Thank you for standing by, and welcome to the Nickel Industries Limited September quarter results webcast. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Justin Werner, Managing Director. Please go ahead.
Thank you and welcome everyone to the Nickel Industries September quarterly results call. If I could just ask the moderator to move the presentation to slide three, and we'll start there. Another strong quarter for Nickel Industries, with a number of records again achieved and a number of significant milestones, including the recognition of Hengjaya Mine's environmental performance, which I'll touch on a little bit later on. In terms of the numbers, record nickel metal production of over 20,000 tons. That's 30% higher than the September quarter, which was about 15,567 tons. A lot of that was driven through ANI, which continues to ramp up very strongly. Contribution from ANI was almost 10,000 tons, up 56% from the June quarter.
We expect further production increases from ANI, and pleasingly now with the power commission, we're starting to see costs come down significantly, and we expect that to continue. We also, during the quarter, commenced production from HNI to produce nickel matte, and that's part of our strategy of diversification into the Class 1 market, and I'll talk about that a little bit later on as well. There was record RKEF revenue, which was driven by the record production. There was weaker NPI pricing during the quarter. The average received was about $15,950.
However, happy to say that we're now seeing certainly this month a strong uptick in NPI pricing, and so we believe we may have seen the bottom, not just for NPI pricing but also for costs, which I'll talk about. RKEF EBITDA of $45 million. Record Hengjaya Mine production and the mine continues to set records quarter-on-quarter. Total production of almost 1.7 million tons of ore, which was comprised of saprolite and limonite. We achieved a significant milestone at the Hengjaya Mine during the quarter with a JORC resource upgrade to 300 million dry metric tons at 1.22% nickel. That's 3.7 million tons of contained nickel metal and places us firmly among the top 10 known global nickel resources.
It just highlights the size and scale and quality of the Hengjaya Mine, and once again, it's important strategic significance to the operations within the Indonesian Morowali Industrial Park. Mine EBITDA for the quarter was $10.2 million. That was down and that was predominantly driven by lower saprolite ore costs, or prices which declined from about $52 in the June quarter to around $43 in the September quarter. Look that while we saw lower prices at the mine that's also resulted in lower costs at our RKEF operations, and you know as we state the mine does provide a hedge on our ore costs. Underlying cash generation from operations of almost $55 million.
On the corporate front, we completed a further 40% interest in the Oracle Nickel project. We've now moved to 70%, and commissioning has commenced, as of 28th of October with the warming of the first kiln and we expect first NPI to flow within about the next two weeks. Again, Oracle Nickel has come on well ahead of schedule we have the CapEx guarantee in place. As I said, we're now fully funded and we have our 70% interest. Finally, we signed during the quarter a strategic cooperation agreement with QMB New Energy Materials who's in the process of commissioning a 73,000 ton per annum HPAL project.
That's a 20-year strategic supply agreement and the value of that in terms of revenue for the Hengjaya Mine is in excess of $1.5 billion. I think more importantly, it also paves the way for Nickel Industries to take an equity participation within that high-pressure acid leach plant, and we're starting to see more of these plants commissioned and being constructed within Indonesia following on from, you know, the initial HPAL plant, which has proven itself to be operating, you know, amongst the world's best HPAL projects.
Finally, we also received during the quarter our environmental approval for the completion of the haul road between the Hengjaya Mine and the IMIP, and that paves the way for significant ore movements in the future and that will obviously flow through into significant revenue contribution from the Hengjaya Mine. If we could just move to the next slide four, please. Just by the numbers, as I said, record production, 20,000 or in excess of 20,000 tons of nickel, of which Nickel's attributable production is over 16,000 tons, record sales revenue.
The other number I'll touch on there is obviously the Hengjaya Mine, close to 1.7 million tons of ore produced for the quarter. If we could just move to slide five, please. You can see the quarterly production numbers there. You can start to see the significant contribution from Angel Nickel. Pleasingly, we're also seeing very strong production from both HNI and RNI, which return to historical levels of in excess of 10,000 tons combined for the quarter. As I said, ONI is commissioned, and ANI is commissioned. ONI is now commissioning, and we expect a rapid ramp-up, as we've seen with all of our lines, historically.
If we could just move to slide six, please. We obviously saw some margin compression this quarter, predominantly driven by a decrease in NPI contract pricing. Costs also decreased and, you know, we saw September costs decrease from $14,509- $13,597 for this quarter. Almost a 1,000-ton decrease in our costs and that's partly through to the benefit of the ANI power coming through. Just to give you some idea of the significant cost savings and benefits that we're getting from ANI. ANI September average quarter costs were $13,167. ANI's cost in September was slightly less than $12,000 a ton.
You can really see that, you know, as ANI continues to ramp up, we expect to see continued cost improvement from ANI. If you compare that cost of $12,000 a ton or less to our September average contract pricing of $15,950, you know, that's close to the sort of $3,000-$4,000 a ton margin that we're used to experiencing. Just again puts ANI right at the very bottom quartile of NPI producers. As I stated, we're also pleasingly seeing an improvement in NPI pricing more recently. If we could just move to slide seven, please. The Hengjaya Mine, again, another record quarter, 1.7 million tons.
That was despite higher rainfall for the period. We received 1,359 mm versus the historical average of 849 mm. Pleasingly; we were still able to deliver a record result. I mentioned our approval for the haul road. We have about 6.6 km remaining of that haul road to be built. Contractors are currently working on it now and mobilizing. That will allow us to achieve our goal, you know, of 10 million tons of ore movement between the Hengjaya Mine and the IMIP. That's more than a threefold increase, you know, in the numbers and revenue coming out of the Hengjaya Mine and, you know, pleasingly quarter-on-quarter, we're seeing very strong EBITDA numbers.
Finally, we received a number of accolades at Indonesia's 2022 Environmental and Social Innovation Awards. We actually received seven awards in total for various initiatives and recognition, water reduction, domestic waste management, biodiversity protection, just to name a couple of those. We're really focused on the Hengjaya Mine becoming a showpiece for laterite mining within Indonesia. If we could just move to slide eight, please. I mentioned the Hengjaya resource upgrade that occurred during the quarter, and you can see where we sit among known global nickel resources, you know, in the top 10, 3.7 million tons. That resource covers an area of 1,789 hectares. Pleasingly, there's an additional 525 hectares of highly prospective laterite, which is yet to be drilled.
Our focus is to permit that up. We believe that there's still additional upside within that Hengjaya resource. Not only that, we continue to work on additional resource acquisition. The Sidoasih project drilling is going very, very well, completed sort of over 15,000 meters of drilling. We're seeing some very good results there. As I said, we're looking to work on other nickel projects with a view that becoming on a sort of combined basis, taking Nickel Industries to, you know, holding, you know, second, third, potentially the largest known nickel resources globally. They're certainly very much a focus for us moving forward. If we could just move to slide nine please. Again, continued excellent EBITDA to cash flow conversion, 99%.
Just to remind people, we have a significant tax holiday, and we have very little sustaining CapEx. If we could just move to slide 10, please. On the corporate side, we signed a binding term sheet for 200 MW peak plus 20 MW battery solar project, follows on from the MOU that was signed. That project is progressing very well. Pleasingly, it doesn't require any capital contribution from Nic. The electricity tariff is fixed, will remain constant for the next 15 years with no inflation escalation, which we find obviously very attractive. We also have out there another 220 MW peak project, which is also progressing very well.
That brings us to 400 MW+, with, you know, a stated intention of hopefully being able to take that up to somewhere in the range of about 1 GW. Good progress continues to be made. During the quarter, we increased our interest in the Oracle Nickel project from 30%- 70% through the early payment of $212 million. There is a balance of payments of $72 million with only $11.2 million due by the end of this year, and then a further $61 million by the end of March of next year. As I mentioned, pleasingly, 28th of October, the electrification ignition of the first RKEF lines commenced.
While the furnaces are being warmed up, and we expect our first NPI to flow by mid-November. Again, just reminding people that, you know, what we've seen with Angel Nickel in terms of the production capacity, but not only that, more importantly, but the significant cost advantage of that of having the associated power. The fact that, you know, this will now take our nickel metal production on a 100% basis to in excess of, you know 130,000 tons on an annualized basis. We also completed the conversion of our HNI line to the production of nickel matte.
Pleasingly, we have contracts in place through to the end of March 2023, which attract very good payabilities, and those payabilities actually increase as the nickel price increases. The pricing is linked to the Shanghai Futures Exchange, SHFE, but that tracks very closely to LME. Basically, you know, this diversifies us and makes us one of only you know, one of the only global listed nickel producers that has exposure and diversification across Class I and Class II nickel complexes. Finally, we signed a strategic cooperation agreement with PT QMB New Energy Materials, which involves a slurry pipeline being commissioned or being constructed within our Hengjaya Mine area, with the aim to supply around 5-7 million tons of limonite ore per annum to their newly commissioned HPAL plant.
As I mentioned earlier, the revenue value of that is potentially in excess of $1.5 billion over the 20-year period. Also, there is the key part of that agreement was Nickel Industries opportunity to take a potential equity participation within that HPAL plant. You know, this now makes the Hengjaya Mine a material supplier to the two HPAL plants that are currently operating within IMIP. You know, once again underscores the strategic importance of the Hengjaya Mine to IMIP and its operating partners. In summary, another very strong quarter. A number of records a number of very strong milestones achieved, including the JORC resource upgrade. You know, again in amongst top 10 global nickel resources with further upside.
Environmental approval for a haul road which will directly link us into the IMIP and will increase our mine production by, you know, threefold, once that road's complete. Strategic agreement with QMB, whose largest shareholder, GEM, is one of the largest Chinese recyclers, a producer of PCAM. As I mentioned you know, the potential revenue that will flow from the sale of that limonite ore, but also the potential equity participation within an operating and proven HPAL plant. The production of nickel matte, which will diversify us into the Class 1 EV battery space. We look forward to providing updates in the next quarter on the performance of that nickel matte.
As I said again, makes us the only diversified global listed nickel producer with exposure to the two Class 1 and Class 2 pricing complexes. Completed the move at Oracle from 30%-70%, and obviously pleased to announce commissioning has commenced, and we look forward to updating the market when first NPI is tapped. Just touching on the market quickly.
Ladies and gentlemen, this is the conference operator. We have temporarily lost connection with the speaker line. Please continue to hold and the conference will resume shortly.
Is Alan back in?
Ladies and gentlemen, this is the operator. Justin, you have been reconnected. Please go ahead.
Thank you. Look, apologies everyone. I'm actually in Australia, so I'm gonna have to blame Telstra for this one, not the Indonesian phone system. I'm not sure where we got to, but as I said, in summary, you know, another strong quarter, number of milestones, record production, and then just closing out with costs and market. You know, pleasingly costs are decreasing at ANI, and we're really seeing the benefit of the integrated power, particularly, you know, September costs below $12,000 a ton. If you compare that to the average price received for the September quarter of $15,950, you can see, you know, very strong margins.
We are seeing a significant improvement in NPI pricing from, you know, sort of a low of $ 1,250 earlier in the quarter to close to $ 1,400 renminbi today. We've also our contracts have now moving forward with a significantly reduced penalties by, you know, in order of several hundred dollars for the production of grades in excess of 12%. I think if you look at the NPI market and certainly within China, you know, we've had GDP growth in China this quarter of 3.9% versus, you know, 0.4% for the previous quarter. Obviously, you know, we had Communist Party re-elections which went smoothly, and so there's no significant changes there.
With you know, ONI now commissioning, and our production set to significantly increase past, you know, 130,000 tons per annum. You know, margins are temporary, production is permanent, and so we're extremely well-placed, you know, to take advantage of what hopefully we see is improving margins. We think we've come through the worst of it and look really unscathed, you know. We're still able to produce a very strong EBITDA for the quarter, achieve a number of milestones and, you know, we look forward to moving forward and continuing to grow our production base. With that, I'll hand over to questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Adam Baker with Macquarie. Please go ahead.
Yeah. Good day, guys. Just wondering with Angel pretty you know quick ramp up there. Just wondering, you know, how that's looking in the fourth quarter. Do you think you'll be at that 130% capacity level by this quarter? Or do you think there'll be another kind of quarter to go before we get to that 130% of nameplate capacity level?
Yeah. We achieved that towards the end of this quarter. Yeah, I think it's fair to expect that for the fourth quarter, you should see Angel at 100%. Also I think, you know, costs are stabilized and we'll also see, you know, the benefit in terms of much lower costs than what the Angel costs were at the beginning of the quarter.
Yeah, sure. Great. The ramp-up of ONI, you know, are we expecting to see quite a similar trajectory to the ramp-up of ANI there? You know, kind of a six to nine, 12 months ramp-up process.
Yeah, correct. How it will look is, it will operate at around 60% of capacity until the commissioning of the power, which we expect around March. Once that power is commissioned, it's actually quite a fast ramp-up in terms of to 130%. You know, post sort of one to two months post-March, we would expect Oracle to be at sort of that a 130% capacity as well.
Yeah, great. Just in your quarterly just interested around your comment around saying that there was a change in composition of the met coal injected into the rotary kilns. Just wondering if there's any cost savings that have been achieved there and maybe if you could just walk us through what you know, what you've actually done there.
Yeah. Look, there is a cost saving that's been realized through that change in composition. Look, that's you know one of the reasons we're delighted to have Tsingshan as our partner and major shareholder. They're constantly innovating. They're constantly looking for ways to reduce costs. You know, they've used innovative things like you know substituting nut coke in, for example. Look on a technical level, I can't tell you what the benefit is other than you know it has delivered a cost saving. Again , just another example of, you know, the sort of innovation and the way that these guys are constantly looking to, you know, maintain their position at the very bottom end of cost curve and, you know, improve the profitability of their operations.
Yeah, sure. Maybe lastly, just on the improvement in NPI pricing that you're just seeing in the, you know, the recent month or so, is that on the back of you know improving stainless steel demand out of China or you know, what's kind of driving that at the moment?
Yeah, we are seeing improving stainless steel demand. We've also seen a switch of about 20 RKEF lines that were producing nickel pig iron now producing nickel matte. You know, some of that NPI that was in the market is no longer going to be in the market. We've seen an improvement in the NPI price off the back of that as well. Yeah, look, it's really sort of twofold. It's improving stainless steel market and also, you know, a reduction in the NPI units that are coming out of Indonesia as some of these RKEF capacity is switched to produce nickel matte.
Yeah, great t hanks. Thanks, guys. I'll pass it on.
Thanks, Adam.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We'll now pause a moment to allow for any final questioners to register. Thank you. Your next question comes from David Coates with Bell Potter Securities. Please go ahead.
Good morning, Justin. Thanks for the call and nice work on the production costs this quarter. Just on a slightly separate thing, you just touched on it there towards the end of your presentation, the opportunities the potential opportunities with HPAL plants. Can you just give us a bit of a rundown on how, you know, the Hengjaya Mine is kind of helping you perhaps with that and what opportunities might be presented in terms of, you know, picking up that equity ownership and how those deals, you know, might be structured, you know, as a sort of on some ore feed or I'm not sure, but just maybe give us a bit of color on that.
Yeah. No, look, thanks Coates. The Hengjaya mine is a supplier to both of the operating HPALs within IMIP, which is HNC and QMB. Obviously with QMB, with the strategic ore supply agreement, you know, we'll be supplying sort of 50%-60% of their requirements moving forward. They're obviously a key part of their business. Hence, you know, that clause around the opportunity to take, you know, future potential equity stakes in that operating HPAL. You know, we're now sort of moving towards. There's a lot of work to be done to look at the construction of the plant within the Hengjaya Mine and permitting and licensing and those types of things.
Obviously the commercial discussion around pricing of our limonite and obviously pricing of equity participation in the QMB plant. That's a very real opportunity and, you know, it's something that both parties are looking to enter into, because we believe it makes a lot of sense. I guess what's attractive for us is that obviously it would be an equity interest in an operating plant. You know, it's significantly de-risked. All of those discussions around, you know, can a portion of the ore body be valued as part of consideration are sort of ongoing at the moment. You know, that's something that we'll continue to work on. That's for the QMB plant.
We also supply ore to the HNC plant, which has the world record for the fastest build, fastest ramp up. We've seen its operating performance and, you know, we've been privy to its costs and its margins and it's you know, it's operating extremely well. You know, we also continue to talk with Huayou as you know, we're a key supplier to their operations as well. Then finally if you recall we have the new energy and collaboration agreement that was signed with Tsingshan about a year ago, which also contemplated Nickel Industries taking, you know, or being involved in a new HPAL build. Those discussions are ongoing as well.
You know, as we look to diversify the business, we're looking to do it on a number of fronts. I think those will be, you know, small interest in operating plants which I think you know, will give people comfort in terms of these plants that they work, and their financials. Then a longer-term strategy of, you know, our own standalone HPAL plant of, you know, could be anywhere from 60-120,000 ton capacity, depending on the size and where we build it.
That's tantalizing for the future. And just again, just on the diversification theme, the nickel matte that you guys are producing, if I understood it correctly, is basically going or being sold to sort of existing counterparties with Tsingshan or SDI. Are there opportunities for you guys to diversify that customer base, sort of, I guess sort of to your own kind of direct downstream customers? Is that an important objective or not really?
No, absolutely. You know, I mean we had the option from day one to sell it to third parties if we thought that was appropriate. Look, you know, it made more sense to sell into existing contracts, and just to allow, you know, sort of potential customers to see grade specifications delivery all of those types of things. We have had a number of inbound inquiries from you know global third parties.
You know, we'll continue to have those discussions over the coming months, with a view to potentially, you know perhaps a standalone contract with a third party perhaps even a Western party that could be concluded you know, when that contract or when our contracted volumes at the end of March come up for renewal. Yeah, it's a discussion we're currently having and you know, we look forward to continuing to seek potential markets for that nickel matte potential buyers sort of outside of the current buyers that the Tsingshan currently has.
Excellent. No, that's all from me. Thanks very much, Justin. Cheers.
Thanks, David Coates.
Thank you. We're showing no further questions at this time. I'll now hand back to Mr. Werner for closing remarks.
Okay. Look, thanks again everyone for joining. You know, just to reiterate another strong quarter, number of records, number of significant milestones. As I said, pleasingly, NPI pricing has ticked up. Costs are trending down. Look, even in a very difficult environment, I think we've just demonstrated to everyone the robustness of our business. It still, you know, generates very strong margins and, you know, we're extremely well-placed with production continuing to grow. You know, when we see mean reversion back to sort of historical margins, y ou know, Nickel Industries is extremely well-placed to continue to make a lot of money. Not only that we you know, continue to work on our diversification into the Class 1 battery space.
It's kicked it off in earnest with nickel matte. We're now looking at HPAL opportunities and supply of our ore into those HPAL opportunities and building potential partners and relationships with existing HPAL producers that we can further leverage in the future. Look thanks again, everyone, and appreciate you attending the call.
That does conclude our conference for today. Thank you for participating. You may now disconnect.