NICMF (NICMF) Q2 2026 Earnings Report, Transcript and Summary

Hello, and welcome to the Nickel Industries Limited 2026 Half Year Results Call. [Operator Instructions] I will now turn the conference over to Justin Werner, Managing Director. Please go ahead.

Thank you, everyone, and welcome to the half year results presentation. If I could just ask the moderator to move to the next slide, please. Start with Safety and ESG, zero 12-month LTIFR, 0.45 12-month TRIFR. So these are world-class safety figures, 18 million safe man hours worked over the past 12 months. In terms of ESG, once again, we were awarded the Green PROPER rating from the Indonesian Ministry of Environment and Forestry, 1 of only 3 nickel mining companies to achieve that rating. We entered into an agreement to look at feasibility of natural hydrogen in and around the Hengjaya mining lease, which could offer potentially low-cost clean energy source in the future. We inaugurated a 197-hectare biodiversity conservation area, a short distance from the Hengjaya Mine. And again, one of very few mines to have successfully been able to inaugurate a biodiversity area. The scholarship program continues to progress very well. We now have 30 students actively enrolled in a number of disciplines. And then finally, on the CSR side, we received CSR awards for excellence in community development, and we also won awards for some of our RKEF operations at the HR Asia Awards. If we could just move to the next slide, half year summary. Very solid results from the existing business prior to any contribution from commissioning of the ENC project. If you could just move to the next slide, please. Group operations and corporate highlights, USD 247.6 million of adjusted EBITDA, up 46% from the same time last year. We also announced the $1.3 billion Sampala valuation in return for a share swap -- sorry, if you could go back -- in return for a share swap in the CNE HPAL, which I'll talk about a little bit later on. We also announced the 1 billion wet metric tonne resource at our Sampala project. So that is a world-class resource. At our mine operations, adjusted EBITDA of USD 73.4 million, up 4% on the same period last year, although -- and I'll talk about this a little bit later on, expect to see a significantly increased EBITDA from the mine off the back of a change in HPM pricing. 5.9 million metric tonnes of ore sales, so on track, same as last year, but we are ramping up towards the back end of this year with ENC commissioning, and I'll touch on that a little bit later. EBITDA per tonne margins from the mine were $12.40, and that was also up 5%. Where we see the majority of the improvement in this half was really from our NPI business. Adjusted EBITDA of $146.7 million, up 87%. In terms of nickel sales, they were down slightly. That was in relation to some plant maintenance that was undertaken at ANI and ONI, which are really our 2 major NPI producers. And the -- we've had -- these results were really driven by a strengthening NPI price, which was $13,784 per tonne for the half, which is up 21% on the same time last year. And then finally, HPAL performed very well in the first half of this year. Adjusted EBITDA from our 10% interest in HNC was USD 35.2 million, up 31% from the same time the previous year. And we're pleased to announce our maiden dividend distribution of USD 3.5 million. And then moving to ENC, tremendous milestone of first MHP production in July, followed not too shortly afterwards by first cathode in August. If we could just move to the next slide. Looking at the P&L and adjusted EBITDA. The real drivers of that significant improvement, 46% improvement in EBITDA was the nickel pig iron price mentioned up 21% to $13,784. And as of today, it continues to strengthen past $14,000 a tonne. The LME price has also risen significantly, up 15% and averaged $17,700 for the first half of this year. We've been able to -- we were able -- and we were one of a very small number of companies that was able to increase our RKAB quota from 9 million last year to 14.3 million this year, and that will drive some continued improved EBITDA. And then we've seen at the mine more recently, changes in the ore price, which are flowing through to very strong margins at the HM mine and resilient NPI production. So despite the maintenance that I mentioned, we were fairly much similar to the last year. If we could just go to the next slide, please. I'll hand over to Chris just to talk through the balance sheet and the next earnings waterfall.

Thank you, Justin. Good morning, everybody. On the balance sheet, the key balance sheet movements between December and June, so 31 December and 30 June, USD 240 million was related to the Sphere transaction. So we had a $239 million receivable as at 31 December and a $240 million payable to Decent. That's in relation to the 10% interest in ENC that Sphere invested. Those receivables and payables have obviously been received during the period. So that is the main reason for the movement in current liabilities and assets. Net debt of $980 million or $982 million as at 30 June. Importantly, for our covenants, that sits us at about a 2.3x leverage ratio, which is within our 3.5x max covenant post our recent refinancing of our bank loans. If it's -- if the leverage stays at that level at 2.3x, our margin over SOFR will fall from 3.5% to 2.5% by the end of this year, which effectively reduces our current -- our cost of debt from the current 7.1% under the bank loans to 6.1%. Can we move to the next slide, please? We've got our profit -- we've just set out the profit and adjusted EBITDA reconciliations here on the chart on the left-hand side. You can see the contribution from the 3 core businesses, the RKEF business of $147 million, the HPAL business of $35 million. And so that's HNC and Tsing Creation, our trading entity and $73 million from Hengjaya Mine -- $73 million from Hengjaya Mine. The total being there of $255 million from operations. There's $7.6 million of Nickel overheads to get us to our final $247 million of adjusted EBITDA for the first half of 2026. On the right-hand side, we then provide the bridge from adjusted EBITDA to profit, and we can see the key items being obviously the $80 million D&A, $29 million in taxes. Our net finance costs of just under $50 million and then some FX related charges of just under $16 million to give us our NPAT for the first half of 2026 of $74 million. Can we move to the next slide, please? On the cash flow waterfall, some 3 key items. We've got $65 million of cash flow. You can see that on the right-hand chart, the first 2 columns, the $77.5 million, operating cash flow less the CapEx of $12 million. That's what we say our cash flow prior to any growth in debt. Our higher earnings were partly -- as we've mentioned, they're partly absorbed by the -- by an increase in nickel ore stockpiles of approximately $30 million. That primarily relates to limonite as we're preparing for the ongoing commissioning of ENC. Taxes and royalties paid and then a decrease in trade payables of approximately $40 million across the half year. We've had growth spend of $137 million throughout the first half of the year, $46 million of that was for our final ENC payment for our final 2% to take us from 44% to 46% equity interest in ENC. Our Sampala development CapEx of approximately $26 million across the half year and then an acquisition payment of $28.5 million for Sampala. That was the advance payment that we announced in May of this year. Our net borrowings following the successful syndicated loan in April of refinancing the outstanding $400 million of bank loans to $450 million of the syndicated loans in April. They are the key items there, we can -- it shows the movement from -- of cash from $320 million -- $323 million at the start of the year to $260 million. So a strong cash balance of $260 million as we head into the second half of 2026. Justin, back to you on Page 8.

Yes. Thanks, Chris. If we could move to the next slide, please. I'll start with the mining operations, 5.9 million wet metric tonnes for the first half of this year, basically on track, the same as the first half of last year. We do have an RKAB for. 14.3 million for the remainder of the year, and we saw a very strong July where we delivered 1.4 million tonnes, and we're on track to potentially exceed that number in August. So expect to see a stronger ramp-up in tonnes in the second half of this year. The average realized sales grew by 28% to USD 31.30. That, again, has increased significantly in the June quarter. And so we expect to see the flow on of those -- of that adoption of the HPM price into the third and fourth quarters of this year. Operating costs were up slightly, $18.7 million. Well, they're up significantly versus the first half of last year, and that was really driven by higher royalties. Adjusted EBITDA of USD 73.4 million, that was up 4%. I think what you'll see is in June, we delivered a $45.7 million EBITDA just for the month of June. And so we only really adopted the new HPM pricing in May. And we did have in the June quarter 14 days of lost production. So the third quarter of this year will be the first full quarter at that new HPM price. And if you look at the adjusted EBITDA per wet metric tonne, it was $12.40 for the first half of 2026. It was $15.90 in the June quarter, and we would expect that EBITDA per tonne margin to continue to rise across the third and fourth quarters of this year. So looking forward to a very strong second half to the year from the Hengjaya Mine through increased volumes versus the first half of this year and increased EBITDA per tonne margins due to the new ore pricing regime. If we could just go to the next slide, please. We were very pleased to announce the Sampala JORC Resource upgrade. Over 1 billion wet metric tonnes with margins currently at around $15.90, you can see the value of that ore body. That contains 8 million tonnes of nickel. So it makes it one of the largest ore resources globally. We were able to leverage the value of that ore body into a share swap for 18% of Sampala's ANN and ETL IUPs, remembering there's actually 3 IUPs, it's only 2 of the 3 IUPs for a 36% interest in the CNE HPAL project, which has about 28,000 tonnes of nickel capacity for 0 cash. That share swap implies a Sampala valuation of above USD 1.3 billion. So it's about a 5.4x value uplift on the consideration that we paid -- that we will pay for the project. In terms of project development, good progress continues to be made. Both the ETL and ANN IUPs, the feasibility studies are being progressed, and we're hopeful of approval of those in the coming weeks. In terms of the construction of the 24 kilometers of haul road, the first 8 kilometers has been completed. The remaining 16 kilometers, we're just waiting on the relevant permits to be issued to be able to continue that 16-kilometer section. At the Siduarsi project, feasibility study is also under review, and that's initially looking at a 2 million tonne per annum ore operation. For Sampala, we're looking at about 19 million to 20 million. So a similar size to what it is or the intention of that Hengjaya Mine. And I should add that we have made an application to increase from the 14.3 million at Hengjaya, and we are hopeful of hearing the results of that very shortly as well. If we could just move to the next slide, please. RKEF operations, nickel production down slightly due to some scheduled maintenance at the power plants and RKEF lines at ANI and ONI, which produced the bulk of our NPI. We did also start a kiln and furnace rebuild on one of the HNI kilns at the end of June. Cash costs were up 13% to $11,480, driven by the Indonesian government raising the benchmark saprolite ore pricing. Sale price up $13,700 to $13,784 a tonne, up 21%. And pleasingly, EBITDA up 87% to USD 146.7 million. So I think that clearly demonstrates the leverage that would have to an improvement in both the NPI and the LME price. So we've got a 21% increase in the NPI price, an 87% increase in adjusted EBITDA. And if you look at the EBITDA per tonne margin, that's gone from $1,250 to $2,500, that's a 100% increase in the EBITDA per tonne. And if you look at NPI demand looking forward, one of the analysts, CRU, they're talking about an additional 697,000 tonnes of nickel required to meet stainless growth, which is about 62% of incremental nickel demand. And currently, there's a moratorium on any new NPI growth in Indonesia. So growing demand for NPI through growth in stainless, but a cap on supply. So we think that looking forward, the NPI business looks to be very strong, and that's supported by the first half results. If we could just move to the next slide, please. At our HPAL operations, commissioning of ENC is progressing well. We began commissioning in May. We've now announced subsequent to that first cathode and first MHP production. We currently have 2 kilns that are in the process of commissioning. They're at about 50% capacity. And we should have an update shortly as to when we will be able to start the commissioning of the third kiln. One of the challenges we are coming up against is it's extremely dry wet season. And so we're just looking at ensuring that we can secure enough water for the whole operation. But other than that, the commissioning is progressing well. At HNC, $35.2 million in adjusted EBITDA, up 31%. Nickel sales were down by about 10%. EBITDA per tonne margin up 52%. So very strong margins from MHP for the first half of this year of $9,113 a tonne. There is obviously some pressures coming through in regards to the cost of sulfur and the situation in the Middle East. I think pleasingly, the June quarter margins were still at $8,090 a tonne at HNC. And we announced the first maiden distribution from HNC of USD 3.5 million. If we could just go to the next slide, please. HPAL is really where we'll see the next leg of growth. And I think if you look at the mine and NPI numbers, they're very, very strong. If we didn't have any contribution from ENC this year, I think we would still be on track to be somewhere around USD 0.5 billion in EBITDA just from the mine and NPI business alone. But you look at what is coming on over the course of sort of the next 12 to 18 months, we have ENC obviously commissioning NIC's attributable interest in that is 33,000 tonnes. Just to remind everyone, has a 15-year tax holiday with an additional 2 years at 11%. And it's the first HPAL globally that will produce MHP, nickel and cobalt sulfate and nickel cathode. And before the end of last year, we announced the transaction with Sphere who is 1 of only 5 accredited suppliers to SpaceX and the only one with a long-term 10-year contract. So nickel cathode will be going into SpaceX rockets. The quality of the cathode that's been produced thus far is very good. And so we're confident that, that will allow us to achieve LME registration. That will take some time. But with LME registration, we should be able to command a premium. The recently announced HPAL transactions, I'll start with TMI. That's $169 million required to be paid in November. That will give NIC 7,000 tonnes of attributable nickel metal. It's in a very strong consortium of Korean and Japanese partners, LS mnM, who are a significant global copper refiner as well as other base metals and cathode producer. Hanwa, Japanese trading company with long deep roots into Indonesia and another unnamed strategic investor who's a global player in the EV chain. As with all of our previous projects, that comes with a CapEx guarantee. And Sampala has signed an MoU to be the exclusive supplier of ore to this project, and we feel the integration should bode favorably when it comes time for [ RKAB ] application at Sampala. And then secondly, CNE, which I touched on in Sampala, effectively swapping an 18% interest in the Sampala project, the ANN and ETL IUPs for nil cash consideration for a 36% interest in CNE. That will give NIC about 10,000 tonnes of attributable nickel metal. So effectively, if you look at the 2 transactions, we're acquiring 17,000 tonnes of additional incremental high-margin MHP for a cash consideration of USD 169 million. So that's a capital intensity of around USD 10,000 a tonne, which is significantly lower than any of our peers are paying or have paid in the market to access high-margin MHP units. If we could just move to the final slide, please. I think this first half has really demonstrated our leverage in the nickel prices given our strong production base. And that was demonstrated through 21% increase in NPI price translating into an 87% increase in EBITDA at our RKEF operations. And we're yet to see any contribution from ENC and then looking forward from CNE and TMI. We're positioned at the very bottom end of the cost curve through our scale and integration. And I think if you look at particularly the first half of last year, where it was -- we were at cyclical lows and a number of our peers were loss-making even during that difficult time, we were able to make a robust margin. Now that we're coming into a period of significantly improved pricing and a much better market outlook, you can see what that has done to our bottom line. Again, a reminder of the material tax concessions that we have and the benefit that brings up to 15 years for our ENC project. We are one of the largest owners of nickel resources globally, and we're seeing strengthening mine margins. So expect for the second half of this year, we're looking forward to increased volumes and significantly stronger margins and also a very strong focus on bringing on Sampala next year into production. And we have a clear pathway that's funded to this growth. And we think this growth, when you combine the incremental HPAL product margins that will come on over the course of the next 12 to 18 months, along with margins from Sampala at a 19 million to 20 million tonne run rate, that sets us up well to targeting EBITDA of USD 1 billion in the next sort of 2 to 3 years. If you look at the market itself, again, coming back to CRU, they believe there's probably about an additional 1.1 million tonnes of nickel demand up until the end of 2030. So that's a CAGR of about 5.6%, 700,000 of that to come from stainless. And so that obviously bodes very well for the NPI business given the lack of new supply coming on. About 250,000 of that from battery and then another 150,000 from other, and that's products such as super alloys, which obviously is the market that ENC will be selling into through the transaction with Spear and the supply to SpaceX. With that, I'll hand over to Q&A.

[Operator Instructions] Your first question comes from the line of Lyndon Fagan of JPMorgan.

Look, the first one, just a bit of accounting treatment tidy up. So with mining, at what point are we going to see all of the revenue going into segment, i.e., I guess, the HPAL division consuming whatever is left there. I guess, are you able to give some color on when that will be 0 revenue, i.e., it's going to feed everything internally?

Chris, do you want to take this one?

Chris' line has dropped.

Okay. I think we've lost Chris, Lyndon.

That's okay. I can take it offline. Okay. The other one was just to pick up on your $1 billion EBITDA comments. Are we able to break that down by division? I guess I'm a bit under that. So just trying to kind of figure out what I might be missing there.

Sorry, Lyndon. I've just been cut off. I heard you say first one is for an accounting treatment tidy up, and then I've been cut off the line. I've just dialed back in. I...

No, that's all right. I guess what I'm trying to determine is just when all of the mining revenue will be into segment. And so I guess that relies on the HPAL division consuming, I guess, the remaining portion of revenue there that's going externally. When should we expect that to be showing 0 revenue in the segment reporting?

Zero revenue -- for the limonite and the saprolite, or just the limonite?

Yes. So I guess at this stage, it's already 0 for limonite and we're seeing the saprolite. When are we going...

The saprolite is all internal. So we eliminate that out already. So the intercompany revenues you're seeing there in the nickel ore mining, that's saprolite revenue -- whereas the limonite ore sales are currently to -- have been to third parties. We have been selling to third parties. So they have not been getting eliminated. We will have a very -- it won't be the same for -- it will be a little bit different when we have bring on ENC and we have the revenues there because we're not going to be consolidating ENC. It's going to be equity accounted treatment. So you'll see in our next set of accounts, in the December accounts, there'll be slightly expanded disclosure. What you're seeing there in the HPAL projects, the revenue of [ ENC ], which is backed out, that is -- that's the revenue, the sales from HNC to Tsing Creation. So that's very different. So HNC, where we've got our 10% interest sells to our trading entity. So we're backing that out.

Yes. So I've got the trading bit sorted. It's really just to try and figure out at what point is the mining division just feeding everything internally to RKEF and HPAL. Are we going to get to that point in the next year?

The intention -- well, currently saprolite, yes. And we intend to prioritize all of our limonite into ENC. And if there is any external left over, then we will sell it externally. But the hope and the plan is that all sales will be internal to the group.

Yes. So that will -- once ENC is ramped up, we basically won't be seeing any revenue in the mining segment. Is that fair?

No, no, no. You'll see it the nickel ore mining will be exact -- sorry, yes, you're right.

There'll be an intersegment elimination all of -- yes -- and when is ENC expected to be fully ramped up to sort of trigger that?

Justin, do you want to talk about the ramp-up timing?

Yes. So we're at 50% of the first 2 autoclaves. We're just waiting on the decision and the timing for the commissioning of the third and final autoclave and then we'll be able to give a more definitive answer, but the target is still very much before the end of this year.

Great. And then Justin, just to pick up on the $1 billion EBITDA target, how should we split that up across the various segments?

Yes. Look, using today's margins, if you assume about 125,000 tonnes of nickel in NPI at $2,500 a tonne, gives you about USD 300 million in EBITDA. If you take the Hengjaya Mine at 14.3 million and you use current margins of sort of $15.90 or $16, it's about $225 million. So that's the as is operations at the moment. So I said it's about $0.5 billion. And that's sort of -- that's supported with the USD 247 million of EBITDA for the first half of this year. Then looking forward, if you look at HPAL, we've got 60,000 tonnes of attributable nickel units coming through from ENC, CNE and TMI. If you use the June quarter margins, which were sort of around $8,000 a tonne, you've got another $480 million. And then you've got Sampala at sort of 20 million tonnes, again, at that $15.90 margin, you've got about another $300 million. So those 3 broad numbers, that takes you to sort of in excess of that USD 1 billion in EBITDA.

Your next question comes from the line of Richard Knights of Barrenjoey.

Just wanted to push you a little bit on the water issue at ENC. What exactly are you looking for there in terms of permitting? And how should we be thinking about the ramp-up? Are you still expecting to hit nameplate by sort of the end of the year? Or how should we think about the risks to that?

Yes. So we have had an above-average dry season. In fact, it's been a very dry season. Given obviously the growth in the park and the size of the park, we are looking at what water is available. We do draw water from one of the major rivers, and that's sort of -- it's at a very low level at this point in time. Look, we think we're confident that when the wet season comes on, which is in the next 2 to 3 months, it will return back to normal. So that's just -- it's something that we're just looking at, at the moment. And that will really determine when we're ready to start commissioning of the third autoclave. So at the moment, we've got 2 commission and the commissioning there is going very well. Availability of water will determine when we start the commissioning of the third autoclave. But we still remain confident given that we should be coming out of the dry season fairly soon that we'll be able to achieve that nameplate by the end of the year.

And the 2 autoclaves that ramp that are operating, they're running, you said about 50% June...

They're already at that 50% of their nameplate.

And so we should expect those 2 to be running at that sort of nameplate by the end of the year with a degree of confidence.

Look, I would think within the next sort of 2 months.

Okay. And then maybe just pushing a little bit on sulfur prices and the impact there. I mean, does that come into your thinking at all in terms of the ramp-up at ENC? And then I suppose the counter to that is what nickel and MHP prices doing, how are those realizations looking? Have you even sold any material from ENC yet?

Yes. So we are still awaiting for the IUI or the sales license to be able to sell some MHP from ENC. And we're confident of sort of getting that in the near term. So that will allow us to make the first sales of MHP, and we also have some cathode, which has been produced. MHP payabilities are holding up quite strongly. Sulfur obviously continues to be a challenge looking forward, although we are sitting at around still about 44,000 tonnes of sulfur in stockpiles. So we do still have a good buffer there until we have to sort of go out into the market and buy some meaningful volumes.

And then maybe just a question on regional quotas. We haven't seen anything firm yet, but there's been rumors that Weda Bay, the sort of 20 million tonne shortfall that Tsingshan had there has now been granted. I suppose what are you seeing in terms of additional quotas being granted halfway through the year? And how do you expect that to inform your application at Hengjaya?

Yes. Look, there was some unfounded news that went out that Weda Bay had received a 20 million tonne increase, but that hasn't been verified. And in fact, before the RKAB quotas are released, they're just waiting for confirmation from the government as to whether they will be making any increases in the RKAB. I believe based on -- I mean, we've been through iterations of evaluation. I think now that we should be in the next 2 to 3 weeks, potentially even earlier than that, we should know the outcome of the applications that have been made by all participants and who may or may not receive an increase. But at this point in time, we're not aware of anyone that's been issued an increase. And there certainly hasn't been anything formal from the government to indicate that there's going to be a new RKAB quota level set. And I think that's really what everyone is waiting for that confirmation of what the number is, whether they're going to stick with it or whether they're going to make an adjustment.

That's interesting. And then just one last one for me, just on the balance sheet. Can you just remind us of the timing of the payments for Sampala and for TMI, CNE...

Yes. TMI, there's $169 million due in November. CNE, you just said payments for TMI and CNE, there's actually no payment for CNE. That's the share swap. And then the remaining payment for Sampala is in April, $144 million for our equity interest in the project. That's in April '27. The follow-up, which other people may have, and I'm expecting to get it is we announced when we did the transaction for TMI, the $169 million payment that should we require it, Tsingshan would look to fund, would be available to fund if required. Subsequent to year-end, we've now actually entered into a facility agreement with a partner of Tsingshan for that purpose. So obviously, we haven't drawn down any of it. I'm not expecting to draw down on it. But for completeness, that facility is there. It's been executed. So if we did require it, we can draw down on that.

And that's a $144 million facility. Is it?

Sorry. The facility is $169 million to match the TMI payment, which is due in November.

Your next question comes from the line of David Coates of Bell Potter Securities.

Congratulations on a good result. Just a couple of quick ones from me, hopefully. Just on the mining, the mining ramp-up, you're waiting on the RKAB license. What's your mining strategy in the meantime? Are you sort of running flat chat and then -- and banking on the sort of permit coming through? Or are you adjusting your mining volumes like in case it doesn't or there's a delay? That's the first one.

Thanks, Dave. Yes, for the mining strategy, we've sort of kept it at about 6 million for the first half of this year in anticipation of saving volumes for the ENC commissioning and ramp-up. We did 1.4 million tonnes in July, probably on track to do about 1.5 million in August. And we're just sort of matching the demands of ENC along with the -- making sure that we sort of get close to our -- or we meet our RKAB target. What we do have, which is great is we have the flexibility of third-party limonite sales to other HPAL producers. So we're just -- we're balancing that against the RKAB quota and then against the commissioning and anticipated limonite requirements coming from ENC. And like I said, hopefully, we'll have -- we'll know the outcomes of our RKAB application in the coming weeks. And then depending on what that is, we do have a strategy in place to -- if required, if we do need to ramp up how we can look to achieve that ramp-up for the larger volumes, if we're successful in our application to increase.

And just a quick reminder, that's 19-point-something million tonnes that application you made. Is that correct?

Yes, application for 19 million tonnes.

And then secondly, the registration of nickel cathode with the LME, you mentioned it might take some time. And I don't particularly want to hold you to a schedule that's probably a bit out of control. But broadly speaking, what kind of time line are you looking at? And what kind of marketing plans do you -- will that kind of enable that you'd be interested in pursuing assuming it comes through?

Yes. Look, our Head of Battery Materials, Simon Miller, he's really driving that LME registration process. My understanding is that it will probably be about an 18-month time frame. But that's sort of the target that we're working towards for the registration. I think what's interesting for cathode is obviously, we already have a large volume that's accounted for outside of the LME for Sphere. And I think their volumes requirements will continue to grow with the growth of SpaceX and the forecast growth of SpaceX and their super alloy requirements.

But you look to leverage that LME premium pricing into that Sphere offtake or...

Yes, yes, absolutely.

Your next question comes from the line of Donavan Tan of BlackRock.

I think I have a couple of clarification questions. Apologies. I didn't hear it clearly. But can I just double check that some cathode has already been produced, one? And two, when you were speaking about the kind of EBITDA waterfall, it's going to be $300 million from RKEF, $0.5 billion from the HPAL and about $300 million from the mines. Is that correct?

Yes. Thanks, Donavan. That's correct. We -- first cathode has been produced and the quality that we're producing subsequent to that is very good. So we're very happy with that. Just in terms of the EBITDA, yes, we're looking at about $300 million from the NPI business, about $200 million from Hengjaya Mine, about $300 million from Sampala. And then from the HPAL, we've got 60,000 tonnes of attributable at nameplate. And really, it depends what margin you use there. We've used the June quarter margin of 8,000 tonnes. So that's another sort of $480 million of EBITDA there.

Got it. So I have 2 questions. So the first one is just asking about the Sphere side of thing from ENC. I understand the products will be kind of pro rata. Is there any expectation for selling your own share of the ENC products over the Sphere, so like incremental demand from them?

Yes. So they obviously have the right to offtake their pro rata 10%. We have entered into an agreement to provide over and above that 10% due to their demand. And I think that demand will continue to grow. And obviously, subject to the pricing being competitive, then we'd look to entertain further cathode sales to Sphere.

Got it. And I think just one final question for myself. I think this is regarding a headline back in July where Tsingshan suspended some exports of metal products. So I understand that you guys sell it to Tsingshan, which is not exactly an export, but have they communicated anything about this to you guys?

Yes. They did pare back some of the production at the IWIP, HPAL operations. I should note that those operations aren't integrated with ore supply. And so as a result, they are paying a much higher price for ore than ENC. And so I think they took a decision just to pare back the production. So again, look, we think it just demonstrates the benefit of being integrated and sitting at the bottom end of the cost curve.

Your next question comes from the line of William Jing of ION Analytics.

So I have just one follow-up question about the mining strategy. So basically, we've seen very strong production at the Hengjaya Mine. And at the same time, our production at the ENC project is still ramping up. So therefore, there should be kind of like a mismatch between the strong production at Hengjaya Mine, which produced limonite used in ENC production. So I just wonder like in case that the limonite production is very strong that outpaced the need for limonite at ENC. So are we going to sell all those excess limonite production to third-party or we're going to stockpile it until like ENC reach its nameplate production and consume all the limonite? Yes. Because I guess we are going to exhaust all the RKAB quota this year so that we can keep the same quota or lift our quota next year. So therefore, I think probably you guys want to produce like up to the RKAB quota.

Thanks, William. No, that's absolutely right. Our target is to get -- is to produce right up to the RKAB quota. And so at the moment, our strongest margins come from the saprolite given the very, very good pricing that we're seeing there. And we have 30 million tonnes stockpiled. So we -- there's no risk of us running out of limonite for ENC, but we're just balancing -- we'll continue to balance ENC's demands along with ensuring that we hit our RKAB target. And I think what's positive there is we have the flexibility of third-party limonite sales. And at this point in time, they want to take everything that we produce. So that's how we're sort of managing the RKAB and limonite sales.

Got it. Just one more follow-up question on the HPM -- sorry, the royalty on the limonite based on the HPM price, sorry. So basically, I think a few quarters ago, you guys mentioned that -- although the HPM for limonite is higher than the market price, but then actually the transactions for limonite are actually happening on a level which is lower than HPM, which basically means that we need to pay more royalties based on the higher market level HPM price. So just wondering if that changed or whether like the buyers for the limonite is accepting a higher price, which basically means that we are not undertaking -- like paying more royalties than the market price -- sorry, than the HPM or it's like we're still like paying royalties more on the higher HPM price, but then selling the limonite market price. So maybe I'm not being clear enough.

No, I think I understand what you're saying. You're right. We are paying more royalties on limonite, and we haven't seen any change in the market price. And that market price has been pretty consistent for sort of the last 3 years, sort of sitting around that sort of $20, $22 a tonne sale price. So that -- I don't think there will be any changes in that in the foreseeable future. But on the saprolite side, we've seen very strong growth in margins there, and that's really because of the increase in the HPM price there. So I mean if you look quarter-on-quarter, our first quarter average saprolite sale price was around $30 and then the June quarter, that had risen to sort of $51.60. So we're making up margin in the saprolite.

Your next question comes from the line of Love Sharma of Point72.

So 2 questions from me. First one, if you can just highlight the working capital usage for the first half and if you can break it down between first quarter and the second quarter. It seems to be quite decent given the gap between your EBITDA and the operating cash flow. And second one, about the question about Tsingshan's ability to export and some disruption there. Did you mention that they have been paying you or paring back the production? I didn't catch that part. So if you could clarify some bit of that.

Chris, do you want to take the first part of that question?

Yes, I can. I don't have the exact numbers or split between the quarters at hand. We did have quite a large working capital build in Q1, a lot of that unwound in Q2. However, and that was working with Tsingshan, particularly around our trades receivable. We managed to really tighten up a lot of the days there. And I think it's a testament -- I'm talking about the NPI sales. I think it's a testament to our relationship there with them. I'm happy to follow up with you with the specific numbers. I don't want to give that...

Yes, sure. That would be very useful. Yes. But broadly speaking, first quarter was negative in terms of the working capital usage and second quarter, you had positive.

It improved it. Yes, that's correct.

Okay. I understand. Okay. It will be good to get some numbers later. And then the other question about Tsingshan and if you can clarify what was it about, the pared-back production or I thought you said...

Yes. Tsingshan did announce that they were scaling back production out of 2 of their HPALs at IWIP.

Okay. And how does it impact you as of now? Or has there been any change in terms of your own production or...

No, look, no impact for us and probably a positive in terms of that's MHP -- higher cost MHP capacity that's not in the market. So obviously means we can look to replace it with lower cost MHP as ENC ramps up.

Thank you. That's all the time we have for today's Q&A. I would now like to pass the call back off to Justin Werner for some closing remarks.

Look, thanks again, everyone. Really just to sort of hit on the fundamentals of the business, and we've built the business historically on nickel pig iron and mining and both of those segments look very good moving forward. And then we're now moving into the commissioning of the higher-margin HPAL business, along with the commissioning of the first production from Sampala, which is also an exciting milestone for the company. And then coming back to the numbers that I mentioned at the end of the presentation with an additional 1.1 million tonnes of nickel required by 2030 according to CRU and a cap on NPI and as well as a cap on MHP and HPAL out of Indonesia. We think that looking forward, the integrated low-cost producers such as ourselves that have a diversified product across different segments of the nickel market, we're positioned very well. And again, I think our leverage to the nickel price really demonstrated in the first half, 21% increase in NPI, 87% increase in EBITDA. So look, thank you, everyone. And if you have any further questions, please don't hesitate to reach out to Chris and myself.

Thank you. This concludes today's conference call. You may now disconnect.