Nickel Mines Limited, driven by the positive outlook of the nickel market

Team Veye | 27 Jan 2021 ASX - NIC
Nickel Mines Limited, driven by the positive outlook of the nickel market

Nickel Mines Limited (ASX: NIC)

Nickel Mines Limited (ASX: NIC) on 25 January 2021, provided its quarterly activities report for the quarter ended on 31 December 2020.

December quarter delivered record operational and financial results, closing 2020 on a highly positive note.

(Chart source: TradingView)

RKEF Operations

Hengjaya Nickel Project (80% interest held by Nickel Mines)

During the December quarter, Hengjaya Nickel produced 5,718.9 tonnes of nickel metal at an average NPI grade of 14.9% at a production-weighted average cash cost of US$7,612/tonne. The Group’s attributable nickel production reported an 11.2% increase from the September quarter production.to 4,575.1 tonnes of nickel metal. Hengjaya Nickel recorded (on a 100% basis) sales of US$78.7M for 5,654.8 tonnes of nickel metal sold. Reported Underlying EBITDA at US$34.9M and Underlying net profit at US$33.0M.

Ranger Nickel Project (80% interest held by Nickel Mines): During the December quarter, Ranger Nickel produced 5,808.1 tonnes of nickel metal at an average NPI grade of 15.0% at a production-weighted average cash cost of US$7,442/tonne. The Group’s attributable nickel production was 4,646.5 tonnes of nickel metal, an increase of 4.5% on the September quarter production. For the December quarter, Ranger Nickel recorded (on a 100% basis) sales of US$80.1M for 5,746.6 tonnes of nickel metal sold, underlying EBITDA of US$36.7M and an underlying net profit of US$34.8M

(Graphic Source – Company Reports)

  • During the December quarter, the combined Hengjaya Nickel and Ranger Nickel projects recorded (on a 100% basis) record sales of US$158.8M for 11,401.4 tonnes of nickel metal, record underlying EBITDA of US$71.6M and record underlying net profit of US$67.8M. Production of 11,527 tonnes of nickel from combined RKEF operations was a record for quarterly production, with production levels consistently around 1,900t p/m of nickel from each project.
  • Expenditure on mine production and development activities during the quarter totalled US$8.5M. Expenditure on mine exploration activities during the quarter totalled US$1.9M.
  • During the quarter the Company has signed a Memorandum of Understanding (‘MoU’) and subsequently a Definite Agreement with Shanghai Decent to acquire a 70% interest in Angel Nickel, The Company’s equity participation in the project will increase to 80%.
  • Underlying Free Cash Flow from Operations reported a 58% increase to US$71.9M (100% basis) from US$45.5M in the September quarter.
  • RKEF December quarter cash costs:
  • Hengjaya Nickel: US$7,612/tonne, up 6.6% from the September quarter.
  • Ranger Nickel: US$7,442/tonne, up 2.5% from the September quarter.
  • Cash + receivables + inventory at quarter end was up by 152.1% to US$517.9M from US$205.4M in the September quarter.
  • Cash reported an increase of 274.6% to US$351.4M.
  •  Reported US$68.8M of repatriations from RKEF operations to project shareholders, including US$55M to Nickel Mines. (Data Source – Company Reports)


Veye’s Take

Key expansion activities made significant advancements during the December quarter in support of the Hengjaya Mine’s plan to further increase the production of both saprolite and limonite ores in 2021. With RKEF assets now well established, a development project underway and a broadly positive outlook across the global nickel market, the future outlook looks promising. The “Higher High” formation on the price charts with positive divergence on the RSI chart and positive cross over on MACD supports the upside rally of the stock. The stock is trading near the upper band of the Bollinger with no reversal candle formation. It can have the potential of growing significantly in the short to medium term. The Latest "Buy" on “Nickel Mines Limited” at the price of $0.68 was given on 31 August 2020. It has already grown by more than 105% in less than five months. Veye maintains a "Hold" on “Nickel Mines Limited” at the current price of $1.40


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