Analysts from Macquarie are soon to tour Nickel Industries Ltd (ASX: NIC)'s Indonesian operations, but have issued a positive research note on the company ahead of the visit.
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Strong first half of the year
Nickel Industries last month reported a strong financial result for its first half, with revenue up 13.1% to US$938.4 million and net profit up 365.8% to US$52.5 million.
The company has hit a minor barrier since then, as the ramp-up of its Excelsior Nickel Cobalt HPAL project (ENC) has been interrupted by dry conditions in Central Sulawesi, Indonesia, which have constrained water supply to the operation.
But the company is expecting normal operations to resume with the onset of the wet season by December.
The company said re the ENC operations:
Prior to the onset of the dry conditions, ENC had ramped up to approximately 50% of nameplate capacity within four weeks of the commencement of commissioning. Should the water supply constraints persist, ENC is expected to operate at approximately 30% of nameplate capacity until water availability normalises.
Nickel Industries said its Hengjaya mine, conversely, had been performing well, with record monthly nickel sales of 1.6 million tonnes in August.
Managing Director Justin Werner said re the update:
ENC has performed exceptionally well since commissioning, reaching approximately 50% of nameplate capacity within four weeks, which is a genuine credit to our operating team. The dry conditions in Central Sulawesi are an unusual and temporary constraint on water supply, and we expect availability to normalise with the onset of the wet season. Combined July and August Adjusted EBITDA from operations of approximately US$90 million demonstrates the earnings capacity of the broader business.
Nickel Industries shares looking cheap
Macquarie said in its research note that a planned slurry pipeline "between Hengjaya Mine and ENC could reduce unit costs by replacing truck haulage of limonite ore, with these savings not reflected in our forecasts''.
They added:
Given elevated diesel prices, the magnitude and timing of cost savings could be a focus during the site visit. At the HPAL operations, rising sulphur prices are emerging as a cost headwind as low-cost inventory is depleted, although this is currently offset by strong cobalt revenues. Quantifying sensitivity to both could also be a key focus.
Macquarie said the company had established a "meaningful battery minerals portfolio".
The broker said they expected dividend payments to resume, with dividend yields of 1.2% in CY26 and 4.1% in CY27 forecast.
Macquarie has a share price forecast of $1.25 on Nickel Industries compared to 79.25 cents currently.
