Asia Pacific Equity Research 07 November 2025 J P M O R G A N Nickel Dashboard Awaiting Indonesia's supply-side reforms LME nickel remained flat in October, averaging USD15,287/t (+0.01% m/m). At present, LME prices are trading closer to the crucial USD15k/t level, ~2.2% below the October peak of USD15,418/t, as persistent oversupply and uncertainty on future demand weighs on sentiment. Global visible inventory increased to ~279kmt (an addition of 27kmt q/q), with 20kmt flowing alone into LME warehouses in ...

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Nickel - **Key Trends**: Strong gains in nickel intermediary prices observed in September, with LME nickel averaging USD 15,310/ton (+1% month-over-month) supported by increased nickel sulfate prices and tighter MHP feedstock [1][3] Core Insights - **Nickel Prices**: Nickel sulfate prices rose approximately 5% due to tighter feedstock and increased demand for precursors, leading to a premium over LME prices of about 2%, the highest since October 2022 [1] - **Nickel Pig Iron (NPI)**: Average price for NPI was USD 11,940/ton, up 4% month-over-month, attributed to Indonesia's crackdown on illegal mining [1] - **Market Dynamics**: Anticipation of pre-buying by smelters ahead of the 2026 permit approval cycles and the Philippines' monsoon season could further influence prices [1] - **Ore Premiums**: High premiums for higher-grade saprolite nickel ore, with prices reaching USD 57-60/ton, compared to a 2Q average of USD 54/ton [1] Company-Specific Insights - **Preferred Picks**: ANTM is favored despite expected soft 3Q earnings due to gold supply issues, as its nickel business is expected to offset declines in gold performance [1] - **Neutral Ratings**: INCO and MDKA are rated Neutral; INCO's stock has outperformed the JCI by 14% in September, but future earnings growth is seen as overvalued [1][3] Supply and Demand Dynamics - **Supply Constraints**: Indonesia's government has suspended 190 mining permits and imposed stricter environmental standards, which may slow refined supply growth to 5.2% year-over-year in 2026 and 3.5% in 2027 [3] - **Global Oversupply**: The Global Commodities team projects nickel to remain in oversupply by 200-300kt over the next two years due to shifts in battery chemistry and a slowdown in stainless steel demand [3] Financial Metrics - **Company Valuations**: - ANTM: Market Cap USD 5.0 billion, P/E 10.1x for FY25E, EPS growth 155.5% [4] - INCO: Market Cap USD 2.8 billion, P/E 61.6x for FY25E, EPS growth -23.1% [4] - MDKA: Market Cap USD 3.5 billion, P/E NM for FY25E, EPS growth NM [4] Additional Considerations - **Investor Sentiment**: Feedback indicates skepticism regarding INCO's future earnings, suggesting that current stock prices may reflect overly optimistic projections [3] - **Long-term Outlook**: The nickel market is expected to face challenges from evolving battery technologies and fluctuating demand from the stainless steel sector, which could impact pricing and profitability [3] Conclusion - The nickel industry is experiencing price increases driven by supply constraints and demand dynamics, with specific companies like ANTM positioned favorably. However, broader market conditions suggest potential oversupply and challenges ahead, particularly for companies like INCO and MDKA.

Financial Data and Key Metrics Changes - Adjusted EBITDA for the first half of 2025 was $159.3 million, slightly above the $155.7 million recorded in 2024, with profit after tax increasing by 80% to $25.5 million from $14 million in 2024 [3][11][12] - Gross profit rose to $114.8 million, up 19%, and operating profit increased by 12% to $98.7 million [8] - Total liabilities decreased slightly due to amortizing debt, with a focus on refinancing to extend tenor and lower costs [10] Business Line Data and Key Metrics Changes - The Hangzhou mine produced over 11.5 million wet metric tons, with adjusted EBITDA of $70.3 million, a significant improvement from 2024 [4][16] - RKF operations saw lower EBITDA due to higher costs and ore shortages, despite an improving NPI price [9][12] - HPAL operations performed well, with production above 2024 levels and stable cash costs, resulting in EBITDA per ton margins around $5,900 [14][15] Market Data and Key Metrics Changes - NPI price increased from $11,290 to $11,350, while cash costs rose from $9,716 to $10,117 due to higher oil prices [12][13] - The company is experiencing a slight upward trend in nickel prices, which is expected to positively impact future margins [13] Company Strategy and Development Direction - The company is focused on responsible and sustainable mining, with initiatives like the Nickel Industries Foundation and a conservation area within the Hengjai mining concession [2][3] - Development of the Sampala project is progressing well, with expectations to host over 1 billion wet metric tons [6][19] - The company aims to double production at the Hengdai mine and is targeting commissioning of the cathode plant by late 2025 [17][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's performance despite challenges in nickel prices, highlighting strong growth in the mining sector [42] - The company anticipates further growth with the imminent release of an RKB that requires no CapEx for increased mine sales [42] Other Important Information - The company has deferred payments for E and C totaling $126.5 million to January and April, allowing for additional production and EBITDA [11] - The cathode plant is expected to be commissioned in October or November, with all key equipment fabricated and erected [17][35] Q&A Session Summary Question: Update on debt refinancing and balance sheet management - Management confirmed entering a commitment letter for a $100 million loan facility to support working capital and is evaluating alternative debt funding options [21][23] Question: Dividend withdrawal reasoning - Management stated the withdrawal is a prudent balance sheet management decision, prioritizing financial stability over dividend payouts [26] Question: Update on VAT refunds and timing - Management expects the $110 million VAT refunds within the next six to twelve months and is in dialogue with the Indonesian government [28][29] Question: Timing for environmental study approval and production targets - Management indicated that the RKB approval is expected by September, with Sampala targeting 6 million tonnes per annum by the end of the year [30] Question: Factors influencing commissioning of the cathode plant - Management explained the delay in commissioning is due to high working capital demands and the need to ensure a strong balance sheet [34][36]

Financial Performance - Sales revenue decreased by 2% from US$843.3 million in 1H 2024 to US$829.7 million in 1H 2025[10] - Gross profit increased by 19% from US$96.3 million in 1H 2024 to US$114.8 million in 1H 2025[10] - Operating profit increased by 12% from US$87.8 million in 1H 2024 to US$98.7 million in 1H 2025[10] - Profit after tax increased significantly by 81% from US$14.0 million in 1H 2024 to US$25.3 million in 1H 2025[10] - Adjusted EBITDA from RKEF decreased by 28% from US$109.0 million in 1H 2024 to US$78.3 million in 1H 2025[10] - Adjusted EBITDA from the mine increased substantially by 76% from US$39.9 million in 1H 2024 to US$70.3 million in 1H 2025[10] - Attributable EBITDA from HPAL increased by 20% from US$22.6 million in 1H 2024 to US$27.1 million in 1H 2025[10] Operational Highlights - RKEF operations saw a slight decrease of 2% in total nickel production, from 63,814 tonnes in 1H 2024 to 62,257 tonnes in 1H 2025[9, 14] - Hengjaya Mine production and sales increased by 90% and 81% respectively compared to the previous corresponding period (pcp)[10, 19] - Limonite mined increased by 121% from 4,177,937 wmt in 1H 2024 to 9,237,715 wmt in 1H 2025[19] - HPAL operations (HNC) nickel production in MHP increased by 2% from 41,172 tonnes in 1H 2024 to 41,934 tonnes in 1H 2025[9, 17] Balance Sheet and Dividends - The company declared a final dividend of A$0.015 per share for the full year 2024 financial result, a 40% decrease from A$0.025 in the previous period[10]