Nickel Industries Limited (NIC) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Nickel Mines Limited March Quarter Results Webcast. [Operator Instructions] I would now like to hand the conference over to Mr. Justin Werner, Managing Director. Please go ahead.

Thank you very much, and thank you, everyone, for your attendance today at the March 2022 quarterly fiscal. If I could just ask the operator if you could just move to Page #2. The March quarter -- sorry, the next page. Thank you. March quarter, excellent quarter, record USD 81.7 million EBITDA from operations, 11,166 tonnes of nickel metal, and we're starting to see a meaningful contribution from ANI with first lines commissioning in January, and we expect all 4 lines to be in operation by the middle of May, and I'll talk a little bit more about the ANI performance a little later on. That resulted in record RKEF EBITDA of USD 72.8 million, which includes the USD 1.7 million EBITDA level loss for HNI and RNI. Pleasingly, this quarter, we saw significant margin expansion despite continued cost inflation pressures. Our margin expanded to USD 7,386, up from the $6,028 a tonne in the December quarter. We also saw record HNI EBITDA of USD 8.9 million and record production of over 1 million net metric tons, which is a mix of saprolite and limonite, and record underlying cash generation from operations of USD 8.13 million. So as I said, a record quarter on a number of fronts and a very good result in the face of challenging conditions globally. As I mentioned, ANI, that's commissioning and ramping up very nicely. On the corporate front, we completed the acquisition of a 10% interest in the Oracle Nickel project, which is under construction within IMIP. We received confirmation of tax concessions for both ANI and ONI. These have an increased tenure to 10 years of 0 tax up from the 7 years that we currently enjoy for HNI and RNI and declaration and payment of a $0.02 per share final dividend. If we could just move on to the next slide, please. Just going through some of the headline numbers. As you can see, realized NPI price was up again in the March quarter to $19,368 versus the December quarter of $18,545. I should make a note that the April contract pricing is close to USD 21,500. So again, already for the start of this quarter, we're seeing that increased NPI pricing continue, and that's almost $2,000 above the -- or these $2,000 above the March quarter average price. So we're continuing to see increased NPL pricing. RKEF EBITDA 20% above the December quarter. As I said, that's an excellent result, and that margin expansion, which is also up 22.5% from 6,028 up to 7,386. If we could just go to the next slide, please. Pleasingly, costs are down around 3% from $12,347 in October, to $11,969 in March. You can see the cost chart there. And what we saw in terms of the cost breakdown, modestly higher nickel ore prices. And when I say modest, I'm mainly talking about $1 from the March quarter to the previous quarter. Pleasingly, thermal coal and power costs were down from about $0.10 last quarter to $0.088. And coking and reductants costs were sort of mostly stable during the quarter, again, a reflection of Tsingshan's ability to manage their costs through centralized procurement and through the large stockpiles that they carry, which enables smoothing. An example of this as well is April ore costs. Obviously, with the spike in LME pricing and the benchmark Indonesian ore cost price ping to the LME price, Tsingshan was able to negotiate with some suppliers, supply of ore for April using the March cost. And so to give you some idea of what that means, the average for 1.754 ore in March was around USD 46. We could have possibly been faced with a cost of USD 75 for April. As I said, that's been largely avoided by using March costs, and we will look at May, which has declined and similar tactic may be employed. But again, all points to the ability of Tsingshan to manage their costs. Once again, I would point out that even if we see an increase in the ore costs, it's more than offset by an increase in the NPI price. And as I pointed out earlier, in April, we've already seen, we've already seen an increase in our realized pricing of around $2,000 a tonne. The other point to note is that rising ore costs drive higher NPI pricing. Given that NPI pricing is still set in China between a real buyer and seller, and again, if you were to compare current Chinese ore costs, which were about 127 [ CIFS ] for 1.8 versus our costs in April of USD 46 -- sorry, in March of USD 46 for 1.75, that's where that significant advantage and benefit lies. And that's why we're able to see this margin expansion. If we could just go to the next slide, please. In terms of the EBITDA per tonne, as I said, pleasingly, against -- despite global inflationary and cost pressures across the whole commodity context, if you look at where we were last year, March '21, we're up from $4,943 to $7,386, an almost 50% increase in EBITDA per tonne margin. And again, just highlights the industrial nature of the operations, but more importantly, our ability to manage costs, and I've just gone into that in some detail in the previous slide. If we could just go to the next slide, please. If you look at the gross margin numbers here, it's now around 40% and 42% for the March quarter. Again, these are industrial type margins. And again, just highlighting the industrial nature of our operations. If we can just move to the next slide, please. Turning to our EBITDA to cash flow conversion, 99%. You don't see that sort of cash flow conversion in a mining company. And again, we are more of an industrial company. This is delivered through minimal sustaining CapEx and obviously, the long-term tax holidays that we enjoy. If we could just move to the next slide. Angel Nickel, pleasingly, first NPI was tapped on the 25th of January, months ahead of the contracted date. Line 1 over the last 10 days has actually operated at 130% of nameplate capacity. So demonstrating the ability to achieve this result. That will reduce as the fourth line comes on. And what we're expecting moving forward until the power plant is commissioned in August, we will see Angel operating at about sort of 66% of nameplate capacity. Once that power plant comes online, we then expect that to ramp up to, in excess of 100% of nameplate. And as I said, it's pleasingly being demonstrated through the last few days of performance out of our first kiln. If we could just move to the next slide, please. Oracle Nickel progressing very well. Construction at about 60%. You can see from the aerial picture there, coming together very nicely. And that's well on track to tap first NPI before the end of February 2023. If you could just move to the next slide, please. On the corporate front, completed an equity raising to institutional investors of USD 106 million at $1.37 per share. It was very strongly supported by both new and existing shareholders. The condition of placement or Shanghai Decent of a further USD 106 million, also at the same AUD 1.37 share price. Pleasingly, we've just, as announced this morning, received further approval, and we'll be going to shareholder approval at an AGM within a week. The SPP was withdrawn due to market volatility, but that was extremely well supported up to sort of $55 million. In terms of Oracle Nickel, we've already secured a 10% interest upon shareholder approval, which we don't see any issue with receiving Shanghai Decent. We'll be taking a further USD 106 million of Nickel Mines shares. That will increase our company ownership in ONI to 30%. That will also increase Shanghai Decent interest in Nickel Mines. And we see that as a very strong signal and endorsement of Tsingshan in terms of their willingness to take scrip instead of cash and obviously further closely aligns the interest of the 2 companies. The material tax concessions I mentioned, pleasingly, have both been received for Angel Nickel and Oracle nickel. Just an update on nickel matte. We're just finalizing the minor capital modifications to enable us to produce nickel matte. Those should be completed by the middle of May. The decision as to when to switch from NPI to nickel matte, that will be determined by sort of the prevailing price relativities between each product. Given the current very strong NPI margins and the fact that in terms of the LME market, it's trading sideways. It's not really a real market as yet. We'd probably see more price downside than upside in the LME and [indiscernible] markets, which is what nickel matte would be linked to. So as I said, there has been no decision made as yet. And we will base our decision based on where we can see the strongest margins. And then finally, as mentioned earlier, final dividend declaration and payment of AUD 0.02 a share, bringing the total paid to 2021 to $0.04 a share. If we could just move to the next slide, please. ANI and ONI and just reinforcing the tremendous growth that NIC is undertaking this year. If you look at the top chart there, you can see, our production for financial year 2021. The green is the nameplate. The blue is the overproduction to 40,410 tonnes on a 100% basis last year that delivered us an EBITDA of USD 225 million. That's set to more than triple with ANI now ramping up and Oracle progressing very well and coming online in less than 12 months. That will deliver a more than three-fold increase in our EBITDA and our production profile, and you can see that will put us above 100,000 tonnes of nickel production per annum. And that firmly cements us in amongst the top 10 global nickel producers, remembering that this has been achieved in a little over 3 years. If we could just move to the next slide, please. In terms of summary, again, as I've just highlighted, Nickel Mines has a compelling growth profile. If you look at most of our listed peers, they're achieving growth through M&A, not through new growth. Our new growth is coming with CapEx guarantees, nameplate guarantees, time frame guarantees. Going to the second point, it's growth that doesn't rely on inflated commodity prices. We sit at the very bottom end of the cost curve, which is demonstrated and delivered quarter-on-quarter. We have a partner who has an unrivaled record of project delivery. All of our projects to date, including ANI have been 8 to 12 months ahead of schedule with a proven ramp-up profile. And if you look at Tsingshan, now build over 75 RKEF lines within Indonesia. It's a tremendous result. As I said, our partner, Tsingshan global leaders in the nickel industry and we're delighted for them to come closer and align their interests more closely with Nickel Mines as they increase their shareholding. And the production of nickel matte, which as I said, will be made at the appropriate time, that will allow us to be a diversified producer of Class I and Class II nickel, which again makes us unique. We would be the only listed nickel producer that would offer sort of exposure to a Class I and Class II nickel production. And so in summary, to quote an investor this morning, this quarter was a straight flush, lower costs, higher production and expanded margins, which have delivered a record quarter for us. With that, I'd like to hand over for Q&A.

[Operator Instructions] Your first question comes from Hayden Bairstow from Macquarie.

A couple from me. Just on that chart where you sort of got the implied increase in long-term guidance. Can you just give us an idea of what is a sensible NPI grade to use in the medium term because the NPL volume numbers have been okay. It's smaller grade have been better than what the original guidance was set at.

Yes. Look, that number sort of between 12% to 14% is probably the number that we've been working towards. Certainly, I don't think in excess of 14%, but perhaps on the higher side, closer to 14%, again, sort of range between that number.

And just on your costs, we obviously saw pretty punchy increases in global PCI prices and thermal coal prices in Indonesia. And what exposure to that do you have? And can you just give us an idea if we break down your costs at [ $12,000 ] a tonne with the movements we've seen in those commodities and nickel ore prices, what's the sort of mix now in those 3 key inputs?

Yes. Yes. Coming sort of firstly to former gold prices and power prices, that's actually reduced from $0.10 last quarter to $0.088 this quarter, reductant coal. And again, I mean, this speaks to Tsingshan's ability, they are able to substitute some other, are there other elements. So for example, nat coke in place of coking coal or coke can be used. So they are able to source sort of cheaper alternatives. And so that's actually resulted this quarter in a reduction -- in our reduction agent cost. So a slight increase in our smelting coal cost. That up about sort of $10 to $12. So again, it speaks to a very large centralized procurement team buying in volumes, very good at what they do in terms of procurement. We're not the hold to the spot market. And so I think it's a very key point that these guys are sort of -- had a very large team that is able to deliver exactly what they've done this quarter, which is smooth pricing. And in fact, we haven't seen a decrease in pricing. In terms of the cost breakdown, again, we've sort of seen this quarter. Nickel ore costs is the greatest percentage at around 36% followed by power at 29%, smelting coal, reductant coal, it's sort of 26% and then labors others on top of that. So if you look in the, that table is actually in the quarterly on Page 5, you can see it moves around a bit, but it's pretty steady in terms of the cost breakdown. As I said, probably the biggest cost pressure that we're facing now is probably going to come from nickel ore given its linkage to LME. But that increase in nickel ore will also drive higher NPI pricing given that the pricing still set in China and Chinese NPI producers are currently sitting at around a cost base of around $19,000, $20,000. If you look back historically, NPI prices are sort of tend to be set at the Chinese cost plus the margin to keep them in business. So whilst there is some pressures that may come through on all costs, we've already seen a significant increase in NPI pricing for the first month of this quarter.

And you have a natural hedge on the ore cost anyway with the mine production? Or is there a difference in the realized pricing out of there versus what your input prices?

No. Exactly, we do. And so we've seen it a record quarter in terms of EBITDA from the Hengjaya Mine. And given the increase in oil costs that we expect that, that may continue into this quarter.

Your next question comes from [ Chan Mui ] from Arkkan Capital.

Congrats on pretty solid results. A couple of questions on the cost to just follow up what was just asked. So number one is on the self-sufficient percentage of nickel ore from Hengjaya into your input. What's the current percentage? And I guess, number two is obviously, we're seeing a lot of cost increase in nickel, nickel ore, coal, and I think you've made reference to that, things should be relatively smooth. But I'm just curious if that is going to be a timing lag, right, for this quarter, obviously, margins have actually expanded despite those costs going up. So is that going to be just because of inventory time lag? And going forward, are we expecting higher costs?

In terms of the first question, our HNI and RNI operations use roughly saw 3.6 million to 3.8 million tonnes of ore per annum. Hengjaya Mine is currently delivering more than 800,000 tonnes of saprolite ore per quarter. So in excess of sort of 3 million tonnes per annum on an annualized basis. So you can see there's a natural hedge over sort of at least 75% of the ore costs. And we -- in terms of rebuilding a haul road between the Hengjaya Mine and IMIP, and once that's completed, we'd be looking to sort of ramp that saprolite ore production up to somewhere around sort of 5 million tonnes per annum. On your second question, really, the biggest cost pressures that we see coming through for this quarter will be from ore costs given their linkage to the LME nickel price. But as stated, the April costs have already been managed, and that's been achieved by applying the March price. And April was more than March, which is when the April price is set, that was when we saw the significant spike in LME pricing. May ore costs will be elevated. But again, coming back to the earlier point, it is once again offset by the increases in the NPI pricing, remembering that Chinese NPI producers are facing exactly the same oil pricing pressure. Other than they actually -- we benefit from a low recovery factor, which is used in determining the price. So any increase in LME price will always see the Chinese oil price increase at a significantly faster rate than the internal Indonesian ore cost. And so that's what helps to drive that margin expansion is that NPI prices which is set out of China are forced to increase to keep Chinese NPI producers in business.

So I guess in the rising cost environment that we are in, are you actually expecting further margin expansion?

Well, I think we'd say more than 50% margin expansion from this time last year. In terms of further expansion this quarter, look, I don't think we are sort of expecting to see significant increase. But I think what we are expecting to see is maintaining the significant gross margins of greater than 40%. So it doesn't get any better than that. Let me just ask the operator. We do have Mr. Weifeng Huang who's joined the call. He's in the waiting room. Are you able to let him in?

Yes, certainly, I'll just place him in the talking mode in the call.

Thank you.

Pardon me. We now have Mr. Huang on the call.

Okay. Look, everyone, I'd like to welcome Mr. Huang Weifeng, who has formerly [ joint-pro ]. He is the Vice Chairman of the Tsingshan Board of Directors, Chairman of Shanghai Decent Nickel Mines largest shareholder and also a Nonexecutive Director of Nickel Mines. Only made himself available to answer any questions that you may have [indiscernible] NIC's operations and Tsingshan's broader operations.

Your next question comes from Mr. Rob Willis from Bell Potter.

Congratulations on a cracking quarter. A couple of things I wanted to ask is back on nickel matte. Have you had to look at, I mean, the traditional sort of NPI to nickel matte conversion has been about 3,000 a tonne, right, at Vale and so on in Indonesia. I mean given that we -- the part makes its own in sulfuric acid and the rest of it, does that, can we think about the nickel map price -- that conversion price being a lot less than -- or significantly less than the traditional with that kits also pretty old, right? And what is the year-end mix going to be? Or you're going to be totally driven by market forces, and how quickly can you swap to deliver nickel matte into the market? Should there be a disparity between that and the NPI price? And secondly, have you've been advancing or had any more thoughts about a potential foreign dual listing or secondary listing in one of the Asian markets, given the difference in multiples of Nickel Mines and then the very least its Indonesian piece?

Thanks, Robbie. Look, in terms of nickel matte, there's some interesting dynamics playing out in the market at the moment. What we're seeing is nickel sulphate prices, which is the result of taking nickel matte or nickel briquettes and upgrading it to nickel sulfate are currently sitting at a significant discount to both LME and sulfate prices. So we are seeing a switch from Chinese nickel sulfate producers to -- from buying briquette to nickel matte. And so we've seen sort of expanded volumes coming out of Indonesia. And in fact, Tsingshan's already bought lines within IWIP online to also produce nickel matte. The payabilities for nickel matte, given that discount between the ultimate end product, nickel sulfate and LME are quite low. We're talking sort of the low to mid-80% payability. And so at this point in time, the margins between NPI and nickel matte are quite similar. But in terms of an end mix, we ultimately would like to get to a point where the company is sort of, has a pie of production, which is NPI nickel matte and then MHP from future HPAL collaboration that we anticipate undertaking. The question of how quickly, the sulfuric acid adding devices are being fitted, and they'll be up and completed sort of middle of this month. It's about 1 to 2 weeks to sort of change from producing NPI to a low-grade nickel matte. So that conversion can happen relatively quickly. But we'll be a seam producer where we see periods of opportunity and diversion and margin opportunity in, say, nickel matte will switch to producing nickel matte. To your second question around dual listing, we have done some exploratory work very early stage and just in terms of looking. I would point out that Tsingshan is in the process of listing its sort of battery side of the business on the Hong Kong Exchange. And so look, that's something that I said very exploratory at this point in time, but it's something that we're certainly aware of and have done some initial inquiries into where and how that might be achieved.

Your next question comes from David Coates from Bell Potter Securities.

Can I just -- well done on a good quarter. Some pretty nice metrics in there. I just follow on those questions from Robbie, just to be clear. When do you think will be producing nickel matte and what proportion of production is that like we were over the course of this year? That's my first question.

Yes, look, we, at this point in time, margins between nickel matte and NPI are quite similar. We -- given the sort of the conversion of 1 to 2 weeks and a small disruption that it would trade a period of sort of production of an off-spec product, which is still salable, we're not in a rush to produce nickel matte. Given that it's predominantly looks like it will be SHFE rather than LME and that the payabilities, as we mentioned, sort of potentially in the low to mid-80s. And we don't really see any price upside in LME or SHFE. In fact, we see more downside risk. At this point in time, it's not something that we're in a hurry to rush into doing, but it's something, obviously, we'll monitor market conditions. Nickel matte pricing can change, contracts may improve on that payability. We made good contracts in the future linked to nickel sulfate pricing rather than LME or SHFE. So we have the ability which is a positive, and we will sort of wait until we see the right market signals and are confident in achieving. Ultimately the aim of producing nickel matte is to try to sort of achieve greater margins where we may see a bifurcation between nickel matte LME pricing and NPI pricing.

No. I'm going to ask probably following up pretty shortly. And so Robbie did ask about the costs. And I think I recall from previous presentations that the indication was that the cost you guys to produce nickel matte will be pretty similar to your NPI traction, if I recall that correctly.

Correct. Yes. Yes. They would be on top of those costs or conversion cost that Robbie has indicated Vale is around $3,000. It would be significantly lower with an IMIP, but there is a conversion cost on top of that that needs to be considered too.

Okay. Okay. And then so the questions I originally had just quickly on that, your limonite productions ramped up. What can we expect for that over the balance of the calendar year is my first question there.

Yes. Probably where we're sitting at the moment is about 100,000 tonnes of limonite ore per month. We don't expect any change in that until that all road is completed later this year. And then we're targeting sort of a significant ramp-up in limonite somewhere in the order of sort of 3 million to 5 million tonnes per annum.

Right. Okay. And you, and again, you just touched on it with one of the earlier questions around collaboration on MHP with the other HFL without getting tested on that? Can you give us sort of an update on how those HFL production ramp-ups are going?

Yes. So Huayue Nickel Cobalt, who would buy limonite ore, that they had sort of successfully commissioned 3 out of 4 lines, and they're all ramping up. So for this quarter, they've already produced -- and this is still in a commissioning phase throughout the fourth line in operation 4,000 to 5,000 tonnes of nickel in MHP. So we expect that ramp up to sort of nameplate to be achieved second half of this year. I just -- sorry, so people may not defer because of the echo, but we do -- as I mentioned, Mr. Huang Weifeng on the call. As I said, as Vice Chairman of Tsingshan Board of Director and Chairman of Shanghai Decent, our largest shareholder and a Non-Executive Director of Nickel Mines. So should we -- if there is any questions for Huang, mainly he is answering them, if you would just ask them to -- just to mute his webcast while he's on the phone just to avoid the echo, which I think happened last time.

Yes, [indiscernible] now.

Thank you.

Your next question is from Patrick Collier from Credit Suisse.

Just back on the cost lags that a few others asked about. Are you able to talk about how the central procurement process to allocate costs to Nickel Mines? Just with regard to stockpiles and whether you're paying prices from potentially like a few months ago or that you're paying the most recent price? Or is it somewhere in between?

Yes, look, the -- given that it's a centralized procurement department, which we obviously don't manage. But if you look at the performance to date. They've continued to deliver thermal coking coal at significantly lower prices than we're seeing in the market and also being able to smooth where we've seen sort of periods of significant spikes. It is a large industrial park. I mean that's part of the Tsingshan's advantage is their experience, their size in terms of procurement and management of procurement. And that cost allocation, I mean, whilst they're not published, if you look across other RKEF operations, costs are very similar across all of the industrial park. And so they be effectively are paying the same price for coal and other elements as there are other tenants within the industrial park. So that cost allocation, as I said, is sort of -- it's consistent, and it's the same across the whole part.

I guess just on more on the accounting rather than consistency across the park like is it first in, first out top arrangement or last in first out, or are you not privy to that from the park?

Sorry, it's Chris here. Go ahead, Justin. Sorry.

Yes. First you go.

Sorry, Patrick, it's Chris Shepherd here. Look, it's, we're not entirely previous to it, but it's not -- one of the things we face this every quarter. Every quarter we have people worried that our costs are going to go up, every single quarter. And we have demonstrated that we maintain our margins through the cycle as costs are going up. It's the margins that everyone should be focusing on. If you worry that we're using inventories from 6 months ago and there's no inventories left, you only need to go back to the quarterlies and compare the inventories across Hengjaya and Ranger and you'll see there's been a very slight drawdown on the inventories of raw materials across those 2 entities. So I really think this focus on future costs. And are we -- how is it being managed is sort of missing the market, the industrial nature of our business. Yes. Sorry, Justin.

Your next question comes from Jim Lennon from Macquarie Bank.

Yes. Justin. Just a quick question on the limonite ore sales. Has it been determined what the limonite ore price will be? And is that going to be related to the same formula that the Indonesian government uses for separate iron ores? And secondly, just on the electricity price, you said that the electricity price had come down during the quarter. I note from the government website the coal price went up, the thermal coal price went up. How did the electricity price come down? Could you give some clarity on the mechanism behind electricity pricing?

On the first point, limonite ore, the Indonesian government is kind of playing a benchmark price, which is similar to the saprolite pricing, that hasn't yet been decided, but it will, as similar to saprolite ore recovery factor, which would be linked to the LME, which will determine a final limonite ore cost interestingly. It may also take into consideration cobalt credits, which would apply to limonite ore price. So I mean, we see upside mostly in the pricing of our limonite ore, but that's yet to be determined by the government as to whether they will introduce a benchmark limonite ore price, but the discussions are certainly underway. And we do think that we will see an outcome on that relatively soon. To the second question around our power costs, I think, again, people tend to look at different markets and different references of what spot prices at the moment and what spot price was over a period of time. I think it's important to note. Again, coming back to ability to manage stocks by the fact of the size of the ability to negotiate, particularly if you look at ore costs for April, the ability to negotiate a March price when you're potentially looking at ore costs in April of $70 to $75. The same applies to the procurement of thermal coal, given the significant volumes that they procure. It's -- again, looking at the spot sort of coal price for our business, it just doesn't work. And as Chris said, sort of time and time again we've delivered or demonstrated the ability to manage costs, where if you look at an index price. It would indicate increases or volatility. Tsingshan is able to manage this in a way that no other operation is and that's size and scale and buying power.

Okay. And just on the limonite side, will there be a cost of producing limonite ore. Is that incorporated within the saprolite cost?

Most of the cost is -- all of the mining cost is incorporated in the saprolite cost. The only cost would be the transportation costs. So once it's mined, delivering it from mine stockpiles to the IMIP, which is just it's a couple of dollars.

Your next question comes from [indiscernible] from Fosun Eurasia Capital.

Hello, Mr. Werner. Thank you for the additional quarter. And I'd like to ask a few questions because we are your bondholder. So my first question is about cash cost expectation, and there was in the presentation -- in the information that nickel ore costs were offset by electricity, and that's very fine. But what are your expectation about the next quarters? That's my first question. My second question is about -- on the ONI acquisition. In particular, how would you expect to raise additional funds to acquire the rest of 40% of [indiscernible]? That's my second question. And the third question about Tsingshan collaboration because market in general and in particular as your bondholders, we're concerned by Tsingshan's first place than as it is #1, your shareholder and [indiscernible]. What could it be the potential pressure on your day-to-day operations and financials, including debt. So my first question was about your cost, the expectation. My second was about on the acquisitions and third about Tsingshan. Thank you.

Thanks, Dimitri, going through each of those questions. Next quarter, as I've highlighted, we do expects to see some increases in ore costs given currently elevated LME costs. We believe though that will be offset, as I pointed out, by higher NPI prices. So the April contract is already $2,000 tonne above the average for the March contracts. And so that offsets any increase in ore costs. We don't expect to see any significant changes in thermal or coking coal across the quarter. So that's our outlook for costs across this quarter. So yes, we don't see any significant impact, which again, quarter-on-quarter, we haven't seen. And the reason for that is you have NPI prices rising faster than costs are rising. And the second question of the ONI acquisition, we had use USD 130 million cash on hand at the end of March. And we've stated to the market our intention to fund the acquisition potentially out of the mixture of debt and internally generated cash flow. The payment schedule given we don't have a -- our next major payment is not due until the end of this year. So we have a significant period of time, during which we expect to see first sales from ANI in May when we received our AUA. And we've already built up over sort of close to 1,500 tonnes there of nickel. So that is still being evaluated, but we have time, and we have flexibility in terms of how we fund that. And then thirdly, I'd invite Mr. Huang just to answer that question and perhaps give an update in terms of operations. And as I said, we see -- operations are unaffected as you can see from this quarter, but perhaps to trying to be able to provide some more color. So maybe if you'll add to that on record?

So you don't expect any pressure from the financial terms, including debt from Tsingshan, right?

That's correct. And to [ Xin Wie ], are you on the call or...

Yes. Justin, you want to direct the question to Mr. Huang?

If you could, yes.

Could I trouble the investor to repeat the question again, I'm sorry, for -- on Tsingshan.

Yes. The question was, what could be the potential pressure from the Tsingshan on your financials of, because Tsingshan has some short squeeze, and it's your major shareholder. So what do you think?

[Foreign Language]

[Foreign Language]

Right. So for a response to that is that Tsingshan's operations as we normally as Justin has mentioned. So he does not expect any financial impact to Nickel Mines.

[Foreign Language]

So Mr. Huang went on to say that the operations of Tsingshan is separate from its future activities on the futures market and the operations as per normal. And it's -- as we can see from the combined performance, there's no impact on that. With regards to the activities on Tsingshan, I think Mr. Huang refers the audience to the only statement that has been made by Tsingshan, which is that they have come to a definitive agreement with the brokerage bank and is in the process of orderly. I'm drilling with the matter which includes the orderly and state of certain positions. So these are on 2 different tracks, and they are not interrelated.

Okay. And my last question to you is about your dividend policy. And as your cash flow would like to grow in the next future as new operations continue. So what are your expectation on dividend policy? And what would be the shareholders' remuneration in terms of cash flow or maybe net income?

Yes, most, we don't have a fully enunciated dividend policy at this stage given the regard, but we're currently in the midst of -- we did release to the market that our intention is to maintain at least a dividend of AUD 0.03 as a minimum, but that we would provide guidance if that was to change. Obviously, last year, we paid $0.04. And so in terms of the dividend going back to the earlier statement, that would be the intention moving forward. But we will obviously make -- notify the market if that was to change.

Your next question is a follow-up question from Chan Mui from Arkkan Capital.

So I guess first question is, I think the sales efficiency of the Hengjaya Mine, you said is the production there is increasing to, from 3 to 5, right? So if we pro forma the 5, and when Angel comes online and how sufficient will that be kind of after actual Angel becomes production? And I guess second question, I think, for Mr. Huang, I guess, is the co-procurement of the parks to produce the captive power. Are those prices on kind of term contracts, term price contracts? Or how much volatility is there to kind of spot market for the coal that they procure for the parks?

Thanks. I'll take the first question. The Angel Nickel RKEF loans are located on a separate island on Halmahera. And so they're not close to the HNI. So Angel will be fed from a number of suppliers in and around operations with largest being whether by nickel, which is supplying already some sort of 8 million tonnes and ramping up into the IWIP industrial park. That's 5 million tonnes of saprolite that I've mentioned, that will see HNI and RNI 100% hedged. And then a portion of Oracle Nickel as that comes online, also hedged through the Angel Mine production. As announced to the market, we are actively in the process of acquiring new nickel resources and we hope to continue to build on the nickel resource base to increase nickel ores quite as a hedge, but not only the resources are becoming more valuable. And obviously, margins in the mining business continue to grow. On the second question to me, if you could just perhaps translate that question from Mr. Huang around coal procurement and term price contracts and sort of volatility to spot pricing.

Sorry, can you just repeat the question, please? At the investor from Arkkan Capital, it's [ CFOD ].

Sure. So the question to Mr. Huang is we would like to get a little bit of insight as to the coal procurement into the parks for the power generation, right? So does the parts or Tsingshan have, I guess, captive coal mines, so that prices is not subject to spot movements? Or do they have long-term contracts and what long-term pricing? How -- and I guess, how much spot volatility is there in terms of kind of their coal costs?

Yes. Okay. So I'll let Xin Wie translate, but I would expect that the answer is going to be that these are -- you're delving now writing into the operations at the industrial parks and they are private matters, but I will allow Xin Wie to translate that. All right.

[Interpreted] I think that -- in the industrial part, they generally work with long-term suppliers. But having said that, it will -- the prices will be on a spot basis. So that's why I think I just wanted to say that the power price do get affected by fluctuations in coal price. He further explains that after the industrial parts for core procurement at least works on the first in, first out basis. So there will be an expected delay in passing through coal cost. Mr. Huang adds on that the core procurement is conducted uniformly or centrally across the industrial park. So the various power plants will, at any one point, will be subject to the same procurement price. Having said that, that also means that we have the bargaining power collectively due to the entire demand from the industrial parks.

Thank you. There are no further questions at this time. I'll now hand back to Mr. Werner for closing remarks.

Look, thank you, everyone, again for your time. Just to reiterate again, a very pleasing quarter, a number of records across the generation of the RKEF assets and our Hengjaya Mine. We contributed growth and a smooth ramp-up of Angel Nickel and excellent progress of Oracle Nickel. And I sort of like of course thanking Mr. Huang for making himself available again to reiterate this comment. We have no impact on production, which we've seen this quarter. And so looking forward to delivery of another strong quarter, next quarter as we continue to see increased nickel production from the ramp-up of Angel Nickel and also first sales, which will help to deliver a significant revenue and EBITDA boost for the upcoming quarter. So with that, thank you, everyone, for your time, and we'll sign off here.

Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]