Supply Chain Agreement and Equity Raise Presentation
Electric Vehicle Supply Chain Agreement and Equity Raise Presentation January 2023 Delivering increased battery metals exposure and aligning our NPI interests 0
Slide 2: Important Notices and Disclaimer
Important Notices and Disclaimer This presentation is dated 18 January 2023 and has been prepared by, and is the sole res ponsibility of, N ickel I ndustries Limited ACN 127 510 589 (“N ic kel I ndustries” or “C ompany"). This presentation has been prepared in relation to the underw ritten ins titut
Slide 3: Important Notices and Disclaimer (cont'd)
Important Notices and Disclaimer (cont’d) U nderw riters disclaimers The Institutional Placement will be fully underwritten by the Joint Lead Managers ("U nderw riters”). The Underw riters , together with eac h of their res pec tive related bodies corporate, s hareholders or affiliates and eac h of
Slide 4: Important Notices and Disclaimer (cont'd)
Important Notices and Disclaimer (cont’d) Effec t of rounding A number of figures , amounts , percentages, es timates, calc ulations of value and frac tions in this pres entation are subject to the effect of rounding. Accordingly, the ac tual c alculation of these figures may differ from the figures
Slide 5: Introduction to Nickel Industries Limited
Introduction to Nickel Industries Limited Nickel Industries Limited (“NIC”) is a world class nickel processing business, currently producing some of the lowest capital intensive and most profitable nickel units in the global market in partnership with Tsingshan, the world’s largest stainless steel p
Slide 6: Nickel Industries – Transaction highlights
Nickel Industries – Transaction highlights 1 Establishes the strategic pillars to become a leading producer of battery grade Class 1 nickel into the EV market 2 Provides derisked exposure to next-generation, operational HPAL alongside industry leading operators Aligns our ONI(1) interest at 80%, on
Slide 7: Why invest in Indonesian nickel?
Why invest in Indonesian nickel? Indonesia is now the global epicentre of global nickel supply for the EV revolution Class 1 nickel demand from The rise of NPI Global nickel mine production 2021 (1) Total nickel demand by sector and scenario, 2020 – 2040(2) EVs and storage nickel Nickel metal (kt) f
Slide 8: Transaction overview
TI .4’ a | INDUSTRIES Transaction overview
Slide 9: Strategic Agreement
Transaction overview Delivering increased battery metals exposure and aligning our NPI interests ▪ Nickel Industries has executed an Electric Vehicle Battery Supply Chain Strategic Framework Agreement (“Str a tegic Agreement”) with Shanghai Decent, and has entered into binding agreements with Shangh
Slide 10: Sources and uses of funds
Sources and uses of funds Following completion of the Equity Raise, Nickel Industries will be fully funded for all acquisition payments ▪ The majority of the proceeds of the Equity Raise will be put towards acquiring S ources U S$ m A $ m (1) 10% interests in two producing nickel assets within the I
Slide 11: Pro-forma capitalisation
Pro-forma capitalisation Transaction structure retains optionality and funding flexibility for future acquisitions ▪ Strong balance sheet position maintained A c quisition P r o forma P r o forma capitalisation (1) U n its C u rrent P l acement – Net debt will be ~US$336m, down from p a yments a c q
Slide 12: Delivering battery metals exposure
Delivering battery metals exposure 11
Slide 13: Three strategic pillars for battery grade nickel
Three strategic pillars for battery grade nickel Establishing the strategic pillars to become a leading producer of battery grade Class 1 nickel into the electric vehicle market Acquiring next-generation, Option for future 1 Delivering nickel matte production 2 operational HPAL 3 DAWN HPAL+ Project
Slide 14: Delivering increased diversification and battery metals exposure
Delivering increased diversification and battery metals exposure 1 2 Acquiring next-generation, 3 Option for future DAWN HPAL+ Delivering nickel matte production operational HPAL Project growth Attributable NiEq production (nameplate capacity and outperformance) – by nickel product 50% Class 1 Nicke
Slide 15: Pillar 1: Delivering nickel matte production
Pillar 1: Delivering nickel matte production Successful delivery of nickel matte production at HNI with ability to roll-out at ONI via Acquired Option Successful conversion of HNI to nickel matte… Tsingshan and Shanghai Decent have successfully pioneered the production of nickel matte from laterit
Slide 16: Pillar 2: Acquiring next-generation, operational HPAL
Pillar 2: Acquiring next-generation, operational HPAL HNC is the first successfully operating HPAL project in the IMIP – industry leaders as partners Asset overview Asset • PT Huayue Nickel Cobalt Project (“HNC”), located in IMIP • Huayou Cobalt, 57% Current • China Molybdenum, 30% ownership • Tsing
Slide 17: Pillar 3: Option for future DAWN HPAL+ Project
Pillar 3: Option for future DAWN HPAL+ Project Strategic partnership utilising NIC’s resource base and Shanghai … and establish Nickel Industries as a battery nickel powerhouse Decent’s project development expertise to produce Class 1 nickel… 2021 Processed nickel production (kt)(1) 1 • NIC to lever
Slide 18: Continuing to diversify into Class 1 battery grade nickel
Continuing to diversify our existing business into Class 1 battery grade nickel Delivering continued growth, and increasing leverage to the LME price Attributable NiEq production (tpa) 7% 5 0% 5 3% 6 6% 200,000 Existing operations demonstrate consistent 9 3% 5 0% 4 7% 3 4% outperformance of 30%+ abo
Slide 19: Continued NPI growth
INDUSTRIES Continued NPI growth
Slide 20: ANI capacity overview
ANIcapacity New overviewramping up over the next 12 months Consistent track record of delivery from Tsingshan ensures little to no commissioning risk. Full capacity at all RKEF operations expected in 2023 First production ▪ All 4 RKEF lines within IWIP commissioned January – May 2022(1) ANI delivere
Slide 21: ONI progressing ahead of schedule and within budget
ONI progressing ahead of schedule and within budget ONI expected to follow similar ramp-up profile as ANI and complete commissioning in Q1 23(1) Key project milestones February 2022 October 2022 November / December 2022 2023+ ▪ Acquisition of initial 10% equity ▪ NIC’s ownership of ONI increased ▪ F
Slide 22: December quarter performance
December quarter performance 21
Slide 23: Dec'22 Quarter financial results
Dec’22 Quarter financial results Movement Presented on a 100% basis unless otherwise stated Units Dec’22 results (Dec’22 vs. Sep’22) Gross production Nickel metal tonnes 23,072 +13.8% (from 20,275 tonnes in Sept Qtr) NPI gross production Nickel metal tonnes 18,329 (9.6%) (from 20,275 tonnes in Sept
Slide 24: Ramping up production across our RKEF portfolio
Ramping up production across our RKEF portfolio Consistent, industrial style cost base with production set to materially increase over the next 12 months as ONI commissions Quarterly RKEF production performance (100% basis) HNI RNI ANI ONI Total 15,000 1 1 ,166 1 5 ,566 2 0 ,275 2 3 ,072 12,428 12,0
Slide 25: Record RKEF EBITDA achieved in Dec'22 quarter
Record RKEF EBITDA achieved in Dec’22 quarter Dec’22 quarter achieved record EBITDA driven by nickel matte production and commissioning of the ANI power plant EBITDA per tonne sold (US$/t) 120.0 $ 6 ,028/t $ 7 ,386/t $ 5 ,367/t $ 2 ,261/t $ 4 ,146/t 100.0 Dec’22 EBITDA up 99% since 90.0 84.9 Sep’22
Slide 26: Another quarter of record production at Hengjaya Mine
Another quarter of record production at Hengjaya Mine Production summary M ar’22 Jun’22 Sep’22 Dec’22 Y TD 2022 Saprolite mined wmt 810,324 792,630 599,790 687,831 2,890,575 Limonite mined wmt 263,201 520,862 1,098,186 2,020,027 3,902,276 Nickel ore mined wmt 1,073,525 1,313,492 1,697,976 2,707,858
Slide 27: Hengjaya Mine – a global top nickel resource
Hengjaya Mine – a global top 10 nickel resource Global contained nickel resources and grade 20.0 3.50% 18.5 3.18% 18.0 3.00% 16.0 2.60% 2.47% 13.9 2.39% Contained Ni Resources (Mt) 2.50% Ni Grade (%) 14.0 1.94% 1.99% 12.0 1.85% 1.81% 1.76% 2.00% 1.70% 1.70% 1.65% 10.0 9.5 1.53% 1.50% 1.36% 1.42% 1.2
Slide 28: Sustainability
tI. 4 | INDUSTRIES Sustainability
Slide 29: Nickel Industries sustainability strategy
Sustainability – Nickel Industries sustainability strategy Focused on three realms of influence ▪ Long term vision to grow the business in a way that provides optimum benefit to the lives of people in the community ▪ Continuously improve the Company’s performance to generate indirect economic impact
Slide 30: Sustainability – economic development
Sustainability – economic development Nickel Industries economic impact Nickel Industries has created a variety of programs that are connected and relevant to the needs of residents whilst avoiding reactive social investments Our operations prioritise hiring local workforces and suppliers, with 9% o
Slide 31: Sustainability – environmental stewardship
Sustainability – environmental stewardship Nickel Industries environmental performance Hengjaya Mine awarded a ‘Green PROPER’ rating in 2022 by the Indonesian Ministry of Energy and Natural Resources for full compliance with the mine’s operating license – one of two nickel companies in Indonesia awa
Slide 32: Sustainability – social responsibility
Sustainability – social responsibility Nickel Industries social performance Committed to a safe work environment which is reflected in our Occupational Healthy and Safety policies that are designed to protect our employees, contractors, suppliers and other workers To assess our commitment to OHS exe
Slide 33: Solar Power – progressing our Future Energy collaboration
Solar Power – progressing our “Future Energy” collaboration Commitment to a more sustainable future for Indonesian nickel ▪ Signed a binding term sheet for a battery solar project in August 2022 with PT Sumber Energi Surya Nusantara ('SESNA') to develop, install, operate and maintain a 200MWp + 20MW
Slide 34: Nickel Industries – Transaction highlights
Nickel Industries – Transaction highlights 1 Establishes the strategic pillars to become a leading producer of battery grade Class 1 nickel into the EV market 2 Provides derisked exposure to next-generation, operational HPAL alongside industry leading operators Aligns our ONI(1) interest at 80%, on
Slide 35: Equity raising details
aon Aire INDUSTRIES Equity raising details
Slide 36: Equity raising details
Equity raising details ▪ Nickel Industries is undertaking a US$471 million Equity Raise comprising: – a ~US$185m fully underwritten Institutional Placement, through the issuance of ~259.1m New Shares at A$1.02 per New Share (representing approximately ~9.5% of the total shares of the Company prior t
Slide 37: Timetable
Timetable Event Date Trading halt lodged and Equity Raise announced Wednesday, 18 January 2023 Completion of Institutional Placement and shares resume trading Thursday, 19 January 2023 Settlement of Institutional Placement Monday, 23 January 2023 Allotment of new securities under the Institutional P
Slide 38: Appendix: Supporting materials
Appendix: Supporting materials 37
Slide 39: Indonesia – the epicentre of global nickel supply
Indonesia – the epicentre of global nickel supply Nickel Industries has established operating footprints in what are now two of the world’s largest nickel production centres HALMAHERA IWIP IMIP Hengjaya Mine MOROWALI 38
Slide 40: Indonesia Morowali and Weda Bay Industrial Parks
Indonesia Morowali Industrial Park Indonesia Weda Bay Industrial Park Steel production capacity 3Mt stainless steel per annum Steel production capacity Currently no stainless steel capacity RKEF lines Over 50 lines planned R KEF lines Over 50 lines planned Employees ~60,000 locals Employees ~40,000
Slide 41: RKEF operations
RKEF operations IMIP IMIP IWIP IMIP HNI RNI ANI ONI 80% 80% 80% 70% OPERATING OPERATING OPERATING COMMISSIONING Hengjaya Nickel Project Ranger Nickel Project Angel Nickel Project Oracle Nickel Project 2 RKEF lines: 2 RKEF lines: 4 RKEF lines: 4 RKEF lines - nameplate capacity - 15ktpa - nameplate ca
Slide 42: ANI overview
ANI overview Material tax concessions – by Decree of the Indonesian Government Existing production Future Production HNI RNI ANI ONI HNC 100% corporate income tax reduction (from the year of 7 years 7 years 10 years 10 years 15 years commercial production) (3 years remaining) (3 years remaining) (9
Slide 43: High cash conversion supporting sustainable, robust profitability
High cash conversion supporting sustainable, robust profitability Underpinned by cost profile, material tax concessions and minimal levels of sustaining capex US$m (100% basis) 140.0 High cash flow conversion throughout 2022 120.0% 120.0 99.5% 99.4% 98.9% 95.2% 100.0% 106.1 103.2 102.6 101.1 100.0 8
Slide 44: Appendix: Legal risks and disclosures
Appendix: Legal risks and disclosures 43
Slide 45: Legal risks and disclosures
Legal risks and disclosures Risk Description Operational risks As a producer of NPI and nickel matte, the earnings of Nickel Industries are correlated to the price of NPI and nickel matte, and Nickel Industries’ cash costs are correlated to the price of other commodities including coal and nickel or
Slide 46: Legal risks and disclosures (cont'd)
Legal risks and disclosures (cont’d) Risk Description Operational risks De velopment of ONI The Company is reliant on Shanghai Decent to commission two Oracle RKEF lines and the associated power station in accordance with the specifications and terms agreed in the CA for ONI. If there is any omissio
Slide 47: Legal risks and disclosures (cont'd)
Legal risks and disclosures (cont’d) Risk Description Operational risks There continues to be considerable uncertainty as to the duration and further impact of COVID-19, including (but not limited to) impact on global supply chains, government, regulatory or health authority actions, work stoppages
Slide 48: Legal risks and disclosures (cont'd)
Legal risks and disclosures Risk Description Operational risks Exploration, development and production at the Hengjaya Mine, the RKEF and power plant operations at HNI, RNI, ANI and ONI and the operations of HNC require various licences and permits from the government (whether at the central governm
Slide 49: Legal risks and disclosures (cont'd)
Legal risks and disclosures (cont’d) Risk Description Operational risks The Company undertook a due diligence process in respect of the acquisition of an indirect 10% interest in HNC (“HNC Acquisit ion”), which relied in part on a review of financial, legal and other information provided in respect
Slide 50: Legal risks and disclosures (cont'd)
Legal risks and disclosures (cont’d) Risk Description Operational risks There can be no assurance that the Company and the Group Entities will achieve their respective production and cost estimates . The failure to achieve these production and cost estimates could have a material adverse effect on i
Slide 51: Legal risks and disclosures (cont'd)
Legal risks and disclosures (cont’d) Risk Description Operational risks The future capital requirements of the Company will depend on many factors. The Directors believe that following completion o f the Institutional Placement and the Conditional Placement (as outlined on slide 8), the Company shou
Slide 52: Legal risks and disclosures (cont'd)
Legal risks and disclosures (cont’d) Risk Description Operational risks Changes in Changes to tax laws may affect the Company and its shareholders, and the Group Entities. taxation laws and There may be tax implications arising from ownership of the Company’s shares, the receipt of dividends (if any
Slide 53: Legal risks and disclosures (cont'd)
Legal risks and disclosures (cont’d) Risk Description Operational risks • (l i sting) ASX announces that Nickel Industries will be removed from the official list or that any Nickel Industries shares will be delisted or suspended from quotation by ASX for any reason (for the avoidance of doubt, exclu
Slide 54: Legal risks and disclosures (cont'd)
Legal risks and disclosures (cont’d) Risk Description Operational risks • (i nvestment and subscription a greements) obligations of relevant parties under the agreements between: o Nickel Industries and Newstride Development Limited, Tsing Creation International Holding Limited, and Shanghai Decent
Slide 55: Legal risks and disclosures (cont'd)
Legal risks and disclosures (cont’d) Risk Description Operational Risks Underwriting risk Each Joint Lead Manager will, in their respective proportions, receive a management and selling fee of 0.4% and an underwriting fee of 1.6% of the Institutional Placement proceeds. Nickel Industries, in its sol
Slide 56: Appendix: Offer restrictions
Appendix: Offer restrictions 55
Slide 57: Offer restrictions
Offer restrictions Int ernational Offer Restrictions This document does not constitute an offer of Ne w Shares of the Co mpany in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares may not be offered or sold, in any c
Slide 58: Offer restrictions (cont'd)
Offer restrictions (cont’d) Chi na This document has not been approved by, nor registered with, any competent regulatory authority of the People's Republic of China (“P RC”, excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region and Ta
Slide 59: Offer restrictions (cont'd)
Offer restrictions (cont’d) No r way This document has not been approved by, or registered with, any Norwegian securities regulator under the Norwegian Securities Trading Act of 29 June 2007 no. 75. Accordingly, this document shall not be deemed to constitute an offer to the public in Norway within
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