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. 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. The Hengjaya Mine won gold at the IntechSEA in 2026 for waste and coastal conservation education. Finally, we continue to expand our scholarships with over 30 students in various disciplines across two 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. $125.9 million adjusted EBITDA with record ore sales and EBITDA at the Hengjaya Mine. The $125.9 million of adjusted EBITDA is up on the June quarter.
Record ore sales of 4.5 million tons, and as I'd 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, $76.9 million, up 68% on the June quarter. That's reflective of the Indonesian government's revised HPM pricing. 4.5 million tons of ore sales. That's also a new record, up 56% on the June quarter. Our EBITDA per wet metric ton margin was also up 8% to a little over $17 a wet metric ton. At our RKEF operations, EBITDA was down 30% to $40.7 million. Really the key driver there is the increase in ore costs. So we've sort of seen margin moving from the RKEFs into the mining business. Sales were pretty stable, 26,800 tons, down slightly.
Pleasingly, the NPI price is holding. So we averaged $14,408 a ton 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 ton last year, and it's now held consistently for the majority of this year at around that $14,000 a ton mark. On the HPAL side of the business, $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 $13 million distributed during the quarter, which is up sort of 271% on the distributions that were made in June. At ENC, as I said, a couple of tremendous milestones. First MHP and first nickel and cobalt cathode productions.
If we could just go to the next slide, please. Mining operations, I mentioned a record 4.5 million tons 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 ton up almost 10%, $17. What we are starting to see there is given that we are now hauling limonite only a couple of kilometers to the slurry plant to feed ENC rather than 20 km to third-party HPALs. We are starting to see that in a reduction in operating costs and an improvement in our EBITDA per wet metric ton. All in all, great result from the mine. It is still up 68% on the previous quarter and $76.9 million.
Moving forward, you can see that the Hengjaya Mine itself is going to be a significant EBITDA contributor to Nickel Industries moving forward. Obviously, these sort of numbers augur very well for the development of the Sampala Project. We continue to work through our RKAB increase. We have been through several revisions. We are hopeful of receiving some sort of outcome relatively soon, and we will 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 km of haul road. You can see the photo on the top right there. That is part of the first 8 km that is already been built.
We are preparing to add another 2.2-km section, and then the remaining section, which is about another 14 km, we are just pending a forestry approval from the government, and then we will be able to start work on that section of the road. Both ANN and ETL are well advanced in having their feasibility study approved. Once that is approved, we will then look to get the environmental studies approved, and they are also well advanced, and then we can make an RKAB application for both of those IUPs. At the 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 have received only 7 millimeters of rainfall, when typically over those two months, you would see around close to half a meter. That has meant that we have had to reduce back the production coming out of ENC. So far for the quarter, we produced 4,840 tons of nickel and 494 tons of cobalt in MHP. 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 ton. That is actually lower than HNC, and we are not fully ramped, so that is very encouraging. Our cathode conversion cost, currently around $3,888 a ton.
We are looking to bring that down as we get that up to full capacity to somewhere in the range of about $2,500 a ton. The cathode quality is also excellent. We have commenced the LME registration process, and so far it is progressing very well given the very high quality of the cathode that is being produced. We also announced subsequent to the quarter a $ 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 is a number of other HPAL producers that actually do not have that exemption as yet. I think it places us very well. The IUI for full sales is progressing very well.
We are expecting to receive that this quarter, and then we will be able to realize first sales from ENC of the products that we have already produced. At HNC, I mentioned EBITDA $8.4 million, down 42%. 1,900 tons of nickel sales, HNC attributable, and EBITDA per ton is down from about $8,000 last quarter to $4,400. Still holding a strong margin despite the significant pressure from sulfur. Pleasingly, sulfur prices have come off the highs of $1,100-$1,200 and currently at the moment they are sitting around $800. HNC is still delivering $4,500 a ton margin, is still a very good margin. 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.
The top left photo one is the slurry plant, which is located within the Hengjaya mining concession, and limonite is delivered there and then sent via a slurry pipeline down to the ENC HPAL plant. That is photo two there on the left. Actually within that photo there is also CNE and TMI. That photo, that whole complex is actually ENC, CNE and TMI. Unfortunately, it does not really give you a feel for the scale. There is a video there that you can watch. There is a link up there in the top right-hand side. The bottom left photo number three is the sulfate and cathode refinery. The final photo number four, you can see there some of the final products. We have got the MHP, which looks like the green wasabi there.
Then we have got some of the nickel cathode there, and you can see it branded PT Fajar. If we could just move to the next slide, please. RKEF operations, 27,822 tons for the quarter. Staying pretty consistent. We are expecting to complete the rebuild of one of the HNI lines in the middle of November. Once that is completed, we expect it to go back to about 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 four lines at HNI and RNI over the coming months. Cash costs of $13,054, and that really, as I mentioned, is just the increase in the nickel price, and a sale price of $14,408. As I said earlier, pleasingly, the NPI price is remaining quite robust.
We have seen a reduction in EBITDA per ton, and that has really been driven by increase in ore pricing, and obviously, that is coming through in our mining numbers. It is really just a transfer of margin from the RKEFs back to the mining business. If we could just go to the next slide and the cash flow overview. I will hand over Chris to talk through this slide.
Thanks, Justin. Good morning, everybody. As Justin mentioned, we had another exceptional quarter with our EBITDA of $126 million. However, this obviously has not 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. This was somewhat offset by the repayment by Tsingshan of the $15 million nickel matte converter option that we received through the quarter. Another $43 million was spent in debt servicing costs, which is obviously on our bonds and our bank loans. Then we come to the cash flow, before growth and debt of - $12 million.
That was predominantly driven by working capital, as the slide says. We have set this out in this quarter, and we intended 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 is not 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 an HNC product prepayment. So purchasing up our share of the products out of HNC in July and August. However, with MHP payabilities falling throughout the quarter, we did elect not 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, let us call it paid down from the prior quarter, predominantly at HNI and ANI RKEF projects.
All in all, it has 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 $245 million asset level debt at ENC on extremely attractive terms. So it is non-recourse, seven-year debt at SOFR + 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. As operations hit nameplate in coming months, or as we expect to hit in coming months and the market stabilizes, we will then look to dividend this up to the shareholders. So Nickel Industries would receive its 46% share of any distributions to shareholders. OCBC led the transaction, and I would 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 are 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 a higher margin.
As we feel we have sufficient liquidity at the moment, we elected for the $245 million now. Thanks, Justin. Back to you.
Yeah. Thanks, Chris. If we could just move to the next slide, please. Progress against FY 2026 guidance. So in terms of the mine, we are at 10.4 million sales the end of September.
Of our 14.3 million RKAB. So we are on track to meet that for the year. 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, we are 85,000 tonnes for the year of roughly target of about 100,000- 110,000. That has 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 is really just due to the shortage of water.
Ladies and gentlemen, we will just go on to a brief music hold. Thank you for standing by, and we will now resume.
Yeah, thank you, everybody. Justin is having problems getting back into the line, so I will continue on this guidance slide. Obviously, as everyone is aware, we have not provided guidance in the past, but we have been getting a lot of questions and a lot of requests for it from both the research community and also the investor community. As you can see on the slide, we have set out our 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 to reach $66 million-$73 million by the end of the year. FY 2027 numbers will be provided early next year once we have completed our budget process and the board has signed off on all of that.
Mine consolidated sales, as you can see, 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 RKAB in the coming months, well, then that number may increase. At the RKEF operations, we are at 85,000 tonnes of nickel sales by the end of September, and we are expecting that to reach 100-110 by the end of the year. HPAL attributable sales at 5.8 currently, and we are expecting 10-11 by the end of 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.
Thank you, Chris. As mentioned, we will now begin the Q&A session. For those listening by phone and would like to ask a question, please press star followed by one on your telephone keypad to raise your hand and join the queue. To withdraw your question, simply press star one again. When called upon, please use your handset or headset to ensure your line is unmuted and be ready to ask your question. Again, that is star one to raise your hand and join the queue, and we will pause for a moment to align the queue. Your first question comes from the line of Austin Yoon of Macquarie. Please go ahead.
Morning, Chris, Justin, the team. Just keen to get an update on the current weather condition. As you mentioned in the note, the release, there's extreme dry conditions limiting the production rate of your RKEF lines. We also note there've 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 four RKEF facilities in terms of the impact, and should we see more coordinated production cuts across the whole sector? Thank you.
Yeah, thanks, Austin. 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 two strongest RKEFs, ANI and ONI, are still performing well. Look, there will be coordinated cuts across all of the operations within the IMIP. IWIP at this stage is unaffected from any water shortages. Look, yes, you can expect some of these coordinated cuts. Certainly what we're seeing is the non-integrated producers, again, are the ones that are going to suffer the hardest here. It just again highlights the advantages that we have over our peers. Look, typically, December marks 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.
Thank you, 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?
Yeah. 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. Not a big impact, probably even less than that.
Thank you. That's clear. I'll pass it on.
Thanks, Austin.
Your next question is from the line of Richard Knights of Barrenjoey. Please go ahead.
Hi, gents. Thanks for the call. 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. Thanks for that. A couple of questions. One main one, actually. In terms of the remaining 4 million tons 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? 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 cuts, is there a view to sort of try and maximize revenue at the mining assets through more saprolite sales?
Look, where we can, we will most certainly try and do that. We are prioritizing limonite for ENC. We do have the benefit of third-party producers that are buying limonite. So, there is the opportunity there to sell additional tons, which is really what we did this quarter. For saprolite, look, where we can, and obviously it is driven partly by the mining plan and sequence and sort of saprolite to limonite ratio. But where we can, we will certainly try and maximize saprolite sales given the very strong margins.
Can you give us a flavor of what that split is going to look like roughly over the next sort of three months?
For this quarter, it is a little bit challenging because we are 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.
No worries.
Sorry, Richard. One of the things that we do not want to be doing is mining limonite to get to saprolite and just creating more limonite stockpiles. It is just balancing that mining sequence with demand.
Yep. Fair enough. Yep. Just on price realizations for MHP, you mentioned that they have pulled back a little bit, and obviously Austin alluded to potential coordinated HPAL cuts in the space. Can you give us an idea of to what extent those MHP price realizations have pulled back versus the nickel price? Does it feel like they have found a floor?
Yeah, look, it is back to about 84% for nickel and back to a little over 50% for cobalt. Cobalt was in the high 80s previously, and MHP was over the 90s. So I think we have found a floor. 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 are capturing the gap between the 84% and the 100% payability.
Yep. That makes sense. Just need higher cathode prices. That would be helpful.
Yeah. The nickel price was up 3% overnight. This has certainly been a response to some of these cuts.
Yep. Brilliant. All right. Thanks, guys. I will pass it on.
Thanks, Rich.
Your next question is from the line of Jit Ming Tan of Barclays Bank. Please go ahead.
Hi. Morning, gentlemen. Thanks for the call. 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. Thanks.
Thanks, Jit Ming. As I mentioned, we have a facility in there initially for working capital to ensure that, let's just call it, 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 obviously, we've got shareholder loans in there. Any distribution NIC will receive, it's a 46% share. So 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.
It can just really be looked at as what I'd call a dividend recap to the shareholders.
Thank you.
You are welcome.
Your next question is from the line of Hamish Wiltshire of Jefferies. Your line is open.
Hi, guys. Thanks for the call. Just a quick question on the saprolite sales split. Again, related with the 75% after the 25% production cut out of the RKEFs. Should we expect to see a similar movement in kind of the attributable saprolite volumes heading towards those plants?
Look, our saprolite supply, we are currently about 60% self-sufficient. So cutting it down to about 75%, it will just mean we will 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.
Fantastic. Thanks for that. That is my only one.
Your next question comes from the line of David Coates of Bell Potter Securities. Your line is open.
Morning, gents. Thanks for the call. Look, just a couple quick ones. Sorry if I missed it, the IUI sales permit, just your best guess on timing on that, assuming once that comes through, the stocks that are built up will be able to be sold immediately?
Yeah. Look, that is right, Dave. We have had the final inspection. We have obviously received the MHP exemption. As soon as that IUI comes through, then that will allow us to immediately trigger sales of the product that we have currently built up.
Cool. Thank you. You mentioned ANI is running well above nameplate. Typically, how sustainable is that? What kind of capacity is there to run those RKEF lines at that sort of level above nameplate? I guess on that, what are the constraints on them doing that?
Yeah. I mean, it's a number of different factors that go into being able to run it above nameplate. It's furnace conditions. It's grade of ore. 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 ore at good grades, and it has an ability to blend to get the best 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. ANI is certainly helping to reduce the impact of the reductions of some of the RKEFs at IMIP.
All right. Nice one. Finally, just any additional update from Sampala permitting and schedule, I suppose?
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. As I mentioned, we will be starting work very shortly on a 2.2-km section of the haul road. 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 road, hopefully early in the new year.
Nice one. Okay, cool. Thanks. Good to see the nickel price responding a bit to some of the production cuts.
Yeah. No, I think the other thing is obviously NPI price has held firm throughout the year. We think that's a positive as well.
Excellent. Thanks so much, Justin. Thanks so much, Chris.
Thank you.
Your next question comes from the line of Kay Hatanto of Indo Premier Securities. Please go ahead.
Hi, Justin and team. Really great call. I just have a quick question. Just wanted to know the feasibility on upcoming HPAL projects like TMI and CNE, considering that sulfur costs are pretty expensive and elevated right now, and unfavorable supply-demand dynamics in the HP.
TMI and CNE, they are all part of the same ENC complex. That aerial photo that we looked at earlier in the presentation, that is effectively what you are seeing there is CNE, TMI, and ENC all forming part of the one big HPAL facility. HNC is obviously our proxy into the impact of sulfur prices, and you saw this quarter that margins are still at $4,500 a ton. Still very healthy. Pleasingly, we have certainly seen sulfur come down from its highs of $1,100-$1,200 to today it is sitting at $800. Based on HNC as a proxy, margins are still good. Then pleasingly, the limited commissioning that we have done at ENC, and we only hit 50% capacity, but the costs that we were operating at were lower than HNC.
It reinforces our belief that these HPALs, ENC, CNE, and TMI will all operate in the lowest quartile.
Perfect. Thank you.
Your next question comes from the line of Abraham Aya from Deutsche Bank. Please go ahead.
Hi. Thank you for taking my call, and congratulations on a good set of numbers. Can I just ask very quickly on the details of the intercompany loan that has been reported in the cash flow waterfall? What are the terms, who this is to, what would be the use of proceeds?
Yeah, thanks, Abraham. I'm sorry, I should have mentioned that. The loan to ENC. So it's a working capital loan. It's a shareholder loan into ENC, as we commission the working capital.
Got it. Are there any terms of prepayment 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?
We'll be getting the cash out of the company as soon as we possibly can. The terms are confidential, but as soon as we can, we're going to be taking as much cash out of PT Fajar Metal Industry/ENC up to all three shareholders.
Understood. Thank you very much.
Thanks, Abraham.
Your next question comes from the line of Aman Agarwal of JP Morgan. Please go ahead.
Hey, good morning, management. Thanks for the call. I had a few questions. Firstly, given the cash balance we have as of end 3Q, 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?
Thanks for the question, Aman. I think when we announced it at the end of August in our half yearly, 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 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 draw down on that within the next week or so. Then we'll have quite a long discussion with Tsingshan regarding how much, if anything, 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 we'll draw down. We do not need to draw down on the entire amount in one draw down. 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. 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 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. Whether or not we- How we deal with that April payment will be very much dependent on whether or not we draw down now on the Tsingshan facility, the 169. We have, just I guess as a precaution, whilst that's six months out, we have had discussions with our local partner who's 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.
That is the April payment, right?
The what, sorry?
You mean you can push back the payment in April?
Yes. The April payment.
Okay.
The November payment, we will not push that one back. But the April one, yes.
Okay. If you draw down on the Tsingshan facility, that would be on Nickel Industries' balance sheet.
That's correct.
The one on ENC, that's out of Nickel Industries, right? That's on ENC level.
Exactly. The 245 we announced yesterday is at the ENC level or PT Fajar Metal Industry level, and the Tsingshan facility would be at the Nickel Industries, Listco level.
Okay. Understood. Secondly, I think this is a follow-up on a previous question, but you're reducing RKEFs capacity. What would be the impact on Hengjaya Mine productions? Will that stay as is? The third-party sales will continue there?
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.
How much of your limonite sale was to ENC in the third quarter?
It was, I believe, probably roughly about a third.
Sorry.
Aman, are you there, Aman? We lost you. Hello, Aman?
Hi.
Hey, you are back.
Yes, we can hear you.
Hello.
We can hear you.
Okay. Sorry, I lost you there. So you said a third of the limonite sale was to ENC, right?
Yes.
Awesome. 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.
Yeah. NPI pricing has held pretty consistently at around $14,500, $14,000 for the majority of this year. As I said, that has been a positive, and we do not think there is 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.
Good. Thanks. That is all from me. Thank you.
Thanks, Aman.
Your next question is from the line of Vikash Alaghawala from Framus Asset Management. Please go ahead.
Hi, Justin. Hi, Chris. Thanks for the call. A couple of quick ones from my side. Firstly, just following on the pricing trend, can I understand a little bit on the saprolite pricing trend as well? You reported realizations with C2A is still higher QoQ and much higher than what you were doing in 2025. How should we think about the realizations in 4Q, especially considering the nickel prices overall coming down from the highs in past? How should we think about the realization in 4Q?
You are talking about how we should think about the nickel price in Q4?
The saprolite price.
Saprolite.
Saprolite.
Yeah, look, with the saprolite, with the strengthening of, obviously, LME's up 3% overnight. Look, if you are seeing 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.
How should we think about the realizations in 2Q and 3Q when LME prices were going down?
The saprolite price, really why we have seen a big increase is there was a big disconnect between how the HPM 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 bring the HPM price in line with the actual saprolite market price. That is really why you have seen the big increase in saprolite margins and saprolite pricing.
Understand. That is helpful. On the ENC payment, can I understand, you mentioned that the working capital money will come back very soon. Hopefully soon after the drawdown of the OCBC facility, I am assuming.
Vikash, I think we will wait. As I mentioned on one of the earlier questions, we are going to be working with Shanghai Decent over the course of the next month, ahead of the TMI payment. As part of that TMI payment, we will be working out how much and when we can distribute the OCBC-led financing. I am not going to try to predict that now, when and how much we bring back. We are obviously in a very fluid market. We are in the middle of a drought. Where money, we will leave it in there as long as we have to be honest.
Understand. But on a 100% basis, how should I think about the working capital requirement for ENC?
We believe 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 yesterday's facility, the OCBC facility, for that in the first instance. We don't expect there to be any further requirements for injections from the shareholders.
Got it. Understand. Last question from my side is on the sulfur prices as well. You mentioned that there was an impact from the 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 should have been lasting even beyond the 2026 year. But in case we kept independent sulfur prices of 800 odd dollars, then where do we see the margins for HPALs?
Look, 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. As I said, at a $4,500 a ton margin, still very strong. Pleasingly, sulfur's come off sort of $300 a ton. That means a $3,000 a ton reduction in cost. So, sulfur at this point is not as critical as perhaps it was sort of one or two months ago when we were up over $1,100 a ton. What we're hearing from a lot of people is that, there does appear to be quite a bit of movement through the Strait of Hormuz, and that's obviously being reflected in the pricing.
Got it. That is very helpful. Thanks. That is it from me.
Thank you.
Thank you.
A reminder to join the queue to press star one. Your next question comes from the line of Love Sharma of Point72. Please go ahead.
Hi, guys. Sorry, I missed some part of the call. Just wanted to understand one thing. You have these upcoming payments to $169 million 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? Secondly, on the ENC project finance facility, what kind of cash release will you get, if any, at the corporate level? Thank you.
Okay. Thanks for the question, Love. As I mentioned earlier, 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. 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 on 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 six months.
That will determine how we address the Sampala payment in April, the $144 million payment. As I mentioned earlier, we're prepared for that, and we've already had discussions with our local partner, which is the vendor. Our local partner at Hengjaya Mine is the vendor at Sampala, and we believe that should it be required, we will have the ability to push back that April payment. Does that answer your questions, Love?
Sure. Basically, the $245 million would be fully available to you. Is that right? It pays off any kind of shareholder loans et cetera you might have there. Is that right?
The 245 is fully available to distribute up to the shareholders. Depending on how the commissioning go or when we ramp back up to nameplate, will determine how much of that facility we actually distribute up to shareholders. That facility really has, in this operating environment, given us a lot of breathing room. We will, as I mentioned earlier, maximize the distributions from ENC up to the shareholders as early as we can and as large an amount as we can.
We should take it as pro rata, right? Based on your shareholding there.
Yeah, correct.
All right. Okay, understood. Thank you. That is it from me.
Thanks, Love.
Your next question comes from the line of Xiang Gao of BofA. Please go ahead.
Good morning, everyone, and thank you for the very good presentation. Just a very small quick follow-up from my side. First is, what is the outstanding balance of the working capital loans to ENC at this moment? Secondly, is that because you target to commissioning the CNE in mid-2027 and TMI in September 2027, is this target still hold here?
I missed the second part of the question. I will come to that. On the working capital loans, across all shareholders, north of $100 million at the moment. We have not disclosed the entire amount, seeing we have not got the approval of Tsingshan to do so as our operating partner, but it is north of $100 million. So there is a lot of working capital that we have injected into ENC, which obviously, as and when we can, we will distribute back to shareholders. The second question you had, sorry, we missed that. Could you repeat that, please?
Previously, the CNE is targeted to commissioning in mid-2027, and the TMI, based on the slide, is expected to reach nameplate in September 2027. Are these two projects still holding to the target?
Yes.
The commissioning and nameplate targets.
It is progressing very well.
Okay. Lastly, what is the margin expectation on our CNE and TMI? Will it be similar to HNC or more similar to ENC?
Look, we would expect the margin to be superior to HNC, given that we have already demonstrated that we can achieve lower operating costs at ENC. The biggest driver of margin will be, what is the sulfur cost in September of next year? And obviously, what is the nickel price and cobalt price?
Got it. Thank you.
Your next question is from the line of Donavan Tan of BlackRock. Your line is open.
Hi. Morning. Thank you for the presentation. I think I just want to check in on one thing, given we have kind of seen the headlines on the production cuts, and I think one of them that were named was Tsingshan also regarding 50% on MHP and 20% on NPI. Could you just comment on that and whether that affects you? Thank you.
Yeah. In the quarterly, you would've seen that, in October, we've cut back NPI to 75% capacity. 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. 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 tons of cathode per annum.
Okay, so it's still full capacity for the MHP producing plants? Okay. Thank you.
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.
Okay, got it. Thank you for clarifying.
Yeah. Thank you.
Thanks, Donavan.
Your next question is from the line of Bharat Shettigar of Standard Chartered Bank. Please go ahead.
Yeah. Hi, management. Thanks a lot for the call. Couple of things. Firstly, apart from the $100 million shareholder loan at ENC, is there any other debt at the Fajar entity or at the ENC opco?
There's very shortly or very soon to be $245 million of additional debt at the ENC opco. That's the amount that we announced yesterday. Other than that, there is no other debt.
Okay. Just to be clear, once you are able to draw down the new $245 million loan,
Yes
you can immediately repay the shareholder loans, right?
We can.
But whether you choose or not, you-
Correct. That is correct.
Right. In terms of the dividend recap exercise, you mentioned earlier, it is primarily related to the 100 odd million dollar shareholder loan that will be repaid. Or some of the equity that you infused in ENC, will there be some kind of repayment of that as well?
When I refer to the dividend recap, I am effectively talking about the $245 million facility. So we have put that debt in there at the ENC project level in order to dividend the majority of it, well over 90% of it, to shareholders as effectively it is— I should not call it a dividend, it is a repayment of shareholder loans. The entire operation, the entire ENC project has been funded by equity as shareholder loans. So the money that we have put in via the OCBC-led syndicate will be distributed to shareholders via repayment of those shareholder loans.
Okay. That is completely clear now. Thank you.
Thank you, Bharat.
That concludes our Q&A session for today. I will turn the call back over for closing remarks.
No, look, thank you everyone again for your attendance today. As I said, it has been a consistent three quarters for this year. 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. Look, once we get some rainfall, we have already seen some relief in sulfur prices. We are still very well-positioned and there is a lot of growth that we will start to see coming through over the course of this quarter, and then certainly moving into next year. Thank you again everyone for your time.
This concludes today's conference call. Thank you all for joining us. You may now disconnect.