Nickel Asia Corporation

Transcription

1 Nickel Asia Corporation Presentation on NAC Click to edit Master subtitle style PSE: NIKL RIC: NIKL.PS BBG: NIKL.PM 3 rd Annual dbaccess Philippines Conference Makati City 8 9 October 2014

2 NAC at a glance Listed in the PSE on November 22, 2010 Largest nickel mining company in the Philippines and long operating history of mining nickel laterite since operating nickel mines, 5 nickel exploration properties, and 4 exploration properties for gold and copper One of the largest supplier of lateritic nickel ore globally Substantial proved and probable ore reserves and long average mine lives Successful downstream processing with a 10% interest in the world class Coral Bay HPAL facility and 22.5% interest in the new Taganito HPAL facility, now on its first full year of operations Strategic relationships with two key shareholders, Sumitomo Metal Mining (Sumitomo) and Pacific Metals (PAMCO) 2

3 Leading laterite ore producer with a strong reserve base 2012 Global Top 5 Laterite Ore Producers Contained nickel production (kt) Source: NAC Study Antam NAC PT Inco Eramet Cerro Matoso Total Mineral Resources and Ore Reserves 1,2,3 December 31, 2013 December 31, 2012 Ore Type kwmt %Ni %Fe kwmt %Ni %Fe %Inc Mineral Resources (Measured and Indicated) Saprolite 126, , % Limonite 258, , % Ore Reserves (Proved and Probable) Saprolite 119, , % Limonite 249, , % Source: NAC, as of 31 December 2013 Notes: 1 Mineral resources and ore reserves for four operating mines (Rio Tuba, Taganito, Cagdianao, Taganaan) 2 Includes subsidiaries that are not wholly-owned by the Company 3 Report prepared under the Philippine Mineral Reporting Code We are one of the largest lateritic ore producers in the world. We have substantial reserves to support our dominant position and supply feedstock to our downstream processing facilities 3

4 Overview of our Mines Rio Tuba Mine Ownership NAC (60%) PAMCO (36%) Sojitz Corp (4%) Operations Commenced 1975 Remaining mine life 1 MPSA Renewal Year 2023 Approx. 13 years 2013 Volume/Revenue 5.8 mwmt / 3.0 bphp Cagdianao Mine Ownership NAC (100%) Operations Commenced 1999 Remaining mine life 1 Approx. 77 years MPSA Renewal Year Volume/Revenue 0.9 mwmt / 0.7 bphp 1H 14 Volume/Revenue 0.3 mwmt / 1.0 bphp 1H 14 Volume/Revenue 3.0 mwmt / 3.0 bphp Taganito Mine Ownership NAC (65%) PAMCO (33.5%) Sojitz Corp (1.5%) Taganaan Mine Ownership NAC (100%) Operations Commenced 1980 Operations Commenced 1987 Remaining mine life 1 Approx. 8 years Remaining mine life 1 Approx. 30 years MPSA Renewal Year Volume/Revenue 3.9 mwmt / 3.1 bphp MPSA Renewal Year Volume/Revenue 3.4 mwmt / 3.4 bphp 1H 14 Volume/Revenue 1.1 mwmt / 1.5 bphp 1H 14 Volume/Revenue 3.3 mwmt / 3.4 bphp Note: 1 Remaining mine lives from January 1, 2014, calculated based on December 31, 2013 ore reserves and estimated annual nickel ore shipments and deliveries for each mine We have a proven track record in successfully operating mines in the Philippines. Most of our mines have significant exploration potentials. 4

5 Our Investment in Downstream Processing Plants: Coral Bay Facility High Pressure Acid Leach (HPAL) processing plant Coral Bay Nickel Corporation (CBNC) Location In a Special Economic Zone adjacent to the Rio Tuba mine Ownership NAC (10%) Sumitomo(54%) Mitsui (18%) Sojitz(18%) Ore Supply Low-gradelimonite ore from Rio Tuba mine; approx. 3.3M WMT per year Operations Line 1 (10,000tNi) commissioned 2005 at cost of $200M Line 2 (10,000tNi) commissioned 2009 at cost of $308M Technology HPAL process licensed from Sumitomo Product Nickel-cobalt sulfide sold exclusively to Sumitomo US$ MM Sales volume (contained-ni tons) 23,569 23,923 22,668 18,783 16,898 10,506 10,355 US$ MM Revenue Cost of goods sold Operating expenses Income from operations Net income Net income margin 1.3% 14.4% 30.7% 39.6% 25.2% 1.2% 57.0% Average realized LME price Pilot plant to test for commercial recovery of Chromium is operating, while pilot plant for the recovery of Scandium expected to commence Q

6 Our Investment in Downstream Processing Plants: Taganito HPAL Facility Location HPAL processing plant In a Special Economic Zone adjacent to the Taganito mine Technology HPAL process licensed from Sumitomo Ownership Ore supply Operations NAC (22.5%) Sumitomo (62.5%) Mitsui (15.0%) Low-grade limonite ore from our Taganitomine; approx. 4.5M WMT per year Nameplate capacity: 30,000 tni 20% capacity increase to 36kT from 2016 First shipment commenced Oct 2013 Investment cost Financing Product Capital cost of US$1,590 million, funded by JBIC loan (US$750m), equity (US$455m) and shareholders' loans. SMM funding NAC portion of shareholders' loans in return for 1% fee. JBIC Loan contract was signed on July 5. Initial drawdown was made on August 4, Nickel-cobalt sulfide sold exclusively to Sumitomo Taganito HPAL Nickel Corp. Pilot plant for recovery of Hematite expected to commence Q

7 Our Investment in Downstream Processing Plants: Taganito HPAL We will derive from the THPAL facility: Additional limonite ore sales of +4.5m WMT/year (1 st Half 2014 sales: 1.96m WMT) Direct P&L recognition of income from 22.5% interest (1 st Half 2014 equity income: Php292m) October 2010 January 2012 April 2013 Present Sumitomo is one of the few companies with the technological know-how and proven execution capability to successfully develop HPAL facilities 7

8 Product portfolio breakdown Saprolite Limonite Type of Ore: Hi Grade Low Grade Hi Grade High Fe Low Grade 1.8% Ni 1.5% Ni 1.5% Ni % Ni; 48-50% Fe % Ni Supplied By: Rio Tuba Taganito Cagdianao Hinatuan Rio Tuba Taganito Cagdianao Hinatuan Cagdianao Rio Tuba Taganito Hinatuan Rio Tuba Taganito Sold To: Japan FeNi Smelter Japan FeNi Smelter / China NPI Smelter (EF & RKEF) China NPI Smelter (Blast Furnace) China NPI Smelter (Blast Furnace) / China Pig Iron Smelter (Blast Furnace) Philippines CBNC Taganito HPAL Final Products: Ferronickel Ferronickel / Hi-Grade NPI: 10-12% Ni Medium Grade NPI: 6-8% Ni Low Grade NPI (1-3% Ni) / Pig Iron Ni-Co Sulfide 55% Ni For Use In: 300 Series Stainless Steel 300 Series Stainless Steel 300 Series Stainless Steel 200 Series Stainless Steel / Carbon Steel Ni Smelter Pricing Method: LME Ni Price x Payable Ni 1 Negotiated US$/WMT Negotiated US$/WMT Negotiated US$/WMT 2 LME Ni Price x Payable Ni 2013 Volume (kwmt) 1,147 2, ,586 4, % Volume 8% 17% 4% 40% 31% 2013 % of Revenue 16% 16% 2% 52% 14% 1 Benchmarked against China prices (US$/WMT) effective Q Pricing was correlated with the iron ore price until Q when pricing started to be linked to nickel 8

9 NAC sales tonnages 14,000 13,998 From 1977 to 2004, annual sales volume averaged 880 thousand 12,000 11,730 WMT 10,000 32% 10,387 In 2005, CBNC commenced commercial (Thousand WMT) 8,000 6,000 65% 6,541 7,268 3,774 6,459 8,339 5,122 6,951 7,494 10,404 7,729 40% 5,537 5,519 operations From 2005 to 2007, sales volume grew at an effective annual rate of 65% 4,000 2, '77-'04 Ave. 4,562 5,553 3,448 3,742 2,685 2,027 1,400 4,236 3,494 3,217 3,436 3,594 1,897 2,210 1,796 1,285 1, H H 2014 Saprolite Limonite In 2008, following the global financial crisis, volume down by 53% From 2008 to 2013, sales volume grew at an effective annual rate of 32% 9

10 Low cost nickel producer Favorable geologic conditions at all of our four mines, with near-surface open-pit deposits Mining does not require explosives, chemicals or complex waste handling Ability to sell limonite ore and lower grades of saproliteore to the China NPI market and Coral Bay HPAL enables lower unitcost per WMT of nickel ore sold All four operating mines are located within 3 to 7 km from the tidewater loading area Rehabilitation of our mining areas is a simple and straightforward process Cash Costs (US$/WMT sold) 2011 Pct Pct Pct. Production % % % Shipping & Loading % % % Excise Tax & Royalties % % % General & Admin % % % Total Cash Costs / WMT % % % Revenue (US$/WMT) Operating Margin (US$/WMT) Average Nickel LME Price (US$/lb.)

11 Financial highlights We are one of the most profitable nickel miners in the world. Revenue (Php MM) Sale of ore EBITDA 1 (Php MM) Net Income 2 (Php MM) 16,572 5,827 4,687 65% 8,336-6% 12,695 11,607 11,110 Services and others 4,384 9,338 10,529 2,252 1,650 4,110 6,862-16% 1,830 4, % 5, % 5,080 4, % 419% 219% 1, ,547 3,538 2,207-24% 2, , H'13 1H' H'13 1H' H'13 1H' H 13 1H 14 EBITDA margin 64% 39% 35% 49% 54% 44% 44% 42% 62% Net income margin 2 29% 27% 6% 19% 28% 19% 18% 15% 35% Ave. Ni price per pound (US$) Source: Company data Notes: 1. EBITDA is calculated as total revenue less costs and expenses (before depreciation and amortization of RTN LT stockpile) plus other income from RTN s ancillary services 2. Represents net income attributable to equity holders adjusted for derivative transactions gains/losses. Derivative transaction gain was Php519 MM in 2007, while derivative transaction losses were Php1,417 MM, Php79 MM, and Php47 MM in 2008, 2009, and 2010, respectively. 11

12 Historical Dividend Payout and Payable (since 2010 IPO) Year Type Payment / Issue Date Dividend rate %of PY Earnings Regular Cash May 9, /sh.* 30.3% Special Cash December 8, /sh.* 13.0% Regular Cash May 11, /sh.* 30.5% Stock September 24, % N/A Regular Cash May 14, /sh.** 31.7% Stock July 12, % N/A 2014 Regular Cash May 8, /sh. 36.9% * Adjusted for the effects of the 50% and 25% stock dividends issued on September 2012 and July 2013, respectively. ** Adjusted for the effect of the 25% stock dividend issued on July Our dividend policy entitles holders of Shares to receive annual cash dividends of up to 30% of the prior year s recurring attributable net income based on the recommendation of our Board of Directors. 12

13 Nickel Asia Corporation INDONESIAN ORE BAN

14 Nickel Ore Flow 2013 China s Stainless Steel Production Stainless Steel Production (million MT) Ni % Ni Tonne (kilo MT) 200-series 7.5 1% series % series 3.8 0% 0 Total Source of Ni in China SS Production SS Scrap 15% Primary Ni 32% NPI 53% 510 MT China s Importation of Nickel Ore Ore Type Indonesia Philippines Total mwmt Ni-kMT mwmt Ni-kMT mwmt Ni-kMT High Grade 1.8% Mid Grade 1.5%-1.6% Low Grade 1.0% Subtotal for NPI For Carbon Steel Total % to stockpile Stockpile mwmt Ni-kMT Beginning imports Total

15 Nickel Ore Flow Outlook 2014 China s Importation of Nickel Ore Ore Type Indonesia Philippines Stockpile Total mwmt Ni-kMT mwmt Ni-kMT mwmt Ni-kMT mwmt Ni-kMT High Grade 1.8% Mid Grade 1.5%-1.6% Low Grade 0.9% Subtotal for NPI For Carbon Steel Total World Nickel Consumption and Supply China s Stainless Steel Production Stainless Steel Prod (mmt) Ni % Ni Tonne (kmt) 200-series 8.3 1% series % series 4.2 0% 0 Total ,067 47% (502kMT) from NPI 2014 ending inventory: 15mWMT ore / 108kMT Ni F 2015F Ni Consumption (MT) 1.272M 1.488M 1.597M 1.652M 1.790M 1.912M 1.993M Ni Supply (MT) 1.365M 1.455M 1.630M 1.786M 1.972M 1.887M 1.877M World Market Balance (MT) +93K -33K +33K +135K +181K -25K -115K Ave. LME Ni Price ($/lb.) ?????? Source: Macquarie Research, August

16 Market Overview for Ore Products Post Indonesian Ore Ban Nickel ore price soared by 260% from early April to end May due mainly to extreme optimism of Chinese traders. The market has since stabilized although still more than double as compared to the old normal. Surge in mid-grade (1.5%) ore exports from the Philippines this year used for blending with old stocks of Indonesian high grade (1.8%). High Fe ore is now being priced with a nickel premium, used for low grade NPI production. NPI production volume in 1H2014 was 250k mt. Chinese nickel ore inventory as of end June stood at 23M wmt. Nickel ore exports to China reached 19.2M wmtfrom Jan -May 2014, a decrease of 5.4M wmtor 25% y-o-y JAN FEB MAR APR MAY JUN JUL LME Ni 1.4%N Pricei 1.5%N Price 1.6%Ni Price 1.8%Ni Price

17 Shipment seasonality by quarter Millions WMT Average Shipment Volume (exclusive of HPAL) for the Last 3 Years Q 2Q 3Q 4Q % Volume 10% 30% 41% 19% 17

18 Nickel Asia Corporation EO 79 ON MINING POLICIES

19 Impact of Presidential Executive Order No. 79 on Mining Policies Moratorium on new mining permits until higher taxes are legislated No impact on existing operations. No impact on exploration permits/activities. Will delay conversion of exploration permits to mining permits. Moving forward, amendments to tax structure are expected to be implemented in Impact on higher taxes Three of four NAC mines operating within Mineral Reservations will most likely not be significantly affected by higher taxes. Currently our four mines are paying the following tax rates based on gross revenue: Taxes and Fees RTN TMC CMC HMC Excise tax 2% 2% 2% 2% Royalty to the Government * - 5% 5% 5% Royalty for Indigenous People 1% 1% - - Local Business Tax 0.5% 1% 1% 1% Total 3.5% 9% 8% 8% * under the Surigao Mineral Reservation Act 19

20 Nickel Asia Corporation END

21 Nickel Asia Corporation APPENDIX

22 NAC Shipments Profile (Nickel Ore in kwmt) HPAL 2,977 29% % Japan 843 HPAL 3,352 29% % Japan 1,313 63% China 6,567 60% China 7,065 HPAL 4, % 31% Japan 1,051 HPAL 7,774 44% 2014F 10% Japan 1,853 62% China 8,668 46% China 8,170 Source: Company data 22

23 NAC Shipments Profile (Nickel Ore Revenue in Php Million) HPAL 1, % 20% Japan 2,416 HPAL 1, % Japan 2,447 22% China 7,805 64% 66% China 7,368 HPAL 1, % 14% Japan 1, F HPAL 13% Japan 22% 72% China 7,377 China 65% Source: Company data 23

24 Nickel Supply-Demand Forecast Source: Macquarie Research, August