Shares in Nickel Industries (ASX: NIC) were up around 3% at the open after revealing that its earnings for the three months to 31 March would be significantly up on the previous quarter.
Despite unseasonably high rainfall and widespread flooding, quarterly earnings from operations are now expected to come in between US$85 million ($135 million) and US$90 million, representing a 20% uptick both year on year and quarter on quarter.
The miner’s Hengjaya Mine, in the east coast province of Central Sulawesi, Indonesia - in which it owns an 80% stake - delivered 2.6 million wet metric tonnes (wmt), compared to 1.2 million wmt in the March 2024 quarter.
Today’s result follows a major increase in rainfall this month compared to March 2024.
A total of 165 milimetres was recorded across two days (15 and 16 March) which resulted in the water levels from nearby rivers external to the IMIP exceeding their drainage capacity and overflowing into areas of the industrial park operations.
While heavy rainfall led to the closure of Oracle Nickel electric furnaces for three days, the furnaces have since been restarted with no significant damage.
Major shareholder exits
Today's share price jump provides welcome relief for shareholders who watched the miner shed $600 million last week. This was after a major shareholder, Harum Energy, sold half of its stock below the asking price.
As the biggest pure-play nickel producer listed on the ASX - with mining and low-cost downstream nickel processing assets in Indonesia - the stock is directly exposed to nuances impacting the country's mining sector.
The miner’s Indonesian operations are in partnership with Chinese billionaire Xiang Guangda, founder of Tsingshan Holdings.
Unsurprisingly, what also irked shareholders recently was the Indonesian government’s decision to contemplate raising royalties paid by mining companies to fund spending, to repair the country’s budget.
Given that nickel production in Indonesia is significantly cheaper than in Australia, any plans by the Indonesian government to raise royalties could materially impact the miner’s operations.
It’s understood that the proposed changes could see nickel royalties jump from 10% to as high as 19%, which could lead to an $8 million increase in royalties from the Tangaya mine for FY24.
Recent developments
Having established itself as a globally significant producer of nickel pig iron (NPI), Nickel Industries is now focusing on the electric vehicle (EV) battery supply chain.
The miner recently acquired a 10% interest in the Huayue Nickel Cobalt (HNC) HPAL project, adding mixed hydroxide precipitates (MHP) to its product portfolio.
The miner is also investing in Excelsior Nickel Cobalt (ENC), a next-generation HPAL project capable of producing MHP, nickel sulphate and nickel cathode.
The share price dropped 20% on 10 March to $.605 but has since bounced back to $0.64.
Nickel Industries has a market cap of $2.7 billion making it an ASX200 stock. The share price is down 18% over the past year and 22% year to date.
According to multiple indicators, the stock is in a long-term bearish trend.
Consensus is Moderate Buy.
This article does not constitute financial or product advice. You should consider independent advice before making financial decisions.