Nickel Asia Corporation ($NIKL)

Good afternoon, everyone, and welcome to Nickel Asia Corporation's briefing for our Operational Results for the First Quarter of 2026. My name is Miren Cueto, Nickel Asia Corporation's Senior Manager for Investor Relations. Joining me today are our Group President and CEO, Mr. Dennis Zamora; our VP for Finance and Deputy CFO, Mr. Andre Dy; Director of our Geothermal Business, Mr. [ Joseph Thorpes ]; and President of Cordillera Exploration Company, Inc. or CExCI, Dr. Jun Yumul. [Operator Instructions] So let's now begin with our financial highlights. This slide presents our consolidated financial highlights for the first quarter of 2026 compared to the same period last year. The left most set of bar charts indicate our top line performance for the period and historically over the last 3 years. Revenues, which are comprised of the sale of ore, power and other services amounted to PHP 3.2 billion in the first quarter, an 8% increase year-on-year from PHP 2.9 billion in 2025. The set of bar charts in the center showcases our consolidated EBITDA for the period, which totaled PHP 1.3 billion from PHP 1.5 billion in the first quarter of last year, of about 13%. The right most set of bar chart shows our net income excluding minority interest. For the first quarter of 2026, attributable amounted to PHP 0.4 billion or a decrease of about 26% from PHP 0.5 billion in the first quarter of last year. So we see here that the attributable net income declined despite the increase in revenues. So the primary reason for this is the onetime gain of PHP 800 million that we disclosed in the first quarter of last year. So if you recall, there was a onetime gain from Nickel Asia's 15% stake in Coral Bay Nickel Corporation. So excluding this onetime gain for the first quarter of last year, we would have reported an attributable net loss instead of a net income. Specifically, the attributable net loss last year without the onetime gain would have been around PHP 25.5 million. So if we look at our first quarter performance this year from a core earnings basis, our performance has actually improved with a turnaround year-over-year from negative to positive. So moving on to our margins, as shown in the table below, gross profit margin for the first quarter of this year stood at 51%, up from 40% last year, an improvement of about 11 percentage points. EBITDA margin improved -- sorry, EBITDA margin stood now at 43% from 53% last year and net income margin this year is at 21% from 23%. Moving on to our Nickel Mining performance for the quarter. This slide details our mining volumes, prices and revenues. So let me walk you through each set of charts. Starting with sales volumes on the left represented in millions of wet metric tons. The green portion represents saprolite ore exports, while the orange portion represents limonite HPAL sales. Total mining sales volumes for the quarter declined 9% year-on-year to 2.27 million wet metric tons from 2.48 million wet metric tons. Saprolite ore exports particularly were down 15% year-on-year to 0.56 million wet metric tons from 0.66 million wet metric tons. With respect to limonite HPAL deliveries, these decreased by 6% year-on-year to 1.71 million wet metric tons from 1.82 million wet metric tons in the first quarter of last year. So the reason for this decrease is primarily because of weather disruptions from our Taganito and Rio Tuba mines as well as the nickel grade that were sold this year were slightly lower than what were sold last year. So moving on to the movement in average ore prices, your attention in the middle charts, please. So for ore exports, which are seen in green, the average prices registered at $35.63 per wet metric ton. This is a slight decrease of 3% from last year's average price of $36.60 per wet metric ton. For limonite HPAL prices, there was an increase of 35% from $12.99 per wet metric ton from 2025, $9.10 per wet metric ton. So weighted average ore prices grew by 10% year-over-year to $18.03 per wet metric ton from $16.40 per wet metric ton. The table below gives us additional context on nickel prices. So the average nickel LME price per pound for the first quarter of this year stood at $7.87, an increase from $7.05 in the first quarter of last year, so approximately 12%. The effective nickel pay factor or exports stood at 23.92%, slightly lower from 24.80% last year. On revenues, which is shown in the right-side chart, we see that total ore revenues totaled PHP 2.42 billion, which is still an increase of 3% year-on-year. Our export revenues were down 16%. However, HPAL revenues grew strongly by 29% year-on-year, driven by higher realized prices. So this slide walks us through the key drivers of our revenue performance in the first quarter versus the first quarter last year. As mentioned previously, total revenues grew by 8% year-on-year. There were several contributors to that. The first is better nickel price realizations for HPAL, which gave us about PHP 284 million more in revenues versus last year. So as seen in the previous slide, weighted average ore price grew by 10%. Nickel payability also improved for our HPAL sales due to renegotiated prices. So another reason is higher generation revenues from our San Isidro plant, which had an incremental contribution following the energization from October last year. Finally, another contributor for better top line was the favorable movement in Philippine peso-U.S. dollar exchange rates. So the average exchange rate this quarter was at PHP 59.19 to $1 compared to PHP 57.85 to $1 in the first quarter last year, which contributed positively to our peso-denominated revenues. Partially offsetting these positives, however, was a lower export volume due to the unfavorable weather conditions in some of our operating lines. So this slide now summarizes our costs and operating expenses for the quarter. Year-on-year, our cost and expenses decreased by 4% to PHP 2.37 billion from PHP 2.47 billion in the first quarter of 2025. So the savings were primarily due to a reduction of about PHP 207 million year-on-year in mining costs. So this was due to improved production volumes. Essentially, higher production volumes reduced the carrying costs that we had for our inventory, thereby lowering shipment costs that we recognized in the first quarter. With respect to the renewable energy side, costs increased primarily due to additional depreciation charges from the San Isidro solar power plant, which commenced their testing and commissioning in the fourth quarter last year. But we see that these costs are consistent with our planned capacity build-out, and we expect these things to eventually be offset over time by the revenues generated by these new assets. Let me walk you now through the key movements in our balance sheet as of March 31, 2026. On assets, total assets stood at PHP 65.7 billion as of end March 2026 compared to PHP 70.2 billion at year-end 2025, a 6% decrease over the quarter. The variance was primarily for paying dividends and retiring debt at the EPI level or our renewable energy business. Trade and other receivables also declined by 22% to PHP 1.9 billion, which is consistent with the collection activity after the strong close we had last year. PPE grew modestly by 3% to PHP 34.2 billion. With respect to liabilities, total liabilities decreased 12% quarter-on-quarter to PHP 19.7 billion. So notably here, our short-term debt declined significantly by 68% to PHP 2.1 billion. So this reflects the prepayments fees were related to the renewable energy business under DTI. Long-term debt here remained relatively the same at PHP 9.3 billion, essentially flat from year-end. On equity, total equity attributable to the parent stood at PHP 38.2 billion, broadly consistent with our strong equity base at year-end. So overall, the balance sheet remains healthy and well-positioned to support our ongoing growth initiatives. So moving on to our renewable energy update. I'll now hand the floor over to our Director for our Geothermal Business, Mr. Joseph Thorpes.

Thank you, Miren. Let me begin with an update on JSI, our flagship operational solar asset located at Mount Santa Rita within the Subic Bay Freeport Zone in Zambales with an installed capacity of 172 megawatts. As of the end of the first quarter of 2026, 170 megawatt peak of JSI's capacity has been contracted under power supply agreements. Our PSA to WESM sales mix for the quarter stood at 94% to 6%, a significant improvement in contracted exposure compared to 78% PSA in the same period last year. The additional PSA contracted in January 2026, covering 55-megawatt peak was a key contributor to this improvement. Our direction continues to be to fully contract JSI's energy output through PSAs, insulating our revenues from WESM price volatility. Moving on to the San Isidro project, which is being developed under Greenlight Renewables Holdings, Inc., our joint venture with Shell Overseas Investments B.V. The project is divided into 2 phases, each contributing 120 megawatts peak of capacity. Both phases are fully contracted. Phase 1 was energized in the fourth quarter of 2025 and is targeted for Commercial Operations Date or COD in the second quarter of 2026. Phase 2 construction is ongoing with energization targeted within the third quarter of 2026 and commercial operation in the first quarter of 2027. Here are the consolidated financial highlights for EPI, our renewable energy arm for the first quarter of 2026. The standout figure this quarter is generation, which grew 63% year-on-year to 5,831 megawatt hours. The strong growth was driven by the contribution of San Isidro Phase 1, the first full quarter of generation from the 120-megawatt peak San Isidro Leyte facility. EBITDA more than doubled, growing 120% year-on-year to PHP 267 million with EBITDA margin expanding significantly to 62% from 46%. This reflects both higher revenues and the relatively low incremental operating costs of the new capacity. The weighted realized tariff improved to 4.52 per kilowatt hour, a 7% increase year-on-year attributable to higher contracted tariff rate at JSI from a new PSA signed in January 2026 and the contribution of San Isidro, which is fully contracted with Shell Energy at attractive rates. Overall, the renewable energy business is gaining meaningful scale, and we expect this trajectory to continue as our pipeline projects come online. Speaking of which, let us now move on to updates on our development pipeline. Our next project under the Greenlight Renewables Holdings joint venture with Shell is the San Juan, Botolan project in Zambales. The project is made up of 2 phases, Phase 1 at 45 megawatts is fully contracted and is targeted for energization in the fourth quarter of 2026 with commercial operation in second quarter of 2027. Phase 2 at 14 megawatts peak is targeted to be 100% contracted with energization in the first quarter of 2027 and COD in the third quarter of 2027. Construction activities are progressing in line with schedule. For our wholly-owned renewable energy subsidiary, the Subic Tower project remains a key development asset. This is a 145-megawatt facility divided in 2 phases within the Subic Bay Freeport zone. Phase 1 of 70 megawatts peak is currently 64% contracted with active ongoing negotiations for the remaining 36%. Energization is targeted for the second quarter of 2027 with COD in the third quarter of 2027. Phase 2 of 75 megawatts is targeted to be 100% contracted. Energization is expected in the fourth quarter of 2027 and COD in the first quarter of 2028. Our fourth development project is the Nazareno facility in Bataan, a 50-megawatt peak power plant. This project is currently in the predevelopment stage with offtake contracting ongoing. Energization is targeted for the third quarter of 2028 with COD in the fourth quarter of 2028. Next slide would be a summary of our projected capacity buildup. This slide summarizes the expected progression of EPI's installed generation capacity over the next 2 to 3 years. By the end of 2026, EPI's gross installed capacity is expected to reach 458 megawatts, incorporating JSI and the contribution of San Isidro Phase 1. By 2027, we are targeting a gross capacity of 670 megawatts, revised from our previously disclosed 667 megawatts, reflecting updated project time lines and our transition toward a value-driven rather than volume-driven expansion strategy. As we have communicated before, our primary focus going forward is on maximizing the value of each megawatt we bring online, prioritizing fully contracted assets, integrating battery -- energy storage systems across the portfolio and exploring hybrid solutions for Island grid operations to capture mid-merit supply options.

Thank you, sir, Joseph. Moving on now to updates on our gold and copper exploration projects. I give the floor to Dr. Jun Yumul, President of Cordillera Exploration Company Inc.

Thank you. I'm pleased to provide an update on the exploration progress we have made for CExCI's Cordon project in the first quarter of 2026 as well as a general background on the project itself. The Cordon project sits in Northern Luzon spanning the municipalities of Cordon in Isabela and Diadi in Nueva Vizcaya. The total tenement covers just under 5,000 hectares. This project has 2 separate mineral systems within the same tenement, both epithermal gold and porphyry copper and gold mineralization associated with alkaline porphyry intrusions. Current exploration targets are estimated at approximately 6.5 million tons averaging 2.4 grams per ton gold, equivalent to more or less 500,000 ounces of gold for the epithermal gold system and approximately 150 million tons averaging 0.4% copper and 0.3 grams per ton gold for the porphyry copper and gold system. With respect to strategy, why is [ Snap ] doing this? Why are we going into the gold copper business? For 3 reasons. First, diversification. We are the largest nickel producer in the Philippines, and that's a strength, but single commodity exposure is a risk that we would like to mitigate. Copper and gold reduce that dependency. Second, copper is an essential metal for the energy transition and EV infrastructure. Additionally, gold is at record high and serves as a portfolio hedge. Third is the ability for operational continuity. Given the project Cordon is in the Philippines, we're not entering an unknown territory. We operate in the Philippines, understand the regulatory environment and have relationships on the ground. On the right side of the slide, we have the time line of milestone we aim to accomplish. Right now, we have 40 drill holes completed and scout drilling is actively continuing across the tenement. The drills on the ground as we speak. This year, our exploration permit renewal is secured and our drilling campaign is fully active. In 2027, the nature of the drilling shifts, we moved from scout drilling, which is about finding and characterizing the mineralization to infill drilling, which is about defining it. This is when we can begin to work -- begin the work needed to establish an initial inferred resource at San Luis. In 2028, the objective is delivery of a full drill compliant mineral resource estimate. And beyond 2029, the work continues to upgrade the resource from inferred into the indicated and measured categories, the higher confidence classifications that underpin feasibility studies and ultimately a development decision. Moving on to our first quarter project highlights. In the last quarter, we completed 4 drill holes totaling 1,795 meters as part of our ongoing scout drilling program. Our Scout drilling continues to consistently intersect copper gold mineralization hosted by alkaline copper intrusions alongside epithermal gold mineralization, reflecting what we believe is a mineralization system of considerable potential. Drilling will continue through the remainder of 2026 with the objective of further intercepting high-grade [indiscernible], determining structural trends and defining the lateral and depth extent of the corporate copper gold system. Together with previously resulted reported results, these intercepts continue to reinforce the quality and continuity of the mineralization at Cordon. We look forward to providing further updates as drilling advances through the year. This slide puts Cordon in the context against upsell operating mines and resources in the Philippines. We have 2 tracks, gold on the left and copper on the right. Let me take you through each. On gold, we're comparing Cordon's epithermal system target grade of 2.4 grams per ton against 2 Philippine peers. FCF Runruno operated by Metals Exploration is an operating epithermal open pit gold mine with gold grade of 1.42 grams per ton. Didipio, which is operated by Xali Gold is another porphyry copper gold system currently operating in the Philippines grades at 0.85 grams per ton. Cordon's epithermal gold target of 2.4 grams per ton grade is a first order of [indiscernible] above both FCF and Didipio deposits. Take note that Cordon, Runruno and Didipio are hosted by alkalic [ rack ] complexes. That's the common denominator. One thing to be clear about the 2.4 grams per ton is Cordon's epithermal system exploration target. It is not yet a [indiscernible] resource. The confirmation is what infill drilling in 2027 will deliver. On copper, we have 4 competitors here, all porphyry systems, which can serve as the peer group for Cordon's copper story. Makilala is a Philippine porphyry resource grades at 0.48% copper. Carbon copper in Cebu is an operating open pit mine at 0.33% and of course, Didipio at 0.32%. Philex is at 0.12%. Cordon's copper target of 0.4% copper sits above Carbon copper and Didipio, the 2 operating Philippine copper mines and just below Makilala, which is also a resource not yet in production. The bottom line on this slide is straightforward. Cordon epithermal gold and porphyry copper gold -- competitive and in most cases, above what is actually being mined in the country today. These are not global stretch comparisons. These are Philippine operations sourced from company disclosures and Cordon holds up well against all of them. That's all the update regarding strategy. Back to you, Miren.

Thank you, Dr. Yumul, and thank you to all of our presenters today. So that concludes the formal presentation that we have. [Operator Instructions] So let's go through the questions. So this is from [indiscernible] Securities. The first question has to do with the sensitivity of fuel prices to costs.

Yes. So let's take this on. So sensitivity of fuel price to cost. So diesel prices have gone up. So for us, if diesel prices stay at PHP 100 per liter, this increases our cash cost by $3 per wet metric ton. So compared to our budget. So our budget is from around PHP 60 to PHP 70 per ton. And then the impact on sulfur prices to HPAL plants. So the global nickel oversupply won't expand because mixed hydroxide precipitate, which is the product of the HPAL takes a hit with the shortage of sulfur. And meanwhile, it's an opportunity for nickel matte to substitute the decline in MHP production. So we see that trend of the use for NPI and saprolite benefiting with the impact of sulfur prices impacting the HPAL production.

The next question is from Ras Mercado from China Bank Securities. Ras is asking, how are we addressing diesel supply issues? And how are we mitigating the impact?

We have adequate supply due to the long-term supply contracts we have. We're fortunate the rise in nickel prices more than offset the high fuel diesel prices, and we continue to manage our controllable costs in order to drive more efficiency in our operations.

Next is a combined question from Jessica Lim of Redwheel and Ras, again. So the first question is, how does the company view the sustainability of elevated nickel ore prices? And how have regulatory changes in Indonesia affected our outlook for nickel prices and our top line?

We think it's sustainable the high -- the elevated ore prices because last 15th April, the Indonesian Ministry of Mineral and Energy Resources or the ESDM, had changed the pricing formula for nickel ore and effectively doubled the benchmark prices for saprolite, nickel ore and limonite. So the ESDM had raised the adjustment factor on benchmark price calculations. So these have gone up to 30% from 17%, which has effectively raised saprolite ore benchmark prices to $60 from $30 for the 1.5% nickel ore. The bigger impact, however, from this regulation comes from the limonite pricing. Limonite ore was trading before at $15 to $17 per ton. Now it's being priced at a maximum of $45 per ton after the new formula had taken effect. The new formula also includes the payability of cobalt into the limonite ore price. And based on the cobalt price of $55,000 per ton and 0.1% cobalt content, there will be an additional $10 wet metric ton to the limonite ore. So coupled with the high sulfur prices due to the war, our channel checks suggest a major drop in HPAL's cash margins. Like Huayou, HPAL has announced production cuts of around 10%.

The next set of questions is from Amos of CLSA. So his first question is, what is the average moisture content percentage-wise of our saprolite and limonite ore?

That's around 33% to 35%.

With respect to our power supply, do we get that from renewable energy? The answer is no. We don't get that from renewable energy. And I think the last question regarding the Indonesian government's pricing, you just answered that earlier. Okay. Next slide. There's another set -- now moving on to the East Copper disclosure that you had recently. So another question from Amos is, could you share more on East Copper's decision to sell some stake in the Karchiga mine? What year did the mine begin operating? And can you tell us about the mining regulatory environment in Kazakhstan and when we expect this transaction to be completed?

Yes. So for the seller of the 20% stake, this is not their core business. So this was an opportunity for us to get into high-grade copper. And for the seller, it was an opportunity for them to raise funds for their core business. This mine was operating as early as 2018. And then we expect this transaction to be completed within this year, hopefully earlier. So we're doing everything we can to do it. But definitely within this year, we will wrap it up. And in terms of the mining regulatory and tax environment, let's just say that in Kazakhstan, the mining sector is a big contributor to their GDP, and that's 12% of the country's GDP.

So are we open to considering or acquiring more copper mines overseas or in the Philippines in the near term?

Yes, we are open to acquiring more resources in copper. So part of our strategy is not just acquiring and investing into more nickel resources, but also into gold and copper.

And a final question from [ Klien ] of Regis Partners. She asks, what is the reserve life of East Copper? Will it be accounted for as an associate? And could you also provide its revenue, EBITDA and net income?

We will provide more details at the closure -- once we close -- formally close this transaction. Yes, it will be accounted as an associate. But for the revenues, EBITDA and net income, we shall disclose more during the formal closing of this transaction.

So we're not seeing any additional questions in the Q&A box. [Operator Instructions]

I may have missed it earlier, but what was the income contribution of the HPAL plant in the first quarter, income or loss?

I will have to get back to you on that.

But I can get back to you on that. And it should be seen as well when we release our [indiscernible].

Understood. And for the EBITDA, I guess -- sorry, can you just go back to the first slide on EBITDA. Okay. So what contributed to the drop in EBITDA margin? Was it the taxes, the new taxes that was introduced this year? Did those already reflect in your financials?

No. We've not included any of the changes in the fiscal regime with respect to the taxes on our NPS. But mostly the change in the EBITDA, the difference -- yes, it's a onetime gain.

So you included it. What would it be -- what would EBITDA be without the gain in apples-to-apples, core operations, would it -- because revenues for mining was flat, right? So I was wondering if there was an improvement in EBITDA or the deterioration.

There was an improvement from a net income perspective because last year, it would have been attributable net loss without the onetime gain. It would have been a loss last year without the PHP 800 million.

Yes, I know the net income, but for EBITDA, if you can.

The amount that I have now is attributable net income. EBITDA margin last year was technically, if you look at the presentation, there's a change. It was PHP 1 billion. So we added back. So that's why it's different, apples-to-apples. So yes, so I'll give you that figure on EBITDA without the onetime gain.

So you're comparing PHP 1.3 billion against PHP 1 billion EBITDA.

Yes, that's right.

Okay. So there was an improvement.

And then for the HPAL, we have the answer for you. It's PHP 109 million loss for the HPAL.

Is there anybody else who might want to ask a question live or you can type it in the Q&A box?

I just like to ask if you can hear me. This is Nicky Franco from Abacus Securities. Just a quick question on the regulatory changes in Indonesia. Would you know the rationale for the change in the pricing methodology that they used so that we can gain an understanding of whether or not this can be sustainable moving forward?

Yes, Nicky. We're flashing a slide now on the new nickel ore benchmark. The motivation for the government to apply this is, I think, to correctly price the ore because it's only been recent that all these developments in Indonesia's development of the nickel supply chain happened during the pandemic. So it's been only 5 years or 6 years that they're trying to set up the nickel supply chain pricing. And in that process, because of the circumstances in supply and demand, the base pricing model is very far from the actual transactions in Indonesia. For example, if you look at this bar on the left, you would see that orange bar. That orange bar is the actual transaction being performed in the market. Before the law was implemented, your base price is the black bar. So you could see the discrepancy between what was set as your base price and what's being traded in the market because of the ore tightness. So in order to make sense out of it, and also, it's also the intention of the government to unlock the value of what the real price of the ore is because it's been outdated. This is an old formula. So new base prices are now set. By saying that a higher factor is applied on the formula is essentially the Indonesian government saying that the correct price of the saprolite ore should be such. So that's why the adjustment upward of the base prices, which you see in green in the middle, is quite close already to the transactional prices. But again, if you look at when this was implemented on the 15th April, it doesn't really impact where the trade of saprolite is because in actual transactions, saprolite prices are still trading above that HPM price that was set. So you could see that small light green to cover, which is now your premium. But at least that premium is now narrower than where it was before where premiums were even more than the base price. But it also applies for limonite. So now for limonite, the base price surpasses the actual transaction prices of the limonite. So I think this is where the market is adjusting right now because right now, HPAL plants are forced to feed -- are forced to pay $40 per ton at a time when sulfur prices have also quadrupled. So in terms of the cost curve, in nickel LME terms, HPAL plants need a higher nickel LME to recover or to have an incentive to run their plants. So it will be interesting to see how nickel LME will behave because of this new nickel ore benchmark pricing in Indonesia and applied. So our view, which we already said last year, we feel that nickel LME is still underpriced. It will still go up. Even at these levels, we still think that nickel LME is low for the current situation of supply and demand in the supply chain.

Just a follow-up. So is it correct to say that you think your selling prices for limonite to the HPAL plants will effectively move higher?

We have an agreement with our partner, Sumitomo. We have some -- it's based on nickel LME formula. But there will be room for us to be able to negotiate because that development in Indonesia is an isolated case. But then again, it's a good comparison for us here in the Philippines. So there's always room for that negotiation with our long-term partner. But definitely, for the saprolite prices, it follows the market. So what you're seeing as the orange is what we follow.

Okay. And lastly, with higher limonite prices, do you think there's room for ore volumes, your ore volumes to increase beyond what you were targeting for the year?

Well, what we're marking as our upside would be coming from saprolite ore. So we've given this guidance of achieving around 20 million tons. So the incremental from last year's 18.5 million, that additional 1.5 million tons, half would come from saprolite and half would come from limonite.

Are there any other additional questions? Sure. So if first quarter performance was impacted by bad weather, how is the weather so far in the second quarter? And do you expect the El Nino to further give second quarter -- to give a second quarter performance?

Yes. At the moment, we're doing pretty well with our shipping and loading and nickel mining production. So we expect 2Q to -- as you know, seasonally, 2Q and 3Q are our strong quarters. So we're well on our way to post the catch-up in shipping and loading. So yes, so far, the weather has been good in our mines.

Anybody else want to ask a live question? If there are no additional questions, the time line is that once our figures are out officially, this presentation will also be available on our website. Our disclosure in our press release as well as our quarterly results should be up as well by tomorrow. So if you have any additional questions, you know how to reach me and Andre. And thank you for joining, and we'll see you again for next quarter.