More annual reports from Nicolet Bankshares:
2023 ReportANNUAL
REPORT
2022
NICKEL INDUSTRIES
and its controlled entities
ABN 44 127 510 589
CONTENTS
Chairman’s Letter
Review of Operations
Corporate Governance Statement
Directors’ Report
Lead Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional ASX Information
Corporate Directory
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2
22
23
39
40
41
42
43
44
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Nickel Industries Annual Report 2022
CHAIRMAN’S LETTER
CHAIRMAN’S LETTER
Dear Fellow Shareholders,
It is with great pleasure I present to you the
Nickel Industries Limited Annual Report for
the financial year ended 31 December 2022.
2022 was a turbulent year with global supply chain
issues stemming from the Russia-Ukraine conflict and
the ongoing effects of the COVID pandemic generating
numerous headwinds across commodity and energy
markets. These issues provided some challenges to our
operations, but also served to highlight the underlying
strength and resilience of our business, which went from
strength to strength with both our RKEF and mining
operations recording new production records with each
passing quarter.
impressive quarter-on-quarter growth
Our
in nickel
production was largely attributable to the commissioning
and ramp-up of our 80%-owned Angel Nickel project at the
Indonesia Weda Bay Industrial Park. Pleasingly, by the end
of the calendar year Angel Nickel was operating at more
than 135% of nameplate capacity. With our Oracle Nickel
project in its commissioning phase, we can look forward
to a similar production and financial contribution over
the coming six months as the project moves towards full
capacity and increases our attributable nickel production
beyond 100k tonnes per annum.
The record performance from the Company’s RKEF
impressive
operations was matched by an equally
contribution from the Hengjaya Mine. Combined saprolite
and
limonite production surpassed 6.7 million wet
metric tonnes for the year, with these production levels
anticipated to approximately double in the year ahead
upon completion of the haul road from Hengjaya Mine to
the Indonesia Morowali Industrial Park.
The strong performance across our RKEF and mining
operations saw the Company deliver record full year results
across all key financial metrics including an Operating
Profit after Tax of US$209.4 million – an outstanding
achievement for which I commend our entire operations
and senior executive team.
During the year the decision was made to change our
name from Nickel Mines Limited to Nickel Industries
Limited. While only subtle in nature, the change reflects
the transition of our business to a more integrated
industrial business model spanning both mining and
industrial processing operations. In noting our change of
name our core operating objective and vision remains the
same – to build a world class nickel business committed to
supporting a sustainable future for Indonesia’s mining and
processing industries.
A major noteworthy milestone in support of this ambition,
and one of which I am particularly proud of, was the
release of our maiden Sustainability Report in May 2022.
As a material global nickel producer and the operator of a
world class mining operation, the Company is absolutely
committed to adopting and adhering to ‘global best
practice’ mining and processing initiatives to minimise its
carbon footprint and ensure the sustainability of Indonesia’s
nickel industry. Hengjaya Mine’s recent achievement of a
“GREEN PROPER” environmental rating is testament to
initiatives put in place over the last several years and will
set the standard for future resources projects we develop
for the entire Indonesian mining industry.
The hard work and dedication of our management team,
led by Managing Director Justin Werner, positions the
Company strongly to be a dominant player in the global
nickel market for many years to come. Having recently
converted some of our NPI production to nickel matte
and announced planned investments into multiple high
pressure acid leach projects, the Company will soon
offer a truly diversified production mix, servicing both the
stainless steel market and the rapidly growing EV supply
chain. Our evolution as a nickel business is certainly at
an exciting phase and we look forward to your ongoing
support as we pursue our objective of becoming one of the
world’s pre-eminent nickel companies.
Yours sincerely
Robert Neale
Chairman
Annual Report 2022 Nickel Industries
1
REVIEW OF OPERATIONS
PRINCIPAL ACTIVITIES AND
REVIEW OF OPERATIONS
(All amounts in US$ unless otherwise stated)
The operating profit of Nickel Industries Limited and
its controlled entities (together ‘the Group’) for the
year ended 31 December 2022 after income tax was
$209,367,610 (31 December 2021: $175,976,986).
Nickel Industries Limited (‘the Company’ or ‘Nickel
Industries’) was incorporated on 12 September 2007,
under the laws of the State of New South Wales, Australia.
The Group has become a globally significant, low cost
producer of nickel pig iron (‘NPI’), a key ingredient in
the production of stainless steel. During the year the
Company also commenced the production of nickel in
high grade (‘HG’) nickel matte, for use in the electric
vehicle supply chain. The Group’s principal operations,
located in Indonesia, are the Hengjaya Nickel, Oracle
Nickel and Ranger Nickel rotary kiln electric furnace
(‘RKEF’) projects located within the Indonesia Morowali
Industrial Park (‘IMIP’), the Angel Nickel RKEF Project
at the Indonesia Weda Bay Industrial Park (‘IWIP’) and
the Hengjaya Mine, a large tonnage, high grade nickel
laterite deposit in close proximity to the IMIP. At year end,
the Company held an 80% interest in each of the Angel
Nickel, Hengjaya Nickel and Ranger Nickel projects and
the Hengjaya Mine and a 70% interest in the Oracle Nickel
project.
During and following the year ended 31 December 2022
significant milestones were achieved as follows:
•
•
•
the Company’s RKEF projects produced a record
70,079 tonnes of nickel metal equivalent, 65,336
tonnes of nickel metal in NPI and 4,743 tonnes of
nickel metal in high grade nickel matte. A total of
67,701 tonnes of nickel metal equivalent were sold
during the year. EBITDA1 from RKEF operations for
2022 was a record $298.7M;
the four RKEF lines of the Angel Nickel project
underwent commissioning, with the first line
commencing at the end of January 2022 and the
fourth line in the middle of May 2022, which is when
commercial sales commenced following receipt of the
project’s commercial sales licence. The 380MW power
plant at Angel Nickel commissioned in August 2022;
the Company acquired a 70% interest in the Oracle
Nickel project, which consists of four RKEF lines
with annual nameplate capacity of 36,000 tonnes of
nickel metal in NPI and Oracle Nickel is constructing
a 380MW power plant. The first of Oracle’s four lines
commenced commissioning in November 2022,
followed by the second line in December 2022 and the
third in February 2023;
1
EBITDA is defined as profit/(loss) for the period, plus depreciation and amortisation costs, plus net financial income/(costs), plus tax
expenses. This non-IFRS financial measure, which is referred to throughout the Directors’ Report, is used internally by management to
assess the performance of the Group’s business and make decisions on allocation of resources. This non-IFRS measure has not been subject
to audit or review.
2
Nickel Industries Annual Report 2022
CHAIRMAN’S LETTER
REVIEW OF OPERATIONS
• both the Angel Nickel and Oracle Nickel projects were
•
granted material corporate tax relief;
• 2,890,575 wet metric tonnes (‘wmt’) of saprolite
nickel ore were mined at the Hengjaya Mine and
2,674,947wmt of saprolite were sold during the
year at an average grade of 1.71% nickel. In addition,
3,902,276wmt of limonite were produced during
the year. Sales of limonite ore to the high pressure
acid leach (‘HPAL’) plants now operating at IMIP
recommenced in April, with 844,405wmt being sold
during the year. On a stand-alone basis, EBITDA from
the Hengjaya Mine for 2022 was $53.9M2 ;
•
in January 2022, the Company declared a final
dividend for 2021 of A$0.02 per share, being a
distribution of A$50.3M and in August 2022 the
Company declared an interim dividend for of A$0.02
per share, being a distribution of A$54.6M;
• after receiving shareholder approval in January
2022 to acquire a 70% interest in the Oracle Nickel
project, in February 2022 the Company completed a
placement of 108,122,223 shares at A$1.37 per share
to institutional shareholders. This was followed in May
2022 with the issuance of a further 108,122,223 shares
at A$1.37 per share to a nominees of Shanghai Decent
Investment (Group) Co., Ltd (‘Shanghai Decent’) as
a share based payment for 20% of the Oracle Nickel
project;
•
in January 2022, the Company signed a MoU with PT
Sumber Energi Surya Nusantara (‘SESNA’) to develop
200MWp of solar capacity within the IMIP. This was
followed by a binding term sheet for a 200MWp +
20MWh battery solar project in August 2022;
in May 2022, the Company signed a binding
definitive agreement for the staged acquisition of a
100% interest in the Siduarsi Nickel-Cobalt project
(‘Siduarsi’) in Papua province, Indonesia;
•
•
•
•
following shareholder approval at the Company’s AGM
on 31 May 2022, the Company’s name was changed
from Nickel Mines Limited to Nickel Industries
Limited;
in August 2022, the Company completed a $225M
inaugural offering of Senior Secured Notes at an
interest rate of 10.0%, maturing 23 August 2025;
in September 2022, the Company announced an
upgraded JORC Resource estimate at the Hengjaya
Mine 300 million dry metric tons (‘dmt’), with an
average grade of 1.22% nickel and 0.09% cobalt (using
a nickel cut-off grade of 0.8%);
in November 2022, the Hengjaya Mine was
awarded a ‘Green PROPER’ rating from Indonesian
Environmental and Forestry Authority; and
• subsequent to year end, the Company executed an
EV Battery Supply Chain Strategic Agreement with
the Company’s largest shareholder and operating
partner Shanghai Decent, and binding agreements to
acquire a further 10% interest in Oracle Nickel and a
10% interest in PT Huayue Nickel Cobalt (‘HNC’). The
Company completed a $185M institutional placement.
2
During the year, the Hengjaya Mine sold saprolite ore to Hengjaya Nickel and Ranger Nickel. Hengjaya Mine profit of $0.3M relating to nickel
ore inventory still held by Hengjaya Nickel and Ranger Nickel at 31 December 2022 is eliminated on consolidation.
Annual Report 2022 Nickel Industries
3
REVIEW OF OPERATIONS
Rkef Operations
Throughout 2022 Nickel Industries held an 80% interest in the Hengjaya Nickel, Ranger Nickel and Angel Nickel RKEF
projects and acquired a 70% interest in the Oracle Nickel RKEF project, which commenced commissioning in November
2022. In October 2022 the two RKEF lines at the Hengjaya Nickel switched from the production of NPI to the production
of nickel matte.
A summary of NPI production from the Hengjaya Nickel, Ranger Nickel, Angel Nickel and Oracle Nickel projects for the
year ended 31 December 2022 is as follows:
Hengjaya Nickel Ranger Nickel
Angel Nickel Oracle Nickel
Total
NPI production
tonnes
108,573
149,929
207,110
7,504
473,116
NPI grade
%
13.5
13.4
14.4
10.0
13.8
Nickel metal in NPI
production
Nickel metal production
tonnes
14,620
20,082
29,887
747
65,336
in NPI attributable to
tonnes
11,696
16,066
23,914
523
52,199
Nickel Industries
Nickel metal in NPI sold tonnes
14,620
20,082
28,798
-
63,500
A summary of nickel matte production from the Hengjaya Nickel project for the year ended 31 December 2022
is as follows:
Hengjaya Nickel
tonnes
4,743
The Company’s RKEF operations produced (on a 100%
basis) 70,079 tonnes of nickel metal, comprising 65,336
nickel metal tonnes in NPI and 4,743 tonnes in HG
nickel matte. The Company’s attributable nickel metal
production for 2022 was 55,993 tonnes.
For 2022, the Company’s RKEF operations recorded (on a
100% basis) sales of $1,202.4M comprising $1,111.9M from
NPI sales (from 63,500 tonnes of nickel metal in NPI) and
$90.5M from HG nickel matte sales (from 4,201 tonnes of
nickel metal in HG nickel matte). Combined EBITDA from
RKEF operations for the year was $298.7M.
Nickel metal in HG nickel
matte production
Nickel metal production in
HG nickel matte attributable
tonnes
3,794
to Nickel Industries
Nickel metal in HG nickel
matte sold
tonnes
4,201
4
Nickel Industries Annual Report 2022
REVIEW OF OPERATIONS
Hengjaya Nickel
(80% interest held by Nickel Industries)
During the year, Hengjaya Nickel produced 19,363 tonnes of nickel metal. 14,620 tonnes was nickel metal in NPI at an
average NPI grade of 13.5% and a weighted average cash cost of $13,466/tonne of nickel metal. 4,743 tonnes was nickel
metal in HG nickel matte at a weighted average cash cost of $15,653/tonne of nickel metal, following the decision to
switch production of the project’s two RKEF lines from NPI to the production of nickel matte.
Hengjaya Nickel
Mar 2022 Quarter
Jun 2022 Quarter
Sep 2022 Quarter
Total
NPI production
tonnes
NPI grade
%
Nickel metal
production
tonnes
Cash costs
$/t Ni
Nickel metal sold
tonnes
36,858
13.6
4,999
12,023
4,999
34,081
13.2
4,510
14,597
4,510
Nickel metal in low grade nickel matte production
Nickel metal in low grade nickel matte converted
Recovery rate
Nickel metal in HG nickel matte production
Cash costs
Nickel metal in HG nickel matte sold
tonnes
tonnes
%
tonnes
$/t Ni
tonnes
37,634
108,573
13.6
13.5
5,111
14,620
13,879
13,466
5,111
14,620
Dec 2022 Quarter
5,104
5,094
93.1
4,743
15,653
4,201
Nickel Industries’ attributable nickel metal production in NPI from Hengjaya Nickel for the year ended 31 December
2022 was 15,057 tonnes.
For the year ended 31 December 2022, Hengjaya Nickel recorded total sales of $358.9M. This included $268.4M for
14,620 tonnes of nickel metal in NPI sold and $90.5M for 4,201 tonnes of nickel metal in nickel matte sold. EBITDA for
Hengjaya Nickel for the year was $96.3M.
Conversion of low grade nickel matte into high grade nickel matte
Annual Report 2022 Nickel Industries
5
REVIEW OF OPERATIONS
Ranger Nickel
(80% interest held by Nickel Industries)
During the year, Ranger Nickel produced 20,082 tonnes of nickel metal in NPI at an average NPI grade of 13.4% at a
weighted average cash cost of $13,526/tonne of nickel metal.
RANGER NICKEL
Mar 2022
Jun 2022
Sep 2022
Dec 2022
Quarter
Quarter
Quarter
Quarter
Total
NPI production
tonnes
NPI grade
Nickel metal
production
%
tonnes
Cash costs
$/t Ni
Nickel metal sold
tonnes
37,232
13.7
5,091
11,916
5,091
34,990
13.3
38,219
13.5
39,488
149,929
13.1
13.4
4,667
5,170
5,154
20,082
14,338
4,667
14,150
5,170
13,754
5,154
13,526
20,082
Nickel Industries’ attributable nickel metal production from Ranger Nickel for the year ended 31 December 2022 was
16,066 tonnes.
For the year ended 31 December 2022, Ranger Nickel recorded sales of $357.6M for 20,082 tonnes of nickel metal sold.
EBITDA for Ranger Nickel for the year was $85.0M.
Angel Nickel
(80% interest held by Nickel Industries)
The first of Angel’s four RKEF lines commenced
commissioning at the end of January 2022. The
second and third lines commenced commissioning
in March 2022 and the fourth line in May 2022. NPI
produced was held as inventory until May 2022 when
commercial sales commenced following the issuance
of an Industrial Business Licence (Izin Usaha Industri)
(‘IUI’) to Angel Nickel. The 380MW power plant at Angel
Nickel commissioned in August 2022. During the year,
Angel Nickel produced 29,887 tonnes of nickel metal in
NPI at an average NPI grade of 14.4% and a weighted
average cash cost of $12,931/tonne of nickel metal.
Control room at Angel Nickel
ANGEL NICKEL
Mar 2022
Jun 2022
Sep 2022
Dec 2022
Quarter
Quarter
Quarter
Quarter
Total
NPI production
tonnes
NPI grade
Nickel metal
production
%
tonnes
Cash costs
$/t Ni
Nickel metal sold
tonnes
7,510
14.3
1,077
N/A
-
45,035
69,327
85,238
207,110
14.2
14.4
14.6
14.4
6,389
9,994
12,428
29,887
14,550
6,639
13,167
9,764
11,769
11,734
12,931
28,798
Nickel Industries’ attributable nickel metal production from Angel Nickel for the year ended 31 December 2022
was 23,910 tonnes.
For the year ended 31 December 2022, Angel Nickel recorded sales of $485.8M for 28,798 tonnes of nickel metal
sold. EBITDA for Angel Nickel for the year was $117.4M.
6
Nickel Industries Annual Report 2022
REVIEW OF OPERATIONS
NPI production at Oracle Nickel
Oracle Nickel
(70% interest held by Nickel Industries)
The Oracle Nickel project commenced commissioning in mid-November 2022, with the first of the project’s four RKEF
lines coming online. The second line commenced commissioning in mid-December 2022 and the third line in February
2023. During the year, Oracle Nickel produced 747 tonnes of nickel metal in NPI at an average NPI grade of 10.0%. As the
project is in its commissioning phase a cash cost /tonne cannot be calculated currently.
ORACLE NICKEL
NPI production
NPI grade
tonnes
%
Nickel metal production
tonnes
Dec 2022 Quarter
7,504
10.0
747
Total
7,504
10.0
747
Commercial sales of NPI from Oracle Nickel will commence following the issuance of an Industrial Business Licence
(Izin Usaha Industri) (‘IUI’), upon the final importation of construction materials to complete the RKEF lines.
Nickel Industries’ attributable nickel metal production from Oracle Nickel for the year ended 31 December 2022
was 523 tonnes.
Annual Report 2022 Nickel Industries
7
REVIEW OF OPERATIONS
Commentary on RKEF Operations
The Company’s RKEF operations delivered record
production of 70,079 tonnes of nickel metal equivalent
and record EBITDA of $298.7M for the year ended 31
December 2022. This performance was underpinned by
the following highlights:
•
•
•
the contribution of Angel Nickel of 29,887 tonnes
of nickel metal and $117.4M of EBITDA following the
commissioning of its four RKEF lines over the course
of the year and its power plant in August 2022;
the conversion of Hengjaya Nickel’s two RKEF lines
at the commencement of the December quarter to
the production of nickel matte, with Hengjaya Nickel
producing 4,743 tonnes of nickel in HG nickel matte in
the December quarter at a margin of $5,950 /tonne;
maiden production in the December quarter of 747
tonnes of nickel metal from Oracle Nickel, as the
project’s first two RKEF lines commissioned.
Despite lower production levels in the first half of 2022,
the RKEF operations generated a record EBITDA of
$158.6M with the strong financial result underpinned by
record NPI prices. The commencement of the second
half of 2022 proved more challenging as operations were
faced with a contraction in operating margins relative to
historic levels. During the September quarter, pandemic-
related lockdowns negatively impacted economic activity
in China leading to significantly reduced NPI contract
prices. Combined with higher global energy prices,
EBITDA/tonnes sold margins fell sharply from record
levels reported in the first half of the year. Pleasingly, the
lower margins generated in the second half were offset
by strong increases in production with quarterly nickel
output more than doubling over the course of the year
with the commissioning and ramp-up of Angel Nickel. By
year’s end, with China winding back lockdown restrictions,
NPI prices and operating margins had improved – these
margins assisted by the Company’s decision to switch
production at Hengjaya Nickel to HG nickel matte,
with that product currently realising materially higher
prices and margins than NPI. The Company believes its
continued transition into Class-1 nickel production will
enable it to further optimise margins for its products in
addition to broadening its customer base, both of which
are expected to deliver tangible long term benefits for the
business. EBITDA from RKEF operations for the second
half of 2022 was $140.1M, resulting in a combined EBITDA
from RKEF operations for 2022 of $298.7M.
The Company’s RKEF operations recorded strong quarterly production growth over 2022
8
Nickel Industries Annual Report 2022
REVIEW OF OPERATIONS
Map showing the boundary of the Hengjaya Mine IUP and various drilling programs
Hengjaya Mine
(80% interest held by Nickel Industries)
The Company holds an 80% interest in PT Hengjaya Mineralindo, the owner of 100% of the Hengjaya Mine, with the
remaining 20% interest owned by the Company’s Indonesian partner.
The mine is located approximately 12 kilometres from the IMIP in the Morowali Regency, Central Sulawesi, Indonesia.
The Hengjaya Mine tenement covers 5,983 hectares and holds a 20-year mining operation/production licence (issued in
June 2011) with two further 10-year extension periods.
Mining
In 2022, production of saprolite ore totalled 2,890,575 wmt, at an average waste to saprolite ore stripping ratio of 0.38:1.
Sales of saprolite ore totalled 2,674,947 wmt, with an average grade of 1.71% nickel.
Production of limonite ore totalled 3,902,276 wmt and sales, which recommenced in April 2022, totalled 844,405 wmt,
with an average grade of 1.18% nickel.
Annual Report 2022 Nickel Industries
9
REVIEW OF OPERATIONS
Mar 2022
Jun 2022
Sep 2022
Dec 2022
Quarter
Quarter
Quarter
Quarter
Total
Saprolite mined
Limonite mined
Nickel ore mined
wmt
wmt
wmt
810,324
792,630
599,790
687,831
2,890,575
263,201
520,862
1,098,186
2,020,027
3,902,276
1,073,525
1,313,492
1,697,976
2,707,858
6,792,851
Overburden mined
BCM(1)
936,648
826,553
390,940
438,255
2,592,396
Strip ratio
BCM/wmt
0.87
0.63
0.23
0.16
0.38
Saprolite sold
Limonite sold
Average saprolite grade
Average limonite grade
Average saprolite price
received
wmt
wmt
%
%
710,136
673,664
565,624
725,523
2,674,947
-
1.72
N/A
258,212
185,271
400,922
844,405
1.74
1.19
1.73
1.14
1.67
1.19
1.71
1.18
$/wmt
40.04
52.43
42.88
42.48
44.42
Average limonite price
received
$/wmt
Average saprolite cost(2) CIF $/wmt
Average limonite cost
CIF $/wmt
(1) BCM represents ‘bank cubic metres’
N/A
25.13
1.65
14.69
26.01
7.99
17.24
26.91
7.01
18.42
28.47
4.34
17.01
26.49
5.93
(2) Average cost of production includes amortisation and depreciation costs for the 12 months of $0.90/t. and exploration drilling costs of $1.79/t
The strong performance from Hengjaya Mine across the year reflects the significant level of capital and operational
improvements and expansion initiatives implemented across the Company’s mining operations over the last 24 months.
These initiatives have included but are not limited to:
• establishing mining operations at the Central Pit;
• establishing and upgrading haul roads between the Central Pit and Bete Bete and the jetty;
• expanding the jetty capacity to cater for multiple 10kt barges;
• upgrading the size of the trucking fleet to 35t-45t trucks;
• utilising different mining contractors across different pit operations to optimise operations;
• establishing limonite mining operations for ore supply to the IMIP’s HPAL operations;
•
integrating additional infill drilling data to optimise the Hengjaya resource, rolling 2-year mine plan and associated
ore cut off grades;
• upgrade of the on-site ore preparation and assay laboratory facility;
• additional solar panels at the mine site infrastructure;
•
improvements to camp sport and recreational facilities; and
• detailed career development and training programs for staff.
These improvement and expansion initiatives were undertaken to help unlock the full strategic value of the Hengjaya
Mine’s large limonite and saprolite resources and as a result, Hengjaya Mine is now making a material contribution to
the overall Group financial performance.
10
Nickel Industries Annual Report 2022
REVIEW OF OPERATIONS
Resource Upgrade
In September, the Company announced a material Mineral
Resource upgrade to the Hengjaya Mine Resource. The
Company commissioned PT Danmar Explorindo to update
a JORC 2012 compliant Mineral Resource based on data
incorporating 529 kms of Ultra Ground Penetrating Radar
survey (‘Ultra-GPR’), - 4,657 drill holes and 111,643 sample
assays from drill cores taken from a 3,000-hectare area at
the Hengjaya Mine. The Resource estimate is 300 million
dry metric tons (‘dmt’), with an average grade of 1.22%
nickel and 0.09% cobalt (using a nickel cut-off grade of
0.8%). This equates to approximately 3,700,000 tonnes of
nickel metal and 270,000 tonnes of cobalt. Since the last
Resource estimate in June 2020, Measured Resources
have increased by 333%, Indicated Resources by 20%
and Inferred Resources by 53%, delivering a significant
conversion of Inferred and Indicated to Measured
Resources and providing increased confidence in the
remaining Resource estimation.
The high grade saprolite Resource of 72 million wmt at
1.8% nickel (cut-off grade 1.5% nickel), represents a source
of long-term ore supply to the IMIP where the Company’s
Hengjaya Nickel, Ranger Nickel and Oracle Nickel RKEF
projects will have total combined ore requirements of
approximately 8.8 million wmt per annum. Hengjaya Mine
is expected to deliver 3.5-4.0 million wmt of saprolite ore
to the IMIP upon completion of the haul road linking the
mine to the industrial park.
The limonite Resource of 151 million wmt at 1.2% nickel
and 0.14% cobalt (cut-off grade 1.0% nickel) positions
the Hengjaya Mine as one of the long-term ore suppliers
to the IMIP’s Huayue Nickel Cobalt (‘HNC’) and QMB
New Energy Materials (‘QMB’) HPAL projects, which are
expected to require up to a combined 20 million wmt
of limonite per annum to produce nickel cobalt mixed
hydroxide precipitate (‘MHP’) for the EV battery market.
This significant limonite resource strategically positions
the Hengjaya Mine to supply any future HPAL projects
which the Company may invest in. As the Hengjaya Mine
is the closest nickel mine to IMIP, the lower relative
transportation costs are expected to contribute to a
higher margin for the 151 million wmt of limonite Resource.
Mineral
Resource
category
Measured
Indicated
Inferred
Total cut-off
> 0.8% Ni
Million
tons (Dry)
XRF (Dry Analysis)
Ni (%)
Co (%)
Fe (%)
85
130
85
1.3
1.2
1.2
0.09
0.08
0.08
30.4
28.6
29.1
300
1.2
0.09
29.2
Hengjaya Mine Mineral Resource summary, 2022
Stockpiles and jetty operating at 3.5m tonnes per annum
Annual Report 2022 Nickel Industries
11
REVIEW OF OPERATIONS
APL segments of haul road to IMIP under construction
Haul road
The mobilisation of the contractor (Presisi) to the haul road project was well advanced during the December quarter
and the construction commenced in a number of areas. The balance of mobile equipment and manpower with continue
to arrive on site early March 2023 quarter and continue to ramp up activities and start in other areas of the approved
IPPKH areas.
The completion of the haul road currently expected by the end of the June 2023 quarter will enable Hengjaya Mine to
significantly increase production and sales of saprolite ore to the Company’s RKEF projects. During 2023 the Company
plans to commence delivering by road increased supply of both stockpiled and mined limonite ores to both HPAL
projects at IMIP. The haul road offers the mine a strategic advantage for delivery of both types of ore, whilst allowing
minimal stockpiling of limonite as the mine develops additional open pits in the central area of the project.
Exploration
During 2022 there were a total of 97,329 metres drilled at Hengjaya Mine. Infill drilling totalled 82,342 metres, while
exploration drilling accounted for 14,987 metres. All drilling costs were absorbed into the mine’s operating costs.
The 3,846 holes drilled in 2022 focused on the infill drilling mostly developed in Bete Bete South, Central West and
Central East, while the exploration drilling (100m x 100m) drilled in Central West, IPPKH 3 Central East and Central
West, and by the Quarter III to Quarter IV drilled in Central North
The mine reconciliation of saprolite ore modelled versus actual saprolite mined continued to confirm excellent results,
well above the forecasted industrial recovery of +80% throughout the planning and mining operations.
Ultra ground penetrating radar (‘UGPR’) was undertaken in three different areas - IPPKH 5 Block A, IPPKH 5 Block B and
MIA West - identifying more than 300 hectares of thick laterite with drilling to commence in 2023.
Closely associated with drilling activities is the Hengjaya Mine’s on-site laboratory which includes preparation and
assay facilities. During the year, the laboratory processed and assayed over 98,752 exploration samples, enabling
fast turnaround times whilst being very cost affective across all areas of exploration, mine grade control and
barging operations. A percentage of samples were also sent off-site to a 3rd party for quality control and assurance
reconciliation. With the mine planning to increase limonite production and sales from 2023 onwards the on-site
laboratory will be further upgraded (approximately +50%) to facilitate the additional quality control requirements.
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Nickel Industries Annual Report 2022
REVIEW OF OPERATIONS
Drilling progress and drill rig locations - December 2022
Annual Report 2022 Nickel Industries
13
REVIEW OF OPERATIONS
REVIEW OF OPERATIONS
Hengjaya Mine safety and rescue training with Indonesian search and rescue groups
SAFETY, ENVIRONMENT AND COMMUNITY
Safety
During the December quarter there were no lost time injuries (‘LTI’) recorded at the mine, with over 4.6 million work
hours registered since the last reported LTI in November 2021. This gives the Hengjaya Mine operations a LTI frequency
rate (‘LTIFR’) of 0.22 and a total recordable injury frequency rate (‘TRIFR’) of 1.3 for each million work hours. Safety
and career development training continued at the mine site which also included supervisory and ISO standards
components.
Community
Nickel Industries continues with its commitment by contributing to both human and infrastructure development around
the Hengjaya Mine and local communities and, as such, is actively involved in numerous Community Development and
Empowerment (‘PPM’) and Community Social Responsibility initiatives. Other programs the Company is involved in
relate to health, education, infrastructure and sustainability projects.
Donations of mobile equipment for waste management and Family Day at the mine site
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Nickel Industries Annual Report 2022
REVIEW OF OPERATIONS
REVIEW OF OPERATIONS
ESG awards for the Hengjaya Mine at ENSIA 2022
Sustainability Manager Muchtazar receiving the
ASRRAT award
Hengjaya Mine nursery for rehabilitation
Environment and Sustainability
In June 2022 the Company published its maiden
sustainability report for the calendar year ended 31
December 2021. This inaugural report was prepared in
accordance with the Global Reporting Initiative (GRI)
Standards: Core Option, with Metals and Mining (MM)
Supplement Sector, Sustainability Accounting Standards
Board (SASB) for Metals and Mining Standard and the
Task Force on Climate-Related Financial Disclosures
(TCFD) for selected disclosure indicators.
The Company’s ESG performance has received several
acknowledgments, including seven trophies at the
Environmental and Social Innovation Awards (ENSIA), a
significantly improved rating at S&P Global’s Corporate
Sustainability Assessment (CSA), in which the Company
was included in the top half in terms of ESG indicators
in 2022 among mining and metal industry group
worldwide, and the ASRRAT accolade above. Additionally,
the Company’s maiden sustainability report has been
shortlisted for several accolades at the Asia
Sustainability Reporting Awards (ASRA) 2022, in which
the results are anticipated to be announced in the first
quarter of 2023 in Singapore.
During the December quarter Nickel Industries was
advised that it had earned a Silver rank award at the
Asia Sustainability Reporting Rating (ASRRAT) 2022
for its inaugural Environmental, Social, and Governance
(ESG) report.
The Company also has conducted a social study for its
nickel-cobalt project in Siduarsi, Papua, with the support
of Cendrawasih University. This research concluded that
the area is socially conducive and the local people are
supportive of mining activities.
In terms of operational ESG initiatives, Nickel Industries
worked with Hatch during this quarter to identify
optimisation opportunities for its fuel usage. This
was a follow-up to the decarbonisation study for the
Company’s value chain earlier in 2022, also conducted
with Hatch. Additionally, the Company has performed
an in-depth analysis of the impact of climate change
on its operations and determined potential mitigation
strategies by following the Taskforce for Climate-related
Financial Disclosures (TCFD) recommendations, which
will be disclosed in detail in the Company’s upcoming
sustainability report.
Additionally, the Indonesia Ministry of Environment and
Forestry granted the Hengjaya Mine a ‘Green PROPER’
rating that indicates beyond compliance practices
in terms of ESG implementation and reporting. The
Hengjaya Mine became the sole entity from Morowali
and the only mining company from Central Sulawesi
to achieve this rank. Overall, just two nickel mining
companies in Indonesia have earned this rank from the
government, demonstrating how prestigious this accolade
is in the country.
Annual Report 2022 Nickel Industries
15
REVIEW OF OPERATIONS
CORPORATE
Ownership interest in Oracle Nickel
increased to 70%
During 2022 the Company completed the acquisition of a
70% interest in Oracle Nickel, having received shareholder
approval at an Extraordinary General Meeting (‘EGM’) on
25 January 2022 for the transaction.
The Oracle Nickel Project comprises:
i.
four RKEF lines, with an annual nameplate
production capacity of 36,000 tonnes of equivalent
contained nickel in NPI; and
ii. ancillary facilities required for the operation of each
of the RKEF lines.
Oracle Nickel is also separately undertaking the
construction of a 380MW power plant that will support the
Company’s RKEF lines and the IMIP’s overall grid power
requirements.
The total consideration for the Company’s 70% indirect
interest is $371 million ($530 million * 70%), together with
the obligation to provide Oracle Nickel $154 million ($220
million * 70%) of funding to the construction for the Oracle
Nickel power plant.
The acquisition was completed in the following three
stages:
i. acquisition of a 10% interest in February 2022,
following the payment of $23 million to Shanghai
Decent, in addition to the $30 million of deposits
already paid in 2021;
ii. acquisition of an additional 20% interest in May
2022, following the completion of a conditional
placement of 108.1 million new ordinary shares
at A$1.37 per share (equivalent to $106 million)
to Shanghai Decent’s nominee Decent Resource
Limited; and
iii. acquisition of an additional 40% interest in
September 2022, following the payment of $212
million to Shanghai Decent.
In addition, the Company has made funding contributions
of $92.4 million to the construction of the power plant
during the year. $81.2 million of this construction funding
was made prior to the Company moving to a 70 % interest
in the Oracle Nickel project and hence consolidating
Oracle Nickel and $11.2 million was made subsequent to
the consolidation of Oracle Nickel. As at 31 December
2022 the Company has $61.6 million remaining of its
construction obligations.
The maiden ‘NPI tap’ was completed by the first of
Oracle’s four RKEF lines on 14 November 2022, well ahead
of the scheduled delivery date of February 2023, the
second line commenced commissioning in mid-December
2022 and the third line in February 2023. The fourth line
is anticipated to have commenced commissioning by the
end of the first quarter of 2023.
Subsequent to year end, the Company announced it
would be acquiring an additional 10% interest in Oracle
Nickel, increasing its equity interest to 80%. For further
details, refer below to ‘Electric Vehicle Battery Supply
Chain Strategic Framework Agreement’.
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Nickel Industries Annual Report 2022
Capital raising initiatives
The Company undertook a number of capital raisings
both during and subsequent to the end of the year, in both
debt and equity markets, as it sought to expand its nickel
production capacity. The primary focus of these capital
raisings during the year was the Company’s acquisition
during 2022 of a 70% interest in the Oracle Nickel project,
as detailed above, including Oracle Nickel’s construction
of a 380MW power plant.
The acquisition of an initial 30% interest in Oracle Nickel
was funded by (i) an institutional placement in February
2022 which raised approximately A$148 million (~$106
million) from the issue of 108.1 million new ordinary shares
at A$1.37 per share and was strongly supported by both
new and existing institutional shareholders and (ii) a $106
million (~A$148 million) non-underwritten conditional
placement to Shanghai Decent (or its nominee). The
conditional placement was approved by shareholders
at an EGM held on 3 May 2022 and Foreign Investment
Review Board approval, which was received on 27 April
2022. Following these approvals, a further 108.1 million
new ordinary shares at A$1.37 per share. were issued to
Shanghai Decent’s nominee Decent Resource Limited in
May 2022, as a share based payment for a 20% interest in
the Oracle Nickel project.
In August 2022 the Company executed binding
agreements for the issuance of $225 million of senior
secured notes (the ‘Notes’) at an interest rate of 10.0%,
maturing August 2025. Issuance of the Notes was
completed on 24 August 2022. This facilitated the move
in September 2022 to a 70% interest in Oracle Nickel
following the early payment of $212 million (originally
required by 31 December 2022) to Shanghai Decent to
secure its increased interest.
Electric Vehicle Battery Supply Chain
Strategic Framework Agreement
In January 2023 the Company signed a multi-faceted
Electric Vehicle Battery Supply Chain Strategic
Framework Agreement (‘Strategic Agreement’) with
Shanghai Decent, and entered into binding agreements
with Shanghai Decent to acquire 10% interests in two
producing nickel assets (collectively the ‘Acquired
Assets’):
The Acquired Assets comprise:
i. a 10% interest in PT Huayue Nickel Cobalt (‘HNC’)
which the Company will acquire from Newstride
Development Limited (‘Newstride’), an entity within
the Tsingshan group and an affiliate of Shanghai
Decent) for $270 million. HNC is an operating HPAL
project in the IMIP; and
ii. an additional 10% interest in Oracle Nickel for $75
million in cash (increasing the Company’s interest to
80%).
CHAIRMAN’S LETTER
REVIEW OF OPERATIONS
The Company also acquired options to collaborate with
Shanghai Decent on future battery nickel opportunities
for $40 million (collectively the ‘Acquired Options’).
The Acquired Options comprise:
i. a $25 million option for the construction of an
HPAL plant with the ability to produce MHP, nickel
sulphate and electrolytic nickel cathode; and
ii. a $15 million option to invest in and construct a low-
grade to high-grade nickel matte converter at Oracle
Nickel.
Equity Capital Raise
To fund the Acquired Assets and Acquired Options the
Company announced it would be undertaking a $471
million capital raise (~A$673 million) (‘Equity Raise’).
The Equity Raise will comprise:
Material tax concessions secured for
Angel Nickel and Oracle Nickel
In January 2022 the Company was advised that Angel
Nickel’s Indonesian operating entity, PT Angel Nickel
Industry, had been granted material corporate tax relief
for its RKEF project. In March 2022 the Company was
advised that Oracle Nickel’s Indonesian operating entity,
PT Oracle Nickel Industry, had been granted the identical
tax concessions.
Notice of the tax relief was communicated to the
Company by official decrees from the Minister of
Finance of the Republic of Indonesia after the Ministry
of Investment/Investment Coordination Committee
conducted studies to assess whether Angel Nickel
and Oracle Nickel “comply with the standards and
requirements for tax relief set out in Article 3 of Minister
of Finance Decree No. 130/PMK.010/2020 on Granting of
Corporate Income Tax Relief Facilities”.
Having satisfied these requirements, the following tax
concessions were granted:
i. a now completed $185 million (~A$264 million) fully
underwritten, institutional placement (‘Institutional
Placement’);
• a Corporate Income Tax Reduction of 100% for a
period of ten tax years, starting from the tax year in
which commercial production is achieved; and
ii. a $270 million (~A$386 million) placement to
Newstride (or its nominee), $15 million (~A$21
million) placement to Shanghai Wanlu Investment
Co. Ltd. (‘Wanlu’) (or its nominee) and $1.4 million
(~A$2 million) placement to Non-Executive Director
Mark Lochtenberg (or his nominee) on a non-
underwritten basis (‘Conditional Placement’); and
iii. a non-underwritten share purchase plan (‘SPP’) to
eligible shareholders in Australia and New Zealand,
with the SPP targeting to raise up to $20 million
(~A$29 million).
The Institutional Placement was successfully completed
on 19 January 2023 and the SPP offer closed on 24
February 2023.
The Conditional Placement will require approval by
shareholders at an EGM (expected to be held in April
2023) and in the case of the placement of shares to
Newstride, approval by the Australia’s Foreign Investment
Review Board (‘FIRB’) - the completion of the acquisition
of the Acquired Assets and Acquired Options is
conditional on the receipt of these approvals..
• a Corporate Income Tax Reduction of 50% of payable
income tax for a period of two tax years, starting from
the end of the initial ten-year period; and
• exemption from withholding and tax collection by
third parties on sales proceeds that would normally be
remitted to the Indonesian Revenue Department for a
period of ten tax years, also commencing from the tax
year in which commercial production is achieved.
The Company’s existing Hengjaya Nickel and Ranger
Nickel projects are currently benefitting from 7-year, 100%
corporate tax relief. The increased tenor of the tax-free
period (to 10 years) applicable to Angel Nickel and Oracle
Nickel is attributed to its materially larger scale and
“planned investment value”.
Acquisition of the Siduarsi
Nickel-Cobalt Project
In May 2022 the Company signed a binding definitive
agreement (‘Definitive Agreement’) for the staged
acquisition of a 100% interest in the Siduarsi Nickel-
Cobalt project (‘Siduarsi’) in Papua province, Indonesia.
Siduarsi is a 6th generation Contract of Work (‘CoW’)
held by PT Iriana Mutiara Mining (‘IMM’) and is one of
only four active nickel CoWs in Indonesia; the other three
being VALE-INCO (which hosts its Soroako nickel matte
production facilities - 65kt of nickel in 2021), Weda Bay
which hosts the IWIP (where the Company’s Angel Nickel
project is) and Gag Island in West Papua province.
Annual Report 2022 Nickel Industries
17
REVIEW OF OPERATIONS
Drill location plan with data until end of December 2022
The Siduarsi CoW covers 16,470 hectares with previous
work undertaken by Battle Mountain (IMM JV partner,
1994 - 1997) and Freeport McMoran (IMM Option holder,
1998 - 1999), who were assessing the project’s limonite
potential. Work undertaken by Battle Mountain and
Freeport McMoran included approximately 367 shallow
hand and machine soil augurs, 24 drill holes and 4 test
pits, which returned highest individual grades of 2.07%
nickel and 0.36% cobalt across 1-metre vertical channel
samples at very shallow depths.
Since the first quarter of 2022, over 21,384 metres of
drilling have been completed (see drill location below).
Detailed geological modelling is well advanced and new
areas in the west of the IUP are currently being drilled.
Currently there are four drill rigs working on the IUP area
of the project.
Additional updates on the project are currently
being undertaken and include ore grade and domain
modelling for metallurgical test work programs, regional
environment base line studies, potential haul road
options and coastal bathymetric studies for suitable port
infrastructure and jetty locations. The first metallurgical
bulk sample was taken during the December quarter
and test work commenced in Jakarta laboratory. Initial
Metallurgical test work will include beneficiation, screen
size analysis followed by acid leach test work.
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Nickel Industries Annual Report 2022
Under the terms of the Definitive Agreement, the
Company can acquire up to 100% of the Siduarsi CoW
through an earn-in structure (the terms of which are
disclosed in our ASX announcement dated May 16,
2022). During 2022 the Company spent $3,348,413 on
exploration costs at the Siduarsi project.
Binding term sheet for 200MWp + 20MWh
battery solar project
In August 2022, the Company signed a binding term
sheet with PT Sumber Energi Surya Nusantara (‘SESNA’)
to develop, install, operate and maintain a 200MWp +
20MWh battery solar project within the IMIP, which will
supply power to the Company’s Hengjaya Nickel, Ranger
Nickel and Oracle Nickel processing operations. The
binding term sheet builds on the MoU signed with SESNA
in January 2022. SESNA has presented the Company
with a compelling project proposal that outlines, amongst
other things, the key responsibilities and deliverables of
the solar project. Nickel Industries will be the long-term
offtake partner for SESNA and will not be required to
contribute any capital funding. The indicative tariff for
electricity (expressed as US cents per kWh) is expected to
remain constant over the life of the project.
Strategic cooperation agreement with
QMB New Energy
In September 2022 the Company signed a long-term
strategic cooperation agreement with QMB. Subject to
the necessary approvals, QMB will build a concentrator
plant within the Hengjaya Mine area that will supply
via pipeline (over a 20-year period), approximately 5-7
million wmtpa of limonite ore (1.1% - 1.3% grade) from the
Hengjaya mine to QMB’s newly commissioned HPAL plant
within the IMIP.
Furthermore, both parties have agreed to explore in
good faith the opportunity for Nickel Industries to have
equity participation in the QMB HPAL that, if executed,
would result in the Company producing ‘Class 1’ nickel
and cobalt for the growing EV battery supply chain in the
form of high-purity, battery-grade MHP, nickel sulfate and
cobalt sulfate.
The strategic cooperation agreement is subject to further
definitive agreements to be agreed by the parties.
Change of Company name
Following shareholder approval at the Company’s AGM
on 31 May 2022, the Company’s name was changed from
Nickel Mines Limited to Nickel Industries Limited.
While the Company’s origins are that of an explorer
and miner of nickel ore, in recent years the Company
has transitioned into a globally significant downstream
processor of nickel metal and this change of name
is considered to reflect the underlying nature of the
Company’s current core operations. With the Company’s
Angel Nickel project having commissioned in 2022 and
the Oracle Nickel project in the advanced stages of its
commissioning, the Company’s revenue and earnings
base will increasingly be activities driven by a growing
suite of downstream “industrial” processing assets.
Board Appointments
In December 2022, the Company announced that Mr
Chris Shepherd and Mr Xiang Binghe would be joining the
Board of Directors.
Chris has served as the Company’s Chief Financial
Officer since November 2021 and has been appointed
in the capacity of Executive Director. Prior to joining the
Company, Chris was a Partner and Managing Director
of The Pallinghurst Group in London where he was
responsible for executing Pallinghurst’s battery material
investment strategy. Chris has over 20 years’ experience
in private equity, investment banking and corporate
finance and has advised on more than $30 billion in
transactions across Australasia, North America, Europe
and Africa.
Mr Xiang Binghe has been a key member of the rapid
development of Tsingshan since 2000. His previous
experience spans many senior roles and operations
including head of AOD Department of Zhejiang Tsingshan
Special Steel Company Limited, the General Manager of
Zhejiang Tsingshan Steel Company Limited, the Chairman
of Zhejiang Ruipu Machinery Company Limited, the Vice
REVIEW OF OPERATIONS
President of Ruipu Technology Group Company Limited,
the Chairman of Fujian Dingxin Nickel Company Limited
and the Vice Chairman of Tsingtuo Group Company
Limited. Mr Xiang has already played a key role in the
development of the Company’s RKEF operations, as a
Shanghai Decent nominee to the Board of the Company’s
Indonesian RKEF entities, as well as director of the
Company’s Singaporean subsidiary holding companies.
In his current role as Chairman of Eternal Tsingshan he
has successfully led the management, development and
operations of the IMIP and the IWIP. Mr Xiang will join the
Board following receipt of a director identification number.
Declaration and payment of maiden
interim and final dividends
In January 2022, the Company declared a final dividend for
2021 of A$0.02 per share, being a distribution of A$50.3M
($35.4M). In August 2022, the Company declared a A$0.02
interim dividend. The dividend was paid on 14 September
2022, totalling A$54.6M ($37.3M).
Competent Persons Statement
The information provided in this report that relates
to Exploration Results and the Mineral Resource at
the Hengjaya Mine, is based on information provided
by Daniel Madre of PT Danmar Explorindo. Mr Madre
is a member of the Australian Institute of Mining and
Metallurgy (AusIMM) and has sufficient experience which
is relevant to the style of mineralisation and type of
deposit under consideration and to the activities which
are being undertaken to qualify as a Competent Person
as defined in the 2012 edition of the “Australian Code for
Reporting of Exploration Results, Mineral Resources and
Ore Reserves”. Mr Madre is an independent consulting
geologist and consents to the inclusion of the matters
based on his information in the form and context in which
it appears. Mr Madre has more than 18 years experience
in exploration and mining of nickel laterites in Indonesia.
The information in this announcement that relates to
Exploration Results in relation to the Siduarsi Nickel-
Cobalt Project is based on and fairly represents
information and supporting documentation compiled by
Michael Thirnbeck BSc (Hons), a Competent Person, who
is a Member of the Australasian Institute of Mining and
Metallurgy. Michael Thirnbeck is a full-time employee of
PT. Iriana Mutiara Mining and has sufficient experience
that is relevant to the style of mineralisation, type of
deposit and activities being undertaken to qualify as a
Competent Person as defined in the 2012 edition of the
Australasian Code for Reporting of Exploration Results,
Minerals Resources and Ore Reserves. The Competent
Person has verified the data disclosed in this release,
including sampling, analytical and test data underlying
the information contained in this release. Mr. Thirnbeck
consents to the inclusion in the announcement of the
matters based on his information in the form and context
in which it appears.
Annual Report 2022 Nickel Industries
19
REVIEW OF OPERATIONS
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD)
Introduction
Nickel Industries recognises its responsibility to support
the global effort to transition to a low-carbon economy,
whilst ensuring that its operations reduce its exposure to
climate risks.
The Company understands the financial risks posed by
climate change and subsequently responds accordingly
through the accounting of its greenhouse gas (‘GHG’)
emissions to examine which risks are most financially
significant. The Company has identified a number of risks,
as summarised below.
Physical risks
Nickel Industries has acknowledged that physical risks,
extreme weather events and longer-term changes in
weather patterns may impact operations. These risks
may lead to production delays, loss of productivity days,
increased costs and increased liabilities. To understand
the current and future risks, several climate scenarios are
used. Each scenario provides a set description of future
climate projections based on GHG concentration. The
physical risks were projected with the Representative
Concentration Pathway (‘RCP’) scenarios developed by
the Intergovernmental Panel on Climate Change (‘IPCC’),
which describes different climate futures based on the
GHG concentration trajectory and its radiative forcing.
Two scenarios are considered to identify how severe
climate change affects the Company:
• RCP 4.5: a moderate scenario in which emissions peak
around 2040 and then decline; and
• RCP 8.5: the highest baseline emissions scenario
in which emissions continue to rise throughout the
twenty-first century.
The identified physical risks include temperature rises,
precipitation increases, sea level rises and natural
disasters; these risks will be described in more detail in
the Company’s Sustainability Report for 2022.
Transition risks
Nickel Industries acknowledges that the world is gradually
transitioning to low-carbon development in accordance
with the Paris Agreement. This transition may have a
future impact on business, particularly for mining and
metal producing companies, which are often identified
as significant GHG emitters, due to their high energy
intensity consumption. To comprehend the transitional
risks, the ‘Policy and Sustainable Development Scenarios’
for the years 2021 to 2050, announced by the International
Energy Agency World Energy Outlook 2021 (‘IEA WEO’)
are utilised to analyse future risks. This IEA WEO scenario
is used to assess a Company’s readiness for changes to
the global energy system.
The identified transition risks include regulatory/policy
changes, technological shifts, and reputational risk; these
risks will be described in more detail in the Company’s
Sustainability Report for 2022.
20
Nickel Industries Annual Report 2022
REVIEW OF OPERATIONS
Core elements of our climate-related financial disclosure
The core elements of the Company’s disclosure are Governance, Strategy, Risk Management and Metrics and Targets.
These elements are depicted in the following image and summarised below.
Governance
Climate change is a substantial governance and strategic
issue that is regularly on the Board’s agenda, particularly
in the context of strategy discussions, portfolio
reviews and investment decisions, risk management
oversight and monitoring, and performance against our
commitments. Therefore, Nickel Industries has developed
a sustainability committee to discuss various ESG issues,
including climate change, within the Company.
Our Board of Directors has diverse backgrounds and
experiences, which positively impact the Company
because each member of the Board can provide a
different view on climate change and other ESG-related
topics. The inputs and outputs obtained from regular
ESG-related sessions are accommodated by the
sustainability committee and are included in the decision-
making process.
Strategy
The Company’s strategy can be separated into the short,
medium and long-term.
• Short-term strategy: The Company has started
to ‘get ready’, developing a GHG inventory and
looking into possible mitigation strategies. We
have engaged with Pertiwi Consulting and Hatch
to conduct GHG inventory, governance and risk
analyses, develop decarbonisation strategies,
and research fuel optimisation opportunities. Our
emissions are dominated by the combustion of coal
and the consumption of electricity. Therefore, the most
prominent short-term action is to optimise fuel and
energy consumption.
• Medium-term strategy: given the current state of
Scope 1 and 2 GHG emissions, the climate scenario
analysis, and the development of coal climate policy,
carbon-related regulation may become effective in the
near future. Such regulations could have a significant
financial impact on the Company. For instance, if a
carbon tax is implemented, penalty fees could be
imposed, and capital expenditures would be expected to
decrease emissions. Therefore, the Company is focusing
on various forms of renewable or lower emissions
energy, such as solar projects, natural gas projects and
fuel reduction strategies.
• Long-term strategy: our scenario analysis revealed that
international and national regulations are anticipated
to exert greater pressure on GHG reduction. The
Company plans to mitigate the transition risk toward
the implementation of low-carbon technologies by
installing renewable energy technologies on our sites.
As the implementation of this technology is a lengthy
process, further studies are required. The Company has
identified and secured attractive market opportunities to
participate in the low-carbon EV battery supply chain.
Annual Report 2022 Nickel Industries
21
REVIEW OF OPERATIONS
Risk Management
Metrics and Targets
The Board of Directors of the Company, led by the
Sustainability Committee, will develop metrics and targets
to assess and manage the Company’s performance in
relation to the identified strategies – the metrics and
targets are expected to be included in the Company’s
2022 Sustainability Report.
CORPORATE GOVERNANCE
STATEMENT
The Board is committed to maintaining standards of
Corporate Governance. Corporate Governance is about
having a set of core values and behaviours that underpin
the Company’s activities and ensure transparency, fair
dealing and protection of the interests of stakeholders.
The Company has reviewed its corporate governance
practises against the Corporate Governance Principles
and Recommendations (4th edition) published by the ASX
Corporate Governance Council.
The Corporate Governance Statement is dated as at
28 February 2023, reflecting the corporate governance
practises throughout the 2022 financial year and was
approved by the Board of Directors of the Company
on 28 February 2023. A description of the Company’s
current corporate governance practises is set out in the
Company’s Corporate Governance Statement which can
be viewed at:
www.nickelindustries.com.au/corporate-governance/.
Nickel Industries may experience disruption in its
operation due to increased disasters in its surrounding
sites. This may lead to an increase in business costs due
to possible delays. Therefore, we consider the following
measures to manage physical risks:
• continue to monitor the development of acute and
chronic physical risks by collecting yearly data;
• develop water management plans;
• monitor water usage and analysis;
•
recycle used water and lessen water loss due to waste,
leakage, and evaporation; and
• develop a contingency plan whenever such extreme
climate disasters arise, both onsite and offsite.
The transition risks for the Company largely come from
policy, technology, and reputation. A comprehensive
transition risk management plan will be created and
followed by strategic plans and actions. Additionally, the
Company considers these measures with the goal of
increasing climate resilience and reducing emissions:
• continue with the ‘Future Energy’ collaboration
framework with Shanghai Decent to optimise the
transition to renewable energy sources across the
Company’s operations;
• early planning and actions for greening the Company’s
operations and facilities, which will help minimise the
effect of the upcoming carbon tax;
• building the reputation as a ‘clean nickel producer’ to
reinforce the trust of investors and the general public;
• expanding our production into Class 1 nickel advances
Nickel Industries into sustainable, transition-oriented
businesses as one of the leading producers of EV
battery materials in the future; and
• continuously monitor the evolution of Indonesian and
global climate policy and explore opportunities for
technological collaboration.
Recognising the challenges to addressing these
requirements, the Company began engaging with external
consultants in 2021 to build in-house capacity and data
collection to understand the risks and opportunities
that climate change can pose towards our business. In
addition, the Company utilise the Task Force on Climate-
Related Financial Disclosures (‘TCFD’) framework in
developing its roadmap.
In 2021, the Company investigated climate-related
governance, the development of its GHG inventory and
GHG emission reduction strategies. In 2022, Nickel
Industries continued to deepen the assessment of the
current climate resilience of the Company. Our work
not only focused on the GHG inventory or preliminary
mitigation ideas, but also on risk assessment and
engaged with the Board of Directors to discuss the results
and initiate the discussions on forward-looking strategies.
As a result, the Company has identified a strategy
roadmap for responding to climate change, identifying
short-term, medium-term and long-term strategies (as
outlined in the section above).
22
Nickel Industries Annual Report 2022
DIRECTORS’ REPORT
The Directors present their report together with the financial report of Nickel Industries Group, being Nickel Industries
Limited (‘the Company’ or ‘Nickel Industries’) and its controlled entities (‘the Group’), for the year ended 31 December
2022 and the auditor’s report thereon:
DIRECTORS
The names and particulars of the Directors of the Company at any time during or since the end of the year are:
Robert Charles Neale – Non-Executive Chairman
Director since 16 April 2018.
Mr Neale graduated from the University of Queensland with a First Class Honours Degree in
Geology and Mineralogy with an additional major in Chemistry. Mr Neale is currently the Non-
Executive Chairman of Mayur Resources Limited, an industrial minerals and energy company
with assets in Papua New Guinea.
Mr Neale is the former Managing Director of New Hope Corporation Limited and the former
Non-Executive Chairman of Mayur Resources Limited. He joined NHC in 1996 as General
Manager and was appointed as an executive officer in 2005 and to the Board of Directors in
2008 until his retirement in 2014. Mr Neale has more than 45 years’ experience in the mining, oil and gas and exploration
industries covering base metals, gold, coal, synthetic fuels and conventional oil and gas, bulk materials shipping, and
power generation. Prior to NHC he spent 23 years with Esso Australia and EXXON Coal and Minerals Company.
Norman Alfred Seckold – Executive Deputy Chairman
Executive Chairman to 16 April 2018. Director since 12 September 2007.
Norman Seckold graduated with a Bachelor of Economics degree from the University of Sydney
and has spent more than 30 years in the full time management of natural resource companies,
both in Australia and overseas.
Mr Seckold has been the Chairman of a number of publicly listed companies including
Moruya Gold Mines (1983) N.L., which acquired the Golden Reward heap leach gold deposit in
South Dakota, USA, Pangea Resources Limited, which acquired and developed the Pauper’s
Dream gold mine in Montana, USA, Timberline Minerals, Inc. which acquired and completed
a feasibility study for the development of the MacArthur copper deposit in Nevada, USA, Perseverance Corporation
Limited, which discovered and developed the Nagambie gold mine in Victoria, Valdora Minerals N.L., which developed
the Rustler’s Roost gold mine in the Northern Territory and the Ballarat East Gold Mine in Victoria, Viking Gold
Corporation, which discovered a high grade gold deposit in northern Sweden, Mogul Mining N.L., which drilled out the
Magistral and Ocampo gold deposits in Mexico and Bolnisi Gold N.L, which discovered and developed the Palmarejo
and Guadalupe gold and silver mines in Mexico.
Mr Seckold is currently Chairman of ASX-listed companies Alpha HPA Limited, Santana Minerals Ltd and Sky Metals
Limited.
Justin Charles Werner – Managing Director
Director since 23 August 2012.
Mr Werner, holds a Bachelor of Management from the University of Sydney and has been
involved in the mining industry for 20 years. He was a founding partner of PT Gemala Borneo
Utama, a private Indonesian exploration and mining company, which developed a heap leach
gold mine in West Kalimantan and also discovered the highly prospective Romang Island with
then ASX-listed Robust Resources Limited which was acquired in 2012 by Indonesian business
tycoon Anthony Salim.
Prior to developing projects in Indonesia, Justin worked as a consultant, leading many
successful turnaround projects for blue chip mining companies around the world including Freeport McMoran (Grasberg
deposit, Indonesia where he spent 2 years), Lihir Gold (Lihir mine, Papua New Guinea), Placer Dome (Nevada, USA),
BHP Billiton (Ingwe Coal, South Africa), Rio Tinto (West Angeles Iron Ore, Australia), Nickel West (Western Australia) and
QNI Yabulu refinery (Queensland, Australia).
Mr Werner is currently a non-executive director of ASX-listed Alpha HPA Limited and Far East Gold Limited.
Annual Report 2022 Nickel Industries
23
DIRECTORS’ REPORT
James Crombie – Non-Executive Director
Director since 23 May 2008.
Jim Crombie graduated from the Royal School of Mines, London, with a B.Sc. (Hons) in Mining
Engineering, having been awarded an Anglo American Scholarship. Mr. Crombie held various
positions with DeBeers Consolidated Mines and the Anglo American Corporation in South
Africa and Angola between 1980 and 1986. He spent the next thirteen years as a Mining
Analyst and Investment Banker with Shepards, Merrill Lynch, James Capel & Co. and finally
with Yorkton Securities. Mr Crombie was the Vice President, Corporate Development of Hope
Bay Mining Corporation Inc. from February 1999 through May 2002 and President and CEO
of Ariane Gold Corp. from August 2002 to November 2003. Mr Crombie was President, CEO
and a director of Palmarejo Silver and Gold Corporation until the merger with Coeur d’Alene Mines Corporation, one of
the world’s leading silver companies, in December 2007. He was a director of Sherwood Copper Corporation until its
business combination with Capstone Mining Corp. in November 2008. Currently, Mr Crombie is President and CEO of
Odyssey Resources Corp.
Weifeng Huang – Non-Executive Director
Director since 26 April 2018.
Mr Huang has graduated with a Bachelor of Engineering degree from Zhejiang University and a
Masters of Business Administration from Zhejiang University.
Mr Huang began his career in several industrial enterprises and has broad management
experiences from serving as the Plant Manager of Wenzhou Tractor Plant, the General Manager
of Wenzhou Machinery Industrial Corporation, the Vice Mayor of Wenzhou and the Executive
Chairman of China Perfect Machinery Industry Corp., Ltd. Mr Huang also served as the Deputy
Director of the Management Committee of Shanghai Jinqiao Export Processing Zone, where
he was appointed as a Director of Shanghai Jinqiao Export Processing Zone Development Co., Ltd, a publicly-listed
company on the Shanghai Stock Exchange and the Deputy CEO of Shanghai Jinqiao Group. Mr Huang was also a former
Chairman of the board of Harbin High Tech (Group) Co., Ltd, another publicly-listed company on the Shanghai Stock
Exchange.
Mr Huang is currently the Chairman of Shanghai Decent Investment (Group) Co., Ltd, a flagship company within the
Tsingshan group which led in the development of the IMIP and he is a Director of PT Indonesia Morowali Industrial Park.
Mark Hamish Lochtenberg – Non-Executive Director
Director since 10 March 2017.
Mr Lochtenberg graduated with a Bachelor of Law (Hons) degree from Liverpool University,
U.K. and has been actively involved in the coal industry for more than 25 years. He was the
Executive Chairman and founding Managing Director of ASX-listed Cockatoo Coal Limited.
He was also formerly the co-head of Glencore International AG’s worldwide coal division,
where he spent 13 years overseeing a range of trading activities including the identification,
due diligence, negotiation, acquisition and aggregation of the coal project portfolio that would
become Xstrata Coal. Prior to this Mr Lochtenberg established a coal “swaps” market for Bain
Refco, (Deutsche Bank) after having served as a senior coal trader for Hansen Neuerburg AG and as coal marketing
manager for Peko Wallsend Limited.
Mr Lochtenberg is currently Chairman of ASX-listed Equus Resources Limited, a director of Terracom Limited and a
director of non-listed companies Australian Transport Energy Corridor Pty Ltd and Montem Resources Limited.
24
Nickel Industries Annual Report 2022
DIRECTORS’ REPORT
Christopher Shepherd – Director and Chief Financial Officer
Chief Financial Officer since 15 November 2021. Director since 23 December 2022.
Chris Shepherd is a Chartered Accountant who holds Bachelor degrees in Applied Finance and
Commerce. Most recently Chris acted as a Partner and Managing Director of The Pallinghurst
Group in London and has over 20 years’ experience in private equity, investment banking and
corporate finance, advising on more than $30 billion in transactions across Australasia, North
America, Europe and Africa.
Prior to The Pallinghurst Group where he was responsible for establishing and executing
Pallinghurst’s battery materials investment strategy, Chris was an investment banker at Merrill
Lynch and Deutsche Bank gaining extensive experience in transaction origination, structuring and execution across the
mining, industrial and consumer sectors.
Dasa Sutantio – Non-Executive Director
Director since 29 May 2020.
Mr Sutantio graduated with a Bachelor of Commerce degree from the Australian National
University in 1987 and has been involved in the Asian financial sector for more than 20 years,
holding various senior positions at Citibank N.A., Bank Tiara Asia Tbk., the Indonesian Bank
Restructuring Agency and PT Bank Mandiri Tbk. He joined the Indonesian Tanito Group in 2010
and is currently a Director and CFO responsible for overseeing the Tanito Group’s investments
in the financial, mining support, marine logistics/shipping, property and hospitality sectors.
Within the Tanito Group, Mr Sutantio is a Director of PT Karunia Bara Perkasa, currently the
Company’s second largest shareholder.
Yuanyuan Xu – Non-Executive Director
Director since 26 April 2018.
Ms Yuanyuan Xu graduated with a Bachelor’s Degree in Fashion Business & Fashion Design
from Instituto Marangoni. Since graduation, Ms Xu has focused on marketing, public relations
and procurement activities.
She is currently an Executive Director of Shanghai Wanlu Investment Co., Ltd.
MANAGEMENT
Richard James Edwards – Company Secretary
Company Secretary since 28 March 2012.
Richard Edwards graduated with a Bachelor of Commerce degree from the University of New
South Wales, is a Fellow of the Governance Institute of Australia, a member of CPA Australia
and holds a Graduate Diploma of Applied Finance and Investment from FINSIA. Mr Edwards
has worked for over twenty years providing financial reporting and company secretarial services
to a range of publicly listed companies in Australia with a focus on the mining sector. He is also
Company Secretary of ASX-listed Alpha HPA Limited and Prospech Limited.
Annual Report 2022 Nickel Industries
25
DIRECTORS’ REPORT
Directors’ Meetings
The number of Directors’ meetings held and number of meetings attended by each of the Directors of the Company,
while they were a Director, during the year are:
Board meetings
Audit
Committee
meetings
Nomination
Committee
meetings
Remuneration
Committee
meetings
Director
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Robert Neale
Norman Seckold
Justin Werner
James Crombie
Weifeng Huang
Mark Lochtenberg
Chris Shepherd*
Dasa Sutantio
Yuanyuan Xu
13
13
13
13
13
13
-
13
13
13
11
13
12
13
13
-
12
12
* Appointed as a Director on 23 December 2022.
2
-
-
2
2
2
-
-
-
2
-
-
1
2
2
-
-
-
1
1
-
-
-
1
-
-
-
1
1
-
-
-
1
-
-
-
1
-
-
1
-
1
-
-
-
1
-
-
1
-
1
-
-
-
Directors’ Interests
The beneficial interests of each Director of the Company in the issued share capital of the Company are:
Director
1 January 2022
Purchased
Sold
Date of this report
Robert Neale
Norman Seckold
Justin Werner
James Crombie
Weifeng Huang
Mark Lochtenberg
Chris Shepherd*
Dasa Sutantio
Yuanyuan Xu
700,000
123,715,661
29,765,228
6,580,000
2,820,000
37,538,584
57,723
-
97,258,258
10,000,000
-
-
-
690,000
-
-
-
-
-
(10,000,000)
-
-
-
-
-
-
-
10,700,000
113,715,661
29,765,228
6,580,000
3,510,000
37,538,584
57,723
-
97,258,258
* Number held at the date of appointment as a Director on 23 December 2022.
26
Nickel Industries Annual Report 2022
DIRECTORS’ REPORT
Dividends
The Company paid an interim unfranked dividend of A$0.02 per share during the year and a final unfranked dividend for
2021 of A$0.02 during the year ended 31 December 2022 amounting to $72,724,697. Total dividends of A$0.04 were paid
or declared during the year ended 31 December 2022.
Significant Changes in State of Affairs
In the opinion of the Directors, significant changes in the state of affairs of the Group that occurred during the year
ended 31 December 2022 were as follows:
• At a General Meeting held in January 2022, the Company’s shareholders approved the 70% acquisition of the Oracle
Nickel project for $371M, which consists of four RKEF lines with an annual nameplate production capacity of 36,000
tonnes of nickel metal and ancillary facilities, as well as a commitment to provide $154M of funding for construction
of a 380MW power plant. During 2022 the Company completed the acquisition of the 70% interest in Oracle Nickel
and provided $92.4M in construction funding.
•
In February 2022 the Company completed a placement of 108,122,223 shares at A$1.37 per share to institutional
shareholders. This was followed in May 2022 with the issuance of a further 108,122,223 shares at A$1.37 per share to
a nominees of Shanghai Decent as a share based payment for a 20% of the Oracle Nickel project.
• During 2022 the Angel Nickel projects four RKEF lines and power plant were successfully commissioned, with the
first RKEF line producing its first NPI in late January 2022 and the fourth line in May 2022, which is when commercial
sales of NPI commenced following receipt of Angel Nickel’s commercial business licence.. The power plant
commenced commissioning in late July 2022.
• The Company released its maiden Sustainability Report in June 2022.
•
In August 2022, the Company completed a $225M offering of Senior Secured Notes at an interest rate of 10.0%,
maturing 23 August 2025.
•
In October 2022, production at the two RKEF lines at Hengjaya Nickel was switched from NPI to nickel matte.
In the opinion of the Directors, there were no other significant changes in the state of affairs of the Group during the
year ended 31 December 2022 other than as disclosed in this Directors’ Report, or in the financial statements.
Impact of Legislation and Other External Requirements
On 12 January 2014 the Indonesian Government introduced a ban on the export of unprocessed minerals. As a
consequence, the mining operations at the Hengjaya Mine ceased. Whilst the ban on the export of unprocessed
minerals remains in place, mining operations were recommenced in October 2015 following the signing of a series of
offtake agreements to supply ore to Tsingshan group companies within the IMIP. There were no environmental or other
legislative requirements during the year that have significantly impacted the results or operations of the Group.
Environmental Regulations
The Group’s operations are subject to environmental regulations in the Republic of Indonesia.
The Board of Directors regularly monitors compliance with environmental regulations. The Directors are not aware of
any significant breaches of these regulations during the period covered by this report.
The Group’s maiden Sustainability Report was published in June 2022.
Likely Developments
Information as to likely developments in the operations of the Group and the expected results of those operations in
subsequent years has not been included in this report because disclosure of this information would be likely to result in
unreasonable prejudice to the Group.
Annual Report 2022 Nickel Industries
27
DIRECTORS’ REPORT
Indemnification of Officers and Auditors
During or since the end of the year, the Company has not indemnified or made a relevant agreement to indemnify an
officer or auditor of the Company against a liability incurred by such an officer or auditor. In addition, the Company has
not paid or agreed to pay, a premium in respect of a contract insuring against a liability incurred by an officer or auditor.
Non-audit Services
During the year ended 31 December 2022 KPMG, the Company’s auditor, has performed other services in addition to
their statutory audit duties.
Auditors of the Company
Audit and review of financial reports – KPMG Australia
Audit and review of financial reports – KPMG Indonesia
Other assurance services – KPMG Australia
Advisory services – KPMG Australia
2022
$
300,249
105,462
47,360
10,350
463,421
2021
$
222,654
117,747
234,914
-
575,315
The Directors are satisfied that the provision of non-audit services, during the 2022 year, by the auditor, or by another
person or firm on the auditor’s behalf, is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001 (Cth). The Directors are of the opinion that these services, do not compromise the external
auditor’s independence for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence, as set out in Code of
Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical
Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making
capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.
Events Subsequent to Balance Date
On 18 January 2023, the Company signed an Electric Vehicle Battery Supply Chain Strategic Framework Agreement with
Shanghai Decent, and entered into binding agreements with Shanghai Decent to acquire 10% interests in two producing
nickel assets, that being an additional 10% interest in the Oracle Nickel project and a 10% interest in HNC. Additionally,
the Company had acquired options to collaborate with Shanghai Decent on future battery nickel opportunities for $40
million. To fund these transactions at the same time the Company announced a $471 million capital raising, comprising a
$185 million (~A$264 million) fully underwritten, institutional placement, a $286.4 million conditional placement and $20
million non-underwritten share purchase plan.
On 24 January 2023 the Company issued 259,103,642 shares to complete the institutional placement component of the
raising at A$1.02 per share, raising A$264.3 million ($185.0 million), before costs.
Other than the matters outlined above, there has not arisen in the interval between the end of the financial year and
the date of this report any other item, transaction or event of a material and unusual nature likely, in the opinion of the
Directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the
state of affairs of the Group, in future financial years.
28
Nickel Industries Annual Report 2022
DIRECTORS’ REPORT
Business Risk Disclosures
Risk
Description
Mitigant
Commodity price
As a producer of NPI and nickel matte, the
The Company continues to focus on
fluctuations
earnings of Nickel Industries are correlated to
minimising the cost of production, which
the price of NPI and nickel matte, and Nickel
we believe provides a level of cash flow
Industries’ cash costs are correlated to the price
protection through the cycle.
of other commodities including coal and nickel
ore.
In addition, the Company has recently
diversified its production to include
Commodity prices, including NPI, nickel matte,
nickel matte and is planning to acquire
coal and nickel ore can fluctuate rapidly and are
MHP production – these products all
affected by numerous factors beyond the control
have different price drivers that should
of the Company. These factors include world
increase the stability of the Company’s
demand for commodities, production cost levels,
earnings.
macroeconomic factors such as expectations
regarding inflation, interest rates and global and
regional demand for, and supply of, commodities,
general global economic conditions, and short
positions taken by traders, miners and processors.
A decline in the market price of NPI or nickel
matte, and price fluctuations for other
commodities may have an adverse effect on the
Company’s revenues and operations and the
Company’s ability to fund those operations.
Annual Report 2022 Nickel Industries
29
DIRECTORS’ REPORT
Risk
Description
Mitigant
Reliance on
The continued operations of Hengjaya Nickel,
To facilitate the operations of Hengjaya
Tsingshan group
Ranger Nickel, Angel Nickel and Oracle Nickel,
Nickel, Ranger Nickel and Oracle Nickel
including commissioning of the remaining RKEF
within the IMIP, and Angel Nickel within
line and power plant of Oracle Nickel and potential
the IWIP, Shanghai Decent has formally,
future development of HPAL and nickel matte
in CAs entered into with the Company in
converter projects are reliant on the relationship
which:
between the Company and Tsingshan, and
Tsinghan’s role in developing and constructing
those projects.
Sales
All sales of NPI are currently sold to Tsingshan
group companies and the Company has heavy
reliance on the Tsingshan group as a purchaser of
NPI produced from Ranger Nickel, Angel Nickel
and Oracle Nickel
There may be a materially adverse effect on the
Company’s financial performance and that of
Ranger Nickel, Angel Nickel and Oracle Nickel
if Shanghai Decent fails to purchase all of the
offtake and alternative customers are not found.
Supply of ancillary services within the IMIP
and IWIP
The Company and the Group Entities do not
have any formal contractual agreements for the
supply of ancillary services within the IMIP or IWIP
that support the operations of Hengjaya Nickel,
• Shanghai Decent has committed to
purchase all of the Company’s NPI
production. The production of nickel
products other than NPI may be
sold to third parties (which Shanghai
Decent encourages) providing
customer diversification;
•
IMIP/IWIP will provide such services
to the relevant Group Entity in
accordance with the ‘principle of
non-discrimination’, substantially the
same manner, with the same degree
of care and at the same price without
discrimination of any kind (such as
priority of entry) as it does for users
within the IMIP or IWIP (as the case
may be); and
• Shanghai Decent has provided a
nameplate (i.e. production level) and
commissioning guarantee to the
Company, and Shanghai Decent has
an extremely history of successfully
Ranger Nickel, Angel Nickel and Oracle Nickel
doing as such.
(for example, power and access to port). The
operations of the Company and the Group Entities
may be affected if these services are not supplied
as in the past.
Finally, the Board of Directors believes
the interests of Shanghai Decent are
closely aligned with that of the Company,
given Shanghai Decent’s major
shareholding in the Company (directly)
and its ownership interests in each of the
Company’s RKEF projects.
30
Nickel Industries Annual Report 2022
DIRECTORS’ REPORT
Risk
Description
Mitigant
Environmental,
Mining for ore and processing NPI and nickel
The Company seeks to minimise
social and
matte can be potentially environmentally
these risks by conducting its activities
governance risk
hazardous and may give rise to potentially
(including its operating entities where
substantial costs for environmental rehabilitation,
within its control) in an environmentally
damage control and losses.
Significant liability could be imposed on the
Hengjaya Mine, Hengjaya Nickel entities, the
Ranger Nickel entities, the Angel Nickel entities,
responsible manner, in accordance with
applicable laws and regulations and
where possible, by carrying appropriate
insurance coverage.
the Oracle Nickel entities and HNC for damages,
Further, the Company maintains strong
clean-up costs, or penalties in the event of certain
community relations to ensure that the
discharges into the environment, environmental
local stakeholders are supportive of the
damage caused by previous occupiers or
Company’s operations in Indonesia.
non-compliance with environmental laws or
regulations. Further, the failure of the Company
or its related entities to engage with the local
communities would risk disaffection on the part
of the communities, which may have adverse
implications for the Company’s operations.
Management and
The Company’s business and future success
Remuneration consultants have been
key personnel risk
heavily depends upon the continued services of a
engaged by the Group during the year
small group of executive management and other
ended 31 December 2022, but their
key personnel.
reporting to the Company remains
outstanding.
If one or more of the Company’s management or
key personnel were unable or unwilling to continue
in their present positions, the Company might not
be able to replace them easily or at all.
The Company’s business may be severely
disrupted, its financial condition and results of
operations may be materially adversely affected,
and it may incur additional expenses to recruit,
train and retain personnel.
Annual Report 2022 Nickel Industries
31
DIRECTORS’ REPORT
Risk
Description
Mitigant
Climate risk
The Hengjaya Mine and the IMIP, where the
For a discussion on the Company’s
Hengjaya Nickel, Ranger Nickel and Oracle
current strategy to mitigate these risks,
Nickel RKEF lines and HNC Project are located,
please refer to ‘TCFD section’ of this
is located in the Indonesian province of Central
report.
Sulawesi. The IWIP, where the Angel Nickel RKEF
lines are located, is located in Halmahera Island in
Indonesia’s North Maluku province.
The Hengjaya Mine. Hengjaya Nickel, Ranger
Nickel, Angel Nickel Oracle Nickel and HNC
operations are therefore subject to the local
climate of Central Sulawesi and North Maluku.
Exploration, mining production and transportation
activities may be susceptible to risks and hazards
resulting from sustained precipitation or other
weather conditions. If these risks do occur, they
may result in production delays, increased costs
and increased liabilities.
Further, changes in laws and policies, including
in relation to carbon pricing, greenhouse gas
emissions and energy efficiency, may adversely
impact operations. Technological changes,
including increasing use of renewable energy, may
affect operations.
Cyber risk
The Company and its Group Entities rely on IT
The Company engages a reputable
infrastructure and systems and the efficient and
third-party IT firm to manage its IT
uninterrupted operation of core technologies.
infrastructure and cyber-security.
The Company’s core technologies and other
systems and operations could be exposed to
damage or interruption from system failures,
computer viruses, cyber-attacks, power or
telecommunication provider’s failure or human
error. These events may cause one or more of
the Company’s core technologies to become
unavailable. Any interruptions to these operations
would impact the Company’s ability to operate
and could result in business interruption, loss
of customers and revenue, damaged reputation
and weakening of competitive position and
could therefore adversely affect the Company’s
operating and financial performance.
32
Nickel Industries Annual Report 2022
DIRECTORS’ REPORT
Risk
Description
Mitigant
Changes in
Changes to tax laws may affect the Company and
The Company, with its advisors,
taxation laws and
its shareholders, and the Group Entities.
monitors developments in this respect
policies
There may be tax implications arising from
and would seek to engage the relevant
authorities should any of these risks
ownership of the Company’s shares, the receipt
of dividends (if any) from the Company, receiving
emerge.
returns of capital and the disposal of the shares.
Further, the Company continues to
Taxation concessions available to any Group Entity
diversify its production mix which
may change or cease to be applicable over time.
may provide some protection against
the effects of any changes in tax laws
and policies that affect any one nickel
product.
REMUNERATION REPORT - (AUDITED)
All amounts in this remuneration report are in Australian Dollars unless otherwise stated.
Principles of Compensation - (Audited)
Key management personnel have authority and responsibility for planning, directing and controlling the activities of the
Group. Key management personnel comprise the Directors of the Company and CFO Chris Shepherd, who was also
appointed a Director in December 2022. No other employees have been deemed to be key management personnel.
The policy of remuneration of Directors and senior executives is to ensure the remuneration package properly reflects
the person’s duties and responsibilities, and that remuneration is competitive in attracting, retaining and motivating
people of the highest quality. Compensation levels have been, and will be, set to be in line with Australian listed entities
of equivalent size and comparable operations in order to attract and retain suitably qualified and experienced key
management personnel but also having regard to the prevailing financial capacity of the Company.
The Board is responsible for reviewing and evaluating its own performance. The evaluation process is intended
to assess the Group’s business performance, whether long term strategic objectives are being achieved and the
achievement of individual performance objectives.
Remuneration generally consists of salary payments. There is no variable remuneration and no share-based payments
have been made. The remuneration disclosed below represents the cost to the Group for the services provided under
these arrangements.
Consultancy Agreements with key management personnel
The Company has entered into an executive consultancy agreement with a company associated with Norman Seckold.
Under this executive consultancy agreement, the consultancy company of Mr Seckold agrees to make Mr Seckold
available to perform the duties and responsibilities of the position of Executive Deputy Chairman. During the year
the Company received a fee of A$33,333 per month, equating to A$400,000 per annum. The consultancy agreement
commenced on 1 May 2018 and continues until terminated in accordance with its terms.
The Company has entered into an executive consultancy agreement with a company associated with Justin Werner.
Under this executive consultancy agreement, the consultancy company of Mr Werner agrees to make Mr Werner
available to perform the duties and responsibilities of the position of Managing Director. During the year the consultancy
company received a fee of US$41,667 per month, equating to US$500,000 per annum, the equivalent of A$722,600.
Additionally, his gross compensation includes amounts paid to him directly in Indonesia for travel allowance, taxes
and operational bonus, which combined took his total remuneration by the group to the equivalent of A$826,500. The
consultancy agreement commenced on 1 April 2018 and continues until terminated in accordance with its terms.
Annual Report 2022 Nickel Industries
33
DIRECTORS’ REPORT
The Company has entered into an employment agreement with Chief Financial Officer Chris Shepherd. Under this
agreement, Mr Shepherd received a fee of A$50,000 per month, including superannuation, equating to A$600,000 per
annum. The agreement commenced on 1 August 2021 and Mr Shepherd assumed the position of Chief Financial Officer
on 15 November 2021, following the resignation of Mr Nightingale.
Each Executive Director is entitled to be reimbursed for reasonable travel and other expenses incurred in connection
with attending meetings of the Board and any committee on which he or she serves. The consultancy agreements may
be terminated by the Company or the consultancy company by either party giving three months’ notice. The Company
may in its absolute discretion make a payment in lieu of all or part of such notice and the employment would terminate
on the date that the Company notifies the Director of the termination. The Company may terminate the consultancy
agreements without notice in certain circumstances, including but not limited to a breach of contract, criminal activity
or serious misconduct by the consultancy company or the key management personnel.
Each of the Company’s Non-Executive Directors have entered into Letters of Appointment with the Company to serve
as Non-Executive Directors. During the period from 1 January 2022 to 31 December 2022, each of the Non-Executive
Directors James Crombie, Weifeng Huang, Mark Lochtenberg, Dasa Sutantio and Yuanyuan Xu received a fee of
A$8,333 per month, equating to A$100,000 per annum. Mr Lochtenberg’s remuneration includes superannuation.
During the period from 1 January 2022 to 31 December 2022, Non-Executive Chairman Robert Neale received a fee of
A$16,667 per month including superannuation, equating to A$200,000 per annum including superannuation.
Each Non-Executive Director receives a fee of A$10,000 per annum for each Board committee on which they serve.
i.e. Mark Lochtenberg and Robert Neale three committees, James Crombie two committees and Weifeng Huang one
committee.
No Directors or senior executives received performance related remuneration during the year ended 31 December 2022.
Remuneration consultants were engaged by the Group during the year ended 31 December 2022 but their reporting to
the Company remains outstanding. There were no remuneration consultants engaged in the prior period.
Consequences of performance on shareholder wealth
In considering the Group’s performance and benefits for shareholder wealth, the Board has regard to the following
information in respect of the current year ended 31 December 2022 and the previous five financial periods.
2022
$
2021
$
2020
$
6 Months
to 31
December
2019
$
2019
$
2018
$
158,978,977
137,938,917
110,610,841
56,504,374
65,525,988
(3,311,526)
USD
Net profit/(loss)
attributable to
owners of the
Company
Dividends paid
72,724,697
75,088,707
15,441,648
-
-
-
The Board also considers non-financial indices in assessing the Group’s performance and the shareholders wealth. This
includes obtaining the permits and approvals to further develop the mining operations, identifying and opportunities for
potential strategic business partnerships and ventures and the success of fund raising activities.
34
Nickel Industries Annual Report 2022
DIRECTORS’ REPORT
Details of Remuneration for the Year Ended 31 December 2022 - (Audited)
Details of Director remuneration and the nature and amount of each major element of the remuneration of each
Director of the Company are set out below. All balances included are denominated in Australian dollars.
Remuneration for year ended 31 December 2022:
Post-
Share
based
Short term
employment
payments
Salary
Superannu-
Other
Proportion of
Value of
remuneration
options as a
performance
proportion of
Key management
and fees
A$
ation
A$
Shares
Benefit
Total
related
remuneration
A$
A$
A$
%
%
personnel
Executive
Directors
Norman Seckold
Justin Werner
Christopher
Shepherd*
Non-Executive
Directors
Robert Neale
James Crombie
Weifeng Huang
Mark Lochtenberg
Dasa Sutantio
Yuanyuan Xu
400,000
826,500
-
-
545,455
55,909
209,092
120,000
110,000
118,182
100,000
100,000
21,432
-
-
12,114
-
-
-
-
-
-
-
-
-
-
-
-
400,000
826,500
-
41,958
643,322
230,524
120,000
110,000
130,296
100,000
100,000
-
-
-
A$41,958 A$2,660,642
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
A$2,529,229 A$89,455
* Appointed as Director on 23 December 2022. Other benefit amount is annual leave balance accrued carried forward.
Annual Report 2022 Nickel Industries
35
DIRECTORS’ REPORT
Remuneration for year ended 31 December 2021:
Post-
Share
based
Short term
employment
payments
Proportion of
Value of
remuneration
options as a
Salary
Superannu-
Termination
performance
proportion of
ation
A$
Shares
Benefit
A$
A$
Total
A$
related
remuneration
%
%
Key management
and fees
personnel
Executive
Directors
A$
Norman Seckold
Justin Werner
212,500
594,473
Peter Nightingale^
300,000
Non-Executive
Directors
Robert Neale
James Crombie
Weifeng Huang
Mark Lochtenberg
Dasa Sutantio
Yuanyuan Xu
Management
Christopher
Shepherd*
155,012
67,500
65,000
67,045
62,500
62,500
69,697
6,970
Total
A$1,656,227 A$25,084
-
-
-
15,159
-
-
2,955
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
212,500
594,473
300,000
600,000
-
-
-
-
-
-
-
170,171
67,500
65,000
70,000
62,500
62,500
76,667
A$300,000
A$1,981,311
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* Remuneration paid subsequent to his becoming Chief Financial Officer on 15 November 2021.
^ Resigned as Director and Chief Financial Officer on 15 November 2021.
The total remuneration expense for the year ended 31 December 2022 of A$2,660,642 (December 2021: A$1,981,311) has
been recognised in the Statement of Profit or Loss at the US$ equivalent of $1,840,929 (December 2021: $1,480,026).
36
Nickel Industries Annual Report 2022
DIRECTORS’ REPORT
Movement in shares - (Audited)
The movement during the reporting year in the number of ordinary shares in the Company held directly, indirectly or
beneficially, by each key management person, including their related parties, is as follows:
1 January 2022
Purchased
Sold
31 December 2022
700,000
10,000,000
-
(10,000,000)
Robert Neale
Norman Seckold
Justin Werner
James Crombie
Weifeng Huang
Mark Lochtenberg
Christopher Shepherd
Dasa Sutantio
Yuanyuan Xu
Robert Neale
Norman Seckold
Justin Werner
Peter Nightingale
James Crombie
Weifeng Huang
Mark Lochtenberg
Christopher Shepherd
Dasa Sutantio
Yuanyuan Xu
123,715,661
29,765,228
6,580,000
2,820,000
37,538,584
57,723
-
97,258,258
-
-
-
690,000
-
-
-
-
700,000
123,715,661
29,209,673
27,601,995
6,580,000
1,450,000
34,538,584
^
-
121,258,258
-
-
555,555
-
-
1,370,000
3,000,000
57,723
-
-
1 January 2021
Purchased
Sold
10,700,000
113,715,661
29,765,228
6,580,000
3,510,000
37,538,584
57,723
-
97,258,258
31 December 2021
700,000
123,715,661
29,765,228
27,601,995*
6,580,000
2,820,000
37,538,584
57,723
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24,000,000
97,258,258
* Number held at date of his resignation as a Director on 15 November 2021.
^ Number held at date of appointment as Chief Financial Officer on 15 November 2021.
Transactions with Key Management Personnel - (Audited)
Director Norman Seckold hold a beneficial interest in an entity, MIS Corporate Pty Limited, which provided full
administrative services, including administrative, accounting, company secretarial and investor relations staff both
within Australia and Indonesia, rental accommodation, services and supplies to the Group. On 1 January 2019 MIS
agreed to provide these services for a fee of A$35,000 per month and this fee was increased to A$37,000 per month
in October 2021 and A$38,000 per month from November 2021. Fees charged by MIS during the year amounted to
A$459,000 (31 December 2021: A$590,500). As at 31 December 2022 $38,000 (31 December 2021: A$3,000) remained
outstanding.
Annual Report 2022 Nickel Industries
37
DIRECTORS’ REPORT
LEAD AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE
CORPORATIONS ACT 2001
The lead auditor’s independence declaration is set out on page 39 and forms part of the Directors’ Report for the year
ended 31 December 2022.
Signed at Sydney this 28th day of February 2023 in accordance with a resolution of the Board of Directors:
Robert Neale
Chairman
Norman Seckold
Deputy Chairman
38
Nickel Industries Annual Report 2022
LEAD AUDITOR’S INDEPENDENCE DECLARATION
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Nickel Industries Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Nickel Industries
Limited for the financial year ended 31 December 2022 there have been:
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
i.
ii.
KPM_INI_01
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
KPMG
Stephen Board
Partner
Brisbane
28 February 2023
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used
under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under
Professional Standards Legislation.
40
Annual Report 2022 Nickel Industries
39
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the year ended 31 December 2022
US$
Sales revenue
Cost of sales
Depreciation and amortisation expense
Gross profit
Directors’ fees and consultants’ expenses
Exploration and evaluation expenditure
Share of gain/(loss) of equity accounted investees
Other expenses
Results from operating activities
Financial income
Financial expense
Net financial expense
Profit before income tax
31 December 2022
31 December 2021
Notes
$
$
22
1,217,041,820
645,935,639
(856,617,781)
(66,598,202)
293,825,837
(9,289,162)
(3,348,413)
404,812
(22,710,611)
258,882,463
1,007,513
(42,844,043)
(41,836,530)
217,045,933
(393,203,284)
(35,977,298)
216,755,057
(9,432,472)
-
(50,482)
(13,255,745)
194,016,358
2,786,467
(15,763,290)
(12,976,823)
181,039,535
15
4
5
5
Income tax expense
10
(7,678,323)
(5,062,549)
Profit for the year
209,367,610
175,976,986
Other comprehensive income
Items that may be classified subsequently to profit or loss
7,088
(81,549)
Total comprehensive profit for the year
209,374,698
175,895,437
Profit attributable to:
Owners of the Company
Non-controlling interest
158,978,977
50,388,633
137,938,917
38,038,069
Profit for the year
209,367,610
175,976,986
Total comprehensive profit attributable to:
Owners of the Company
Non-controlling interest
158,984,647
50,390,051
137,873,678
38,021,759
Total comprehensive profit for the year
209,374,698
175,895,437
Earnings per share
Basic and diluted profit per share (cents) for the year
9
5.93
5.48
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with
the accompanying notes.
40
Nickel Industries Annual Report 2022
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
As at 31 December 2022
31 December 2022
- restated*
Notes
$
$
31 December 2021
18
6
8
7
7
11
16
12
10
13
10
13
14
14
144,242,357
235,617,714
204,845,299
47,793,529
632,498,899
15,162,987
1,922,109,404
-
102,748,404
2,040,020,795
137,861,958
125,094,113
106,997,153
15,208,226
385,161,450
13,193,397
1,264,281,811
30,000,000
77,982,164
1,385,457,372
2,672,519,694
1,770,618,822
177,185,164
21,244,636
1,174,237
7,772,688
207,376,725
2,034,921
96,099,816
948,363
551,515,430
650,598,530
55,738,089
7,647,688
1,159,184
9,284,264
73,829,225
1,955,576
77,982,164
617,535
318,322,283
398,877,558
857,975,255
472,706,783
1,814,544,439
1,297,912,039
942,442,827
19,144,965
337,031,589
732,929,135
19,139,295
250,777,309
1,298,619,381
1,002,845,739
515,925,058
295,066,300
1,814,544,439
1,297,912,039
US$
Current assets
Cash and cash equivalents
Trade and other receivables
Inventory
Other current assets
Total current assets
Non-current assets
Other non-current assets
Property, plant and equipment
Deposit
Goodwill
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current tax payable
Provision
Borrowings
Total current liabilities
Non-current liabilities
Provision – rehabilitation
Deferred income tax liability
Other non-current liability
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained profits
Total equity attributable to equity holders of the
Company
Non-controlling interest
Total equity
*
Restated following adjustment to provisional accounting for acquisition of a controlled entity. See Note 16 for further details.
The above consolidated statement of financial position should be read in conjunction with accompanying notes.
Annual Report 2022 Nickel Industries
41
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*
CONSOLIDATED STATEMENT
OF CASH FLOWS
For the year ended 31 December 2022
US$
31 December 2022
31 December 2021
Notes
$
$
Cash flows from operating activities
Cash receipts from customers
Cash payments to employees and suppliers
Interest received
Taxes and fees paid
Payments for exploration and evaluation
Net cash from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for construction in progress
Payments for deposit
Payments for acquisition of controlled entity
Advance payments for Oracle construction
Cash on acquisition of controlled entity
Advancement of loan monies
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Costs of issue
Dividend distributions
Proceeds from borrowings, net of borrowing costs
Repayment of borrowings
Payment of interest charges
Distributions to non-controlling interest
Contributions by non-controlling interest
Net cash from financing activities
Net increase in cash and cash equivalents
Effect of exchange rate adjustments on cash held
Cash and cash equivalents at the beginning of the year
18
16
16
16
7
14
14
14
13
18(c)
18(c)
1,203,312,931
(1,079,763,371)
1,007,513
(58,165,488)
(3,348,413)
63,043,172
(9,393,090)
(110,378,195)
-
(235,000,000)
(81,200,000)
7,959,574
(2,000,000)
(430,011,711)
106,000,000
(2,486,308)
(72,724,697)
230,296,561
(5,600,000)
(26,750,000)
(28,131,293)
172,550,000
373,154,263
6,185,724
194,675
137,861,958
660,867,873
(463,987,522)
335,985
(8,195,616)
-
189,020,720
(6,494,484)
(41,719,173)
(30,000,000)
(527,600,000)
-
11,458,128
(3,500,000)
(597,855,529)
-
-
(75,088,707)
320,844,143
(45,000,000)
(6,340,658)
(29,123,599)
32,000,000
197,291,179
(211,543,630)
(2,039,734)
351,445,322
Cash and cash equivalents at the end of the year
144,242,357
137,861,958
Non-cash financing and investing activities:
The acquisition of an investment in an equity accounted investee disclosed in Note 11 included a non-cash
transaction of $106,000,000 which was funded through the issue of $106,000,000 in shares.
Non-cash investing activities
Payment for acquisition of controlled entity
Total non-cash investing activities
Non-cash financing activities
Proceeds from issue of shares
Total non-cash investing activities
11
13
(106,000,000)
(106,000,000)
106,000,000
106,000,000
-
-
-
-
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Annual Report 2022 Nickel Industries
43
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
NOTE 1 - REPORTING ENTITY
Nickel Industries Limited (the ‘Company’) is a company domiciled in Australia. The consolidated financial report for
the year ended 31 December 2022 comprises the Company and its subsidiaries (together referred to as the ‘Group’).
The Group is a for-profit entity and is involved in nickel ore mining and nickel pig iron and nickel matte production
operations.
NOTE 2 - BASIS OF PREPARATION
Statement of compliance
The financial report is a general purpose financial report which has been prepared in accordance with Australian
Accounting Standards (‘AASBs’) adopted by the Australian Accounting Standards Board (‘AASB’) and the Corporations
Act 2001. The consolidated financial report of the Group complies with International Financial Reporting Standards
(‘IFRS’) and interpretations adopted by the International Accounting Standards Board (‘IASB’).
The financial report was authorised for issue by the Directors on 28 February 2023.
Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for certain financial
instruments which are measured at fair value.
Functional and presentation currency
These consolidated financial statements are presented in United States dollars, which is the Company’s functional
currency.
Use of estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future
periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying
accounting policies that have the most significant effect on the amount recognised in the financial statements are
described in the following notes:
• Note 10 – Income tax expense and the recoverability of deferred tax assets.
• Note 16 – Impairment of goodwill.
• Note 16 – Controlled entities.
44
Nickel Industries Annual Report 2022
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidation
Business combinations
The Group accounts for business combinations using the acquisition method when the acquired set of activities and
assets meets the definition of a business and control is transferred to the Group. In determining whether a particular set
of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a
minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.
The Group has an option to apply a ‘concentration test’ that permits a simplified assessment of whether an acquired set
of activities and assets is not a business. The optional concentration test is met if substantially all of the fair value of the
gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets
The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets
acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in
profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity
securities.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such
amounts are generally recognised in profit or loss
Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent
consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and
settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each
reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to affect those returns through its power over the
entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that
control commences until the date that control ceases.
Non-controlling interest
The Group measures any non-controlling interest at its proportionate interest in the identifiable net assets of the
acquiree. Acquisitions of non-controlling interests are accounted for as transactions with equity holders in their capacity
as equity holders and therefore no goodwill is recognised as a result of such transactions.
Annual Report 2022 Nickel Industries
45
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions,
are eliminated in preparing the consolidated financial statements. Where a controlled entity issues shares to minority
interests which does not result in loss of control by the Group, any gain or loss arising on the Group’s interest in the
controlled entity is recognised directly in equity.
Investments in equity-accounted investees
The Group’s interests in equity-accounted investees comprise interests in associates.
Associates are those entities in which the Group has significant influence, but not control or joint control, over the
financial and operating policies. A joint venture is an arrangement in which the Group has joint control, whereby the
Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.
Interests in associates and joint ventures are accounted for using the equity method. They are recognised initially at
cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include
the Group’s share of the profit or loss and other comprehensive income of equity-accounted investees, until the date on
which significant influence or joint control ceases.
Nickel ore and nickel pig iron and nickel matte sales revenue
Saprolite and limonite nickel ore and nickel pig iron sales revenue is measured based on the consideration specified
in a contract with a customer. The Group recognises revenue when it transfers control over goods or a service to a
customer.
Invoices for nickel ore sales are generated once a month upon receipt of assay results and are usually payable within
10 working days. Pro-forma invoices for exports of nickel pig iron are generated based on the loading inspection report
and a final invoice is issued based on the nickel content delivered, following receipt of third party assay results. They are
usually payable within 60 days. No discounts are provided for nickel ore and nickel pig iron products, but adjustments
are made to the final sale price for items including final nickel grade, moisture content and nickel content.
Invoices for nickel matte sales are generated once a month, originally on a provisional basis based on until final assay
results undertaken at the port of discharge have been received. When the final pricing is received, which happens
approximately three months after the original invoice any adjustment is taken up in the month in which the amended
final pricing is received.
46
Nickel Industries Annual Report 2022
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to United
States dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are
recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost
in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and
liabilities denominated in foreign currencies that are stated at fair value are translated to United States dollars at foreign
exchange rates ruling at the dates the fair value was determined.
The Group transacts in the following foreign currencies: Australian dollars (A$ or AUD), Indonesian Rupee (IDR) and
Singapore Dollars (SGD).
Financial statements of foreign operations
The assets and liabilities of foreign entities are translated to United States dollars at the foreign exchange rates ruling
at the reporting date. The revenues and expenses of foreign operations are translated to United States dollars at rates
using a monthly average rate for the month in which the transaction occurred. Foreign exchange differences arising
on retranslation are recognised directly in the foreign currency translation reserve (‘FCTR’), a separate component of
equity.
Foreign exchange gains and losses arising from a monetary item receivable or payable to a foreign operation, the
settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net
investment in a foreign operation and are recognised directly in the FCTR.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition,
are translated to United States dollars at exchange rates at the reporting date. The income and expenses of foreign
operations are translated to United States dollars using a monthly average rate for the month in which the transaction
occurred. When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to
profit or loss as part of the profit or loss on disposal.
At 31 December 2022, the functional currency of all components in the Group is United States dollars. The FCTR
represents the foreign exchange differences which arose on retranslation in prior years on subsidiaries which have not
yet been disposed.
Property, plant and equipment
Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Construction in progress
The Group recognises plant construction in progress costs at cost in a construction in progress account. Once
construction has been completed and the plant is in service, costs recognised as construction in progress will be
transferred to the appropriate assets category within property, plant and equipment and depreciation charges will
commence.
Depreciation and amortisation
Mining properties’ amortisation rate is applied on a straight-line basis over the remaining term of the mining licence. The
amortisation is included in the costs of conversion of inventories.
Depreciation is charged to the income statement using a reducing balance method from the date of acquisition using
the following rates:
• Furniture and fittings and plant and machinery are depreciated at 25%.
• Buildings and infrastructure are depreciated at 5%.
• Mine infrastructure assets are depreciated at 5%.
• Office equipment is depreciated at rates of between 25% and 40%.
• Plant and machinery are depreciated at rates if between 6.25% and 12.5%.
• Motor vehicles are depreciated at 25%.
Annual Report 2022 Nickel Industries
47
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
Impairment
Financial assets
The Group recognises expected credit losses (‘ECLs’), where material, on financial assets measured at amortised cost.
The Group measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured
at 12-month ECLs:
• Other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life
of the financial instrument) has not increased significantly since initial recognition.
Loss allowances for trade receivables and contract assets are measured at an amount equal to lifetime ECLs. At each
reporting date, the Group assesses whether financial assets carried at amortised cost and debt securities at fair value
through profit or loss are credit impaired.
The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of
recovering a financial asset in its entirety or a portion thereof.
Non-financial assets
The carrying amounts of the Group’s assets, other than deferred tax assets and inventories, are reviewed at each
balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s
recoverable amount is estimated. Goodwill, being an indefinite life intangible asset, is subject to annual impairment
testing, in which the goodwill is allocated to a cash generating unit (‘CGU’) for impairment testing and the value-in-use is
compared to the carrying value of assets and liabilities in that CGU.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its
recoverable amount. Impairment losses are recognised in the income statement, unless an asset has previously been
revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with
any excess recognised through profit or loss.
Calculation of recoverable amount
The recoverable amount of assets is the greater of their fair value less costs to sell and value in use. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. For an asset that does not
generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which
the asset belongs.
Reversals of impairment
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Impairment charges against the carrying value of goodwill cannot be reversed.
48
Nickel Industries Annual Report 2022
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
Share capital
Transaction costs
Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related income tax
benefit.
Dividends
Dividends are recognised as a liability in the period in which they are declared.
Finance income and finance costs
The Group’s finance income and finance costs include:
•
•
interest income;
interest expense;
• dividend income;
•
•
the foreign currency gain or loss on financial assets and financial liabilities; and
the gain on the remeasurement to fair value of any pre-existing interest in an acquiree in a business combination.
Interest income or interest expense is recognised using the effective interest method. Dividend income is recognised in
profit or loss on the date on which the Group’s right to receive payment is established.
The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the
expected life of the financial instrument to:
•
•
the gross carrying amount of the financial asset; or
the amortised cost of the financial liability.
In calculating interest income and interest expense, the effective interest rate is applied to the gross carrying amount
of the asset (when the asset is not credit-impaired) or to the amortised cost of the liability. However, for financial
assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying
the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the
calculation of interest income reverts to the gross basis.
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in the income statement over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
Annual Report 2022 Nickel Industries
49
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
Income tax
Income tax on the income statement for the year comprises current and deferred tax. Income tax is recognised in
the income statement except to the extent that it relates to items recognised directly in equity, in which case it is
recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially
enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
The following temporary differences are not provided for:
• The initial recognition of assets or liabilities that affect neither accounting nor taxable profit and differences relating
to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying
amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the
related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to
pay the related dividend.
Goods and services tax and Value Added Tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (‘GST’) or value added
tax (‘VAT’), except where the amount of GST or VAT incurred is not recoverable from the taxation authority. In these
circumstances, the GST or VAT is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST or VAT included. The net amount of GST or VAT
recoverable from, or payable to taxation authorities is included as a current asset or liability in the statement of financial
position.
Cash flows are included in the statement of cash flows on a gross basis. The GST or VAT components of cash flows
arising from investing and financing activities which are recoverable from, or payable to taxation authorities are
classified as operating cash flows.
Employee benefits
Wages, salaries, annual leave, sick leave and non-monetary benefits
Liabilities for employee benefits for wages, salaries, annual leave and sick leave that are expected to be settled within
12 months of the reporting date represent present obligations resulting from employees’ services provided to reporting
date, are calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects to
pay as at reporting date including related on-costs, such as workers compensation insurance and payroll tax.
Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on average costs
over the relevant period of production, and includes expenditure incurred in acquiring the inventories, production or
conversion costs and other costs incurred in bringing them to their existing location and condition.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of
completion and selling expenses.
50
Nickel Industries Annual Report 2022
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a
result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation.
If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of money and, when appropriate, the risks specific to the liability.
It has been assessed that no such obligations exist presently in relation to the Company’s RKEF operations which are
undertaken within the confines of the IMIP and IWIP.
Site restoration
In accordance with the Group’s environmental policy and applicable legal requirements, a provision for site restoration
in respect of disturbed land, and the related expense, is recognised when the land is disturbed. Site restoration and
rehabilitation at the Company’s Hengjaya Mine is conducted on a continual basis and as mining operations move
from one area of operation to the next. Additionally, under the Company’s forestry licence obligations pursuant to the
Company being granted access to new areas, the Company is then obliged to plant equivalent acreage of new forest in
an area designated by the local Indonesian authorities (DAS/Watershed management).
Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial
and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes
by refencing the acquisition cost of assets and liabilities on the date of acquisition and if available the findings of
Independent Expert’s Reports who prepared a valuation on a recent comparable transaction basis. Where applicable,
further information about the assumptions made in determining fair values is disclosed in the notes specific to that
asset or liability.
Exploration, evaluation and development expenditure
Exploration and evaluation costs, including the costs of acquiring licences, are capitalised at cost or fair value, as
exploration and evaluation assets on an area of interest basis. Costs incurred before the Group has obtained the legal
rights to explore an area are recognised in the statement of comprehensive income.
Exploration and evaluation assets are only recognised if the rights of the area of interest are current and either:
•
the expenditures are expected to be recouped through successful development and exploitation of the area of
interest; or
• activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable
assessment of the existence or other wise of economically recoverable reserves and active and significant
operations in, or in relation to, the area of interest are continuing.
Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility
and commercial viability and facts and circumstances suggest that the carrying amount exceeds the recoverable
amount. For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating
units to which the exploration activity relates. The cash generating unit shall not be larger than the area of interest.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are
demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment
and then reclassified from exploration and evaluation expenditure to mining property and development assets within
property, plant and equipment.
Annual Report 2022 Nickel Industries
51
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
Financial instruments
Non-derivative financial assets
The Group initially recognises loans and receivables on the date that they are originated. All other financial assets
(including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the
Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it
transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially
all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial
assets that is created or retained by the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and
only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realise
the asset and settle the liability simultaneously.
On initial recognition, a financial asset is classified as measured at:
• amortised cost;
•
•
fair value through other comprehensive income (‘FVOCI’) – equity investment; or
fair value through profit or loss (‘FVTPL’).
Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business
model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first
reporting period following the change in the business model.
A financial asset is measured at amortised cost if it meets both the following conditions and is not designated as fair
value through profit or loss if:
•
•
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on
the principal amount outstanding.
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present
subsequent changes in the investment’s fair value through other comprehensive income. This election is made on an
investment-by-investment basis.
All financial assets not classified as measured at amortised cost or fair value through other comprehensive income as
described above are measured at fair value through profit or loss. This includes all derivative financial assets. On initial
recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be
measured at amortised cost or at fair value through other comprehensive income as at fair value through profit or loss if
doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Subsequent measurement and gains and losses
Financial assets at amortised cost
These assets are subsequently measured at amortised cost using the
effective interest method. The amortised cost is reduced by impairment
losses. Interest income, foreign exchange gains and losses and impairment
are recognised in profit or loss. Any gain or loss on derecognition is
recognised in profit or loss.
Equity instruments at FVOCI
These assets are subsequently measured at fair value. Dividends are
recognised as income in profit or loss unless the dividend clearly represents a
recovery of part of the cost of the investment. Other net gains and losses are
recognised in other comprehensive income and are never reclassified to profit
or loss.
Financial assets at FVTPL
These assets are subsequently measured at fair value. Net gains and losses,
including any interest or dividend income, are recognised in profit or loss.
52
Nickel Industries Annual Report 2022
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
Changes in significant accounting policies
All new standards and interpretations effective for periods after 1 January 2022 have been adopted by the Group in the
preparation of these financial statements and have not had any material effect on the financial statements presented.
New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are able to be early adopted for annual
periods beginning after 1 January 2023 and have not been applied in preparing these consolidated financial statements.
None of these are expected to have a significant effect on the financial statements of the Group.
31 December 2022
31 December 2021
$
$
NOTE 4 - OTHER EXPENSES
Audit fees – KPMG audit of financial reports
Travel
Legal fees
Withholding tax expense
Other
405,711
411,884
684,774
18,228,093
2,980,149
22,710,611
NOTE 5 - FINANCIAL INCOME AND FINANCE EXPENSE
Interest income
Interest expense*
Net change in fair value of investment in associate
Foreign exchange gain/(loss)
1,007,513
(33,767,809)
(404,812)
(8,671,422)
(41,836,530)
340,401
11,400
325,039
11,554,670
1,024,235
13,255,745
335,985
(13,044,911)
2,450,482
(2,718,379)
(12,976,823)
*
Includes bond issue costs of $4,120,535 which are being expensed under the effective interest rate method. Refer to Note 13 for
further details.
Annual Report 2022 Nickel Industries
53
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
NOTE 6 - TRADE AND OTHER RECEIVABLES
Sales taxes receivable
Trade receivables
NOTE 7 - OTHER ASSETS
Current
Prepayments^
Interest receivable*
^
Includes $39.8M of prepaid value added taxes (VAT) at the Oracle Nickel project.
Non-current
Prepayments
Loan*
Other
31 December 2022
31 December 2021
$
$
65,281,833
170,335,881
235,617,714
48,017,752
77,076,361
125,094,113
47,440,071
353,458
47,793,529
8,466,970
5,500,000
1,196,017
15,162,987
15,208,226
-
15,208,226
8,466,969
3,500,000
1,226,428
13,193,397
*
In August 2021 the Company executed a facility agreement with PT Sinar Inti Pembangunan (‘PT SIP’) under which the Company advanced
to PT SIP $3.5M to assist in funding the development and eventual acquisition of the Pt. Adadi Nikel Nusantara (‘ANN’) and Pt. Sulawesi
Nikel Abadi (‘SNA’) nickel projects. Interest is calculated at a rate of 8.5% p.a., with interest payable every thirty days following a six month
interest free period commencing on 9 August 2021. The loan is secured and management assessed that no provision for impairment is
required. In July 2022 the Company advanced to PT SIP an additional $2.0M to further advance the development of the ANN and SNA
projects. Interest is calculated at a rate of 10.0% p.a, with interest payable every thirty days following a six month interest free period
commencing on 7 July 2022.
54
Nickel Industries Annual Report 2022
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
31 December 2022
31 December 2021
$
$
12,455,365
113,665,821
38,677,924
30,803,925
9,242,264
3,858,039
103,139,114
-
-
-
204,845,299
106,997,153
NOTE 8 - INVENTORY
Inventory – Hengjaya mine nickel ore stockpiles
Inventory – nickel pig iron production raw materials
Inventory – nickel matte production raw materials
Inventory – nickel pig iron
Inventory – nickel matte
During the year ended 31 December 2022, the Company’s 80% subsidiary PT Hengjaya Mineralindo supplied nickel
saprolite ore to the Company’s subsidiaries PT Hengjaya Nickel Industry and PT Ranger Nickel Industry under monthly
contracts to supply a minimum of between 50,000 to 70,000 wmt per month to each entity for the year ended 31
December 2022. In April 2022 PT Hengjaya Mineralindo also re-commenced the supply of limonite ore to the Huayue
Nickel Cobalt project within the IMIP.
Nickel pig iron production raw materials includes nickel ore acquired by PT Hengjaya Nickel Industry and PT Ranger
Nickel Industry from PT Hengjaya Mineralindo, operator of the Hengjaya Mine. This continues to be valued at the PT
Hengjaya Mineralindo cost of production.
Inventories are measured at the lower of cost and net realisable value.
NOTE 9 - PROFIT PER SHARE
Basic and diluted profit per share have been calculated using:
Net profit for the year attributable to equity holders of the Company
158,978,977
137,938,917
Weighted average number of ordinary shares (basic and diluted)
Issued ordinary shares at the beginning of the year
2,515,029,051
2,515,029,051
- Effect of shares issued on 15 February 2022
- Effect of shares issued on 4 May 2022
94,792,086
71,686,515
-
-
Weighted average number of shares at the end of the year
2,681,507,652
2,515,029,051
N° of shares
N° of shares
Annual Report 2022 Nickel Industries
55
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
31 December 2022
31 December 2021
$
$
NOTE 10 - INCOME TAX EXPENSE
Profit before tax – continuing operations
217,045,933
181,039,535
Prima facie income tax expense/(benefit) at the Australian tax rate of
30% (31 December 2021: 30%)
65,113,780
54,311,860
Increase in income tax expense/(benefit) due to:
- Effect of tax rates in foreign jurisdictions*
- Effect of change in tax rates in foreign jurisdictions
- Non-deductible/non-assessable income
- Effect of deferred tax assets for tax losses not brought to account
- Effect of net deferred tax assets not brought to account
- Effect of foreign currency conversion
Income tax expense – current and deferred
(60,700,136)
(6,648,588)
11,679,113
(258,481)
(1,314,511)
(192,854)
7,678,323
(53,513,320)
-
5,652,778
(85,545)
(1,781,330)
478,106
5,062,549
*
The current Indonesian company tax rate is 22% but each of the Company’s four RKEF projects currently operate under a holiday from
Indonesian Company income tax.
Deferred tax liabilities have been recognised in respect of the
following items:
Opening balance
Net deductible temporary differences – property, plant and
equipment*
Net deductible temporary differences – change as a result of change
in effective Indonesian income tax rate
* See Note 16 for further details.
Deferred tax assets have not been recognised in respect of the
following items:
Net deductible temporary differences
Tax losses
77,982,164
55,404,895
24,766,240
22,577,269
(6,648,588)
-
96,099,816
77,982,164
2,483,529
3,956,401
6,439,930
2,213,208
1,431,016
3,644,224
The deductible temporary differences and tax losses do not expire under the current tax legislation. Deferred tax assets
have not been recognised in respect of these items because it is not probable that future taxable profit will be available
against which the Company can utilise the benefits of the deferred tax asset. The Company does not have any franking
credits.
Current tax payable:
Income taxes payable
Indirect taxes payable
Value added taxes payable
Withholding taxes payable
Other taxes payable
56
Nickel Industries Annual Report 2022
15,345,721
4,080,929
2,627,201
2,057,747
1,213,967
21,244,636
2,911,108
588,046
67,605
7,647,688
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
31 December 2021 -
31 December 2022
restated#
$
$
NOTE 11 - PROPERTY, PLANT AND EQUIPMENT
Furniture and fittings
Furniture and fittings – cost
Accumulated depreciation
Net book value
Mine infrastructure assets
Mine infrastructure assets – cost
Accumulated depreciation
Net book value
Buildings and land
Buildings – cost
Accumulated depreciation
Net book value
Mining properties
Mining properties – cost
Accumulated amortisation
Net book value
Office equipment
Office equipment – cost
Accumulated depreciation
Net book value
Plant and machinery
Plant and machinery – cost
Accumulated depreciation
Net book value
Motor vehicles
Motor vehicles – cost
Accumulated depreciation
Net book value
Construction in progress
Construction in progress
Accumulated depreciation
Net book value
598,794
(322,372)
276,422
7,554,900
(1,900,478)
5,654,422
209,661,399
(16,750,444)
192,910,955
32,027,200
(7,790,425)
24,236,775
1,922,007
(1,131,359)
790,648
316,255
(167,696)
148,559
10,033,705
(1,608,529)
8,425,176
66,247,888
(8,798,255)
57,449,633
31,342,848
(5,926,464)
25,416,384
1,455,486
(774,991)
680,495
1,123,005,501
(137,915,287)
985,090,214
560,218,885
(81,649,914)
478,568,971
1,018,406
(625,403)
393,003
768,694
(433,667)
335,027
712,756,965
693,257,566
-
-
712,756,965
693,257,566
Total property, plant and equipment
1,922,109,404
1,264,281,811
#
Restated following adjustment to provisional accounting for acquisition of a controlled entity. See Note 16 for further details.
Annual Report 2022 Nickel Industries
57
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
Impairment
The Directors have completed impairment assessments over the carrying value of the Group’s property, plant and
equipment assets at 31 December 2022, and concluded that no impairment charged is warranted.
Reconciliations of the carrying amounts for each class of property, plant and equipment
are set out below.
Furniture and fittings
Carrying amount at beginning of year
Additions
Depreciation
Net book value
Mine infrastructure assets
Carrying amount at beginning of year
Additions
Transfer
Depreciation
Net book value
Buildings and land
Carrying amount at beginning of year
Additions
Depreciation
Net book value
Mining properties
31 December 2021 -
31 December 2022
restated#
$
$
148,559
282,539
(154,676)
276,422
8,425,176
2,166,327
(4,645,131)
(291,950)
5,654,422
57,449,633
143,413,512
(7,952,190)
192,910,955
213,314
3,111
(67,866)
148,559
5,950,519
2,726,918
-
(252,261)
8,425,176
60,394,671
404,053
(3,349,091)
57,449,633
Carrying amount at beginning of year
25,416,384
27,278,951
703,266
(18,916)
(1,863,959)
24,236,775
680,495
466,520
(356,367)
790,648
43,648
(25,511)
(1,880,704)
25,416,384
626,333
310,191
(256,029)
680,495
Additions
Disposal
Amortisation
Net book value
Office equipment
Carrying amount at beginning of year
Additions
Depreciation
Net book value
58
Nickel Industries Annual Report 2022
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
31 December 2021 -
31 December 2022
restated#
$
$
478,568,971
562,786,616
(56,265,373)
985,090,214
505,928,409
2,669,977
(30,029,415)
478,568,971
335,027
249,711
(191,735)
393,003
693,257,566
83,871,205
515,164,044
(579,535,850)
712,756,965
371,398
105,559
(141,930)
335,027
-
36,571,799
688,685,767
(32,000,000)
693,257,566
Plant and machinery
Carrying amount at beginning of year
Additions
Depreciation
Net book value
Motor vehicles
Carrying amount at beginning of year
Additions
Depreciation
Net book value
Construction in progress
Carrying amount at beginning of year
Additions
Additions arising from business combination*
Transfers^
Net book value
Total property, plant and equipment
1,922,109,404
1,264,281,811
*
^
Additions arising from business combinations in 2022 relate to the acquisition of Oracle Development Private Limited on 27 September
2022 (see Note 16 for further details) and additions arising from business combinations in 2021 relate to the acquisition of Angel Capital
Private Limited on 1 October 2021.
Balances in construction in progress are transferred into other categories, as additions, on commissioning of projects, or when available
for use in a manner in which management intended.
#
Restated following adjustment to provisional accounting for acquisition of a controlled entity. See Note 16 for further details.
Annual Report 2022 Nickel Industries
59
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
NOTE 12 - TRADE AND OTHER PAYABLES
31 December 2022
31 December 2021
$
$
Current
Creditors
Accruals
Other
NOTE 13 - BORROWINGS
Current
Interest on Senior Unsecured Notes
Interest on Senior Secured Notes
Working capital loan
Interest on working capital loan
Non-current
Senior Unsecured Notes
Senior Secured Notes
Working capital loan
Interest on working capital loan
170,068,973
49,759,427
6,052,742
1,063,449
177,185,164
5,125,121
853,541
55,738,089
5,281,250
2,491,438
-
-
7,772,688
321,283,009
216,456,370
13,400,000
376,051
5,281,250
-
4,000,000
3,014
9,284,264
318,322,283
-
-
-
551,515,430
318,322,283
Senior Unsecured Notes
In March 2021, as part of the financing package to facilitate the Company’s acquisition of an 80% interest Angel Nickel
project the Company made an inaugural issue of $175,000,000 senior unsecured notes (‘Senior Unsecured Notes’). This
was followed in September 2021 of a $150,000,000 ‘tap’ of the notes, forming a $325,000,000 single series of notes. Key
terms of the Senior Unsecured Notes are as follows:
•
Issue size of $325,000,000.
• Coupon interest rate of 6.5% per annum.
•
Interest is payable on a semi-annual basis in arrears.
• Principal to be repaid at Final Maturity Date of 1 April 2024.
• Total transaction costs for both the inaugural issue and the ‘tap’ issue totalled $8,155,857.
60
Nickel Industries Annual Report 2022
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
Senior Secured Notes
In August 2022, to facilitate the Company’s acquisition of a 70% interest Oracle Nickel project the Company completed
the issuance of $225,000,000 senior secured notes (‘Senior Secured Notes’). Key terms of the Senior Secured Notes
are as follows:
•
Issue size of $225,000,000.
• Coupon interest rate of 10.0% per annum.
•
Interest is payable on a quarterly basis in arrears.
• Principal to be repaid at Final Maturity Date of 23 August 2025.
• Total transaction costs totalled $9,703,439.
Angel Nickel working capital loans
Commencing in December 2021 the indirect shareholders of Angel Nickel, Nickel Industries and Decent Resource
Limited (‘Decent Resource’) an associate of Shanghai Decent, provided working capital loans to Angel Nickel totalling
$80 million ($20 million prior to 31 December 2021) to fund operations through the ramp-up commissioning phase of
operations. These loans are proportionate to the shareholders interest in Angel Nickel; i.e. Nickel Industries provided
80% of the total amount, $64 million ($16 million in 2021) and Decent Resource provided 20%, $16 million ($4 million in
2021). Interest is charged at a rate of 2.5% per annum. Total interest payable by Angel Nickel on the working capital loans
is $1,768,451, with $1,411,763 payable to the Company eliminating on consolidation and $356,688 payable to Decent
Resource. In December 2022 Angel Nickel commenced repayment of the working capital loans, with $22.4 million paid
to the Company and $5.6 million to Decent Resource. The term of the loan was extended from 1 to 3 years during the
year.
Oracle Nickel working capital loans
Commencing in October 2022, the indirect shareholders of Oracle Nickel, Nickel Industries and Decent Resource,
have provided working capital loans to Oracle Nickel totalling $10 million to fund operations through the ramp-up
commissioning phase of operations. These loans are proportionate to the shareholders interest in Oracle Nickel; i.e.
Nickel Industries provided 70% of the total amount, $7 million and Decent Resource provided 30%, $3 million. Interest is
charged at a rate of 2.5% per annum. Total interest payable by Oracle Nickel on the working capital loans is $62,599, with
$43,236 payable to the Company eliminating on consolidation and $19,363 payable to Decent Resource. The term of the
loan is 3 years.
The terms and conditions of the outstanding loan are as follows:
Carrying
Value
31
Face
Value
31
Carrying
Value
31
Face
Value
31
Nominal
December
December
December
December
interest
Year of
Currency
rate
maturity
2022
$
2022
$
2021
$
2021
$
Senior
Unsecured
US$
6.5%
2024
326,564,259
325,000,000
323,603,533
325,000,000
Notes
Senior
Secured
Notes
Angel
working
capital loan
Oracle
working
capital loan
Total interest
bearing
liabilities
US$
10.0%
2025
218,947,808
225,000,000
-
-
US$
2.5%
2024
10,756,688
10,400,000
4,003,014
4,000,000
US$
2.5%
2025
3,019,363
3,000,000
-
-
559,288,118
563,400,000
327,606,547
329,000,000
Annual Report 2022 Nickel Industries
61
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
NOTE 14 - ISSUED CAPITAL AND RESERVES
Ordinary shares on issue at 31 December 2020 - fully paid
Issue of shares
Costs of issue
Number of shares
$
2,515,029,051
216,244,446
732,929,135
212,000,000
-
(2,486,308)
Ordinary shares on issue at 31 December 2022 - fully paid
2,731,273,497
942,442,827
Year ended 31 December 2022
In February 2022, through a placement to institutional investors the Company issued 108,122,223 shares for cash
totalling A$148,127,446 (equivalent to $106,000,000). There were no amounts unpaid on the shares issued and the share
issue costs amounts to $2,418,820.
In May 2022, following shareholder approval, the Company issued 108,122,223 shares to the nominee of Shanghai
Decent, Decent Resource, as a share-based payment for a further 20% interest in the Oracle Nickel project. This
payment was the equivalent of cash with a fair value of A$148,127,446 (equivalent to $106,000,000). There were no
amounts unpaid on the shares issued and the share issue costs amounts to $67,488.
Options
There were no options granted, exercised or lapsed unexercised during the years ended 31 December 2022 or 31
December 2021.
Dividends
The company paid an interim unfranked dividend of A$0.02 per share during the year and a final unfranked dividend for
2021 of A$0.02 during the year ended 31 December 2022 amounting to $72,724,697. Total dividends of A$0.04 was paid
or declared during the year ended 31 December 2022.
Ordinary shares
The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully
paid. The holders of ordinary shares are entitled to receive dividends as declared from time to time.
Reserves
Opening balance
Remeasurement of defined benefit obligation
31 December 2021 -
31 December 2022
restated*
$
$
19,139,295
5,670
19,144,965
19,204,534
(65,239)
19,139,295
*
Restated following adjustment to provisional accounting for acquisition of a controlled entity. See Note 16 for further details.
62
Nickel Industries Annual Report 2022
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
31 December 2022
31 December 2021
$
$
NOTE 15 - EQUITY-ACCOUNTED INVESTEES
Opening balance
Acquisition of a 30% interest in Angel Nickel
Acquisition of an additional 20% interest in Angel Nickel
Share of loss of Angel Nickel
Acquisition of an additional 30% interest in Angel Nickel
Fair value movement in the carrying value of investment in Angel
Nickel
Consideration for business combination of Angel Nickel
Acquisition of a 10% interest in Oracle Nickel
Acquisition of an additional 20% interest in Oracle Nickel
Share of profit of Oracle Nickel
Acquisition of an additional 40% interest in Oracle Nickel
Fair value movement in the carrying value of investment in Oracle
Nickel
-
-
-
-
-
-
-
-
210,000,000
137,600,000
(50,482)
210,000,000
2,450,482
(560,000,000)
-
-
-
-
-
-
-
53,000,000
106,000,000
404,812
212,000,000
(404,812)
Consideration for business combination of Oracle Nickel
(371,000,000)
-
The Company acquired an initial 10% interest of the Oracle Nickel project in February 2022 for $53 million, inclusive of
a $30 million deposit having been paid prior to 31 December 2021. The interest was acquired through the acquisition
of the issued share capital of Oracle Development Private Limited (‘Oracle Development’), a Singaporean holding
company which holds 100% of the shares (directly and indirectly) of PT Oracle Nickel Industry (‘Oracle Nickel’), which is
an Indonesian PMA company which will own and operate the Oracle Nickel RKEF project once completed. An additional
20% interest in Oracle Nickel was acquired in May 2022 following the issuance of 108,122,223 shares in the Company at
A$1.37 to Decent Resource Limited, an associate of Shanghai Decent. On 30 September 2022, the Company acquired
an additional 40% interest in Oracle Development at the cost of an additional $212 million, taking its total interest to
70% and equity accounting of the investment in Oracle Development was ceased at 27 September 2022.
The Company’s equity accounting share of the Oracle Development profit for the period 4 May 2022 to 27 September
2022 was $404,812, primarily from foreign exchange gains.
Annual Report 2022 Nickel Industries
63
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
NOTE 16 - CONTROLLED ENTITIES
Acquisition of controlled entities
Angel Nickel
At 31 December 2021 the Company reported on a provisional basis the business combination acquisition of the Angel
Nickel project. The acquisition and control of Angel Capital had the following effect on the Group’s assets and liabilities
on acquisition date:
Fair value of net assets
of entity acquired:
Pre-acquisition
Fair value
Recognised
carrying
amounts
adjustments
Advancement
values on
$
payment
acquisition
Cash and cash equivalents
Other current assets
11,458,128
5,756,942
-
-
-
-
11,458,128
5,756,942
Property, plant and equipment
275,839,802
228,053,219
184,792,746
688,685,767
Trade and other payables
(5,900,837)
-
Goodwill
Deferred income tax liability
Net assets and liabilities
Consideration transferred:
Fair value of equity accounted
investment
Non-controlling interest
Consideration paid
Cash acquired
Net cash outflow
-
-
22,577,269
(22,577,269)
-
-
-
(5,900,837)
22,577,269
(22,577,269)
287,154,035
228,053,219
184,792,746
700,000,000
560,000,000
140,000,000
700,000,000
(557,600,000)
11,458,128
(546,141,872)
The business combination was recorded on a provisional basis as at 31 December 2021 as the measurement period
had not yet concluded. During the year the Company reviewed the business combination accounting for the Angel
Nickel project and determined that an adjustment against prepaid construction costs totalling $32 million was required,
resulting in a change of the fair value of property, plant and equipment. This adjustment did not have a tax effected
impact, meaning that no adjustment to the deferred tax liability or goodwill was required. The adjustment against the
prepaid construction costs has impacted the total consideration with 80% of this amount representing the Company’s
interest in the Angel Nickel project and the balance being attributable to non-controlling interests. The effect of this
restatement is shown below.
64
Nickel Industries Annual Report 2022
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
31 December 2021
31 December 2021
Effect of
- restated
- original
change
$
$
$
385,161,450
385,161,450
13,193,397
13,193,397
-
-
US$
Current assets
Total current assets
Non-current assets
Other non-current assets
Property, plant and equipment
1,264,281,811
1,296,281,811
(32,000,000)
Deposit
Goodwill
30,000,000
77,982,164
30,000,000
77,982,164
-
-
Total non-current assets
1,385,457,372
1,417,457,372
(32,000,000)
Total assets
1,770,618,822
1,802,618,822
(32,000,000)
Current liabilities
Total current liabilities
Non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained profits
Total equity attributable to equity holders of the
Company
Non-controlling interest
Total equity
73,829,225
73,829,225
398,877,558
398,877,558
472,706,783
472,706,783
-
-
-
1,297,912,039
1,329,912,039
(32,000,000)
732,929,135
19,139,295
250,777,309
732,929,135
-
44,739,295
(25,600,000)
250,777,309
-
1,002,845,739
1,028,445,739
(25,600,000)
295,066,300
1,297,912,039
295,066,300
(6,400,000)
1,329,912,039
(32,000,000)
Oracle Nickel
In December 2021 the Company signed a Definitive Agreement to acquire a 70% interest in the issued share capital of
Oracle Development Private Limited (‘Oracle Development’), a Singaporean holding company which holds 100% of the
shares (directly and indirectly) of PT Oracle Nickel Industry (‘Oracle Nickel’), which is an Indonesian PMA company which
will own and operate the Oracle Nickel RKEF project once completed. The consideration to acquire the 70% interest was
$371 million ($530 million x 70%). At the same time the Company committed to provide 70% of the $220 million funding
required for Oracle Nickel to build a 380MW power plant.
On 27 September 2022, the Company acquired for $212 million a further 40% interest in Oracle Development. This took
the Company’s interest in Oracle Development to 70%, following the acquisition of an initial 30% interest of the Oracle
Development project in February 2022 for $53 million (inclusive of a $30 million deposit having been paid prior to 31
December 2021) and the acquisition of a further 20% in May 2022 following the issuance of 108,122,223 shares in the
Company at A$1.37 to Decent Resource Limited, an associate of Shanghai Decent.
Annual Report 2022 Nickel Industries
65
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
On moving to a 70% interest nominees of Nickel Industries constituted the majority of the Board of Oracle Development
and it was then deemed that Nickel Industries controlled Oracle Development and equity accounting of the investment
in Oracle Development was ceased at 27 September 2022.
The acquisition and control of Oracle Development had the following effect on the Group’s assets and liabilities
on acquisition date, determined on a provisional basis. If new information obtained within one year of the date of
acquisition about facts and circumstances that existed at the date of acquisition identifies adjustments to the above
amounts, or any additional provisions that existed at the date of acquisition, then the accounting for the acquisition will
be revised:
Fair value of net assets
of entity acquired:
Pre-acquisition
Fair value
Recognised
carrying
amounts
adjustments
Advancement
values on
$
payment*
acquisition
Cash and cash equivalents
Other current assets
7,959,574
15,163,020
-
-
-
-
7,959,574
15,163,020
Property, plant and equipment*
216,487,755
250,164,043
48,512,245
515,164,044
Trade and other payables
(8,286,638)
-
Goodwill
Deferred income tax liability
Net assets and liabilities
Consideration transferred:
Fair value of equity accounted
investment
Non-controlling interest
Consideration paid
Cash acquired
Net cash outflow
-
-
24,766,240
(24,766,240)
-
-
-
(8,286,638)
24,766,240
(24,766,240)
229,223,711
250,164,043
48,512,245
530,000,000
371,000,000
159,000,000
530,000,000
(371,000,000)^
7,959,574
(363,040,426)
^
*
$106 million was paid in shares as a share based payment through the issuance in May 2022 of 108,122,223 shares in the Company at
A$1.37 per share to a nominee of Shanghai Decent.
Property, plant and equipment consists of construction in progress costs. The total estimated cost of construction of the Oracle RKEF
lines is $265.0 million, of which $48.5 million are advanced payments of construction costs. The Company has no additional acquisition
costs for the Oracle Nickel project, with all RKEF construction costs to be funded by Shanghai Decent. The Company and Decent are
jointly providing funding for the construction of the Oracle power plant, whose estimated construction cost is $220 million, of which the
Company will be required to provide 70% of. i.e. $154 million. At 31 December 2022 the Company had provided $92.4 million of power
plant construction funding, and Decent had provided $39.6 million. $81.2 million of power plant construction funding was provided by
the Company to Oracle Nickel prior to and $11.2 million was subsequent to Oracle Nickel becoming part of the consolidated Group on 30
September 2022. At 31 December 2022 the Company has a commitment under the Oracle Nickel acquisition agreement to provide an
additional $61.6 million of funding towards the construction of the Oracle nickel power plant by 31 March 2023, with Decent committed to
provide an additional $26.4 million.
The values of assets and liabilities recognised on acquisition are their estimated fair values. The fair value of the assets
was determined on acquisition date by reference to a valuation of $530 million, being the underlying valuation when
determining the cost of any additional increase in the Company’s interest in Oracle Development. The $530 million
relates to the valuation of the RKEF plants and ancillary facilities. The cost to construct the Oracle Nickel power plant
is estimated to be $220M and is being jointly funded by the Oracle Nickel shareholders in proportion to their indirect
equity interest. i.e. 70% the Company and 30% Shanghai Decent.
66
Nickel Industries Annual Report 2022
Particulars in relation to controlled entities:
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
Ordinary shares –
Ordinary shares –
Group interest
Group interest
31 December 2022
31 December 2021
%
%
Parent entity
Nickel Industries Limited
Controlled entities
PT Hengjaya Mineralindo (incorporated in Indonesia)
Hengjaya Holdings Private Limited (incorporated in Singapore)
Hengjaya Nickel Private Limited (incorporated in Singapore)
PT Hengjaya Nickel Industry (incorporated in Indonesia)
Ranger Investment Private Limited (incorporated in Singapore)
Ranger Nickel Private Limited (incorporated in Singapore)
PT Ranger Nickel Industry (incorporated in Indonesia)
Angel Capital Private Limited (incorporated in Singapore)
Angel Nickel Private Limited (incorporated in Singapore)
PT Angel Nickel Industry (incorporated in Indonesia)
Oracle Development Private Limited (incorporated in
Singapore)
Oracle Nickel Private Limited (incorporated in Singapore)
PT Oracle Nickel Industry (incorporated in Indonesia)
Tablasufa Pty Ltd
80
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80
80
-
-
-
100
Annual Report 2022 Nickel Industries
67
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C
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
Goodwill
Opening balance
Goodwill arising on acquisition of Angel Capital Private Limited
Goodwill arising on acquisition of Oracle Development Private Limited
31 December 2022
31 December 2021
$
$
77,982,164
-
24,766,240
102,748,404
55,404,895
22,577,269
-
77,982,164
The increase in the goodwill balance has arisen on the business combinations for the Oracle Nickel project referred to
above. The goodwill has been determined on a provisional basis.
The remaining goodwill balance amounting to $77,982,164 pertains to the Hengjaya Nickel, Ranger Nickel and Angel
Nickel RKEF Projects. The Directors consider there to be no impairment on the basis that the recoverable value,
determined based on value-in-use, is higher than the carrying value of goodwill.
The key assumptions used in the underlying cash flows of each CGU (RKEF plant) are set out below. Nickel price and
cash cost estimates used in the cash flows are based on a ‘steady state’ of operations:
Carrying
Nickel
amount of
production
CGU (RKEF Project)
goodwill
Hengjaya Nickel
Ranger Nickel
Angel Capital
$29,219,349
$26,185,545
$22,577,269
Oracle Development
$24,766,240
(tpa)
20,250
20,250
48,600
42,300
Nickel
price
(p/t)*
$17,500
$17,500
$17,500
$17,500
Cash
costs
($/t)*
$13,500
$13,500
$12,620
$12,620
Discount
rate -
real (%)
Model
period
(years)
9.5
9.5
9.5
10.5
30
30
30
30
*
Price and costs are based on an average of an adopted range per tonne over respective periods. Forecasts are in real terms.
A reasonable possible change in the assumptions utilised in the underlying cash flows would not drive impairment.
Annual Report 2022 Nickel Industries
69
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
NOTE 17 - RELATED PARTIES
Key management personnel of the Group during the year ended 31 December 2022 are the following:
Robert Neale
Chairman (Non-Executive)
Norman Seckold
Deputy Chairman
Justin Werner
Managing Director
James Crombie
Director (Non-Executive)
Weifeng Huang
Director (Non-Executive)
Mark Lochtenberg
Director (Non-Executive)
Dasa Sutantio
Director (Non-Executive)
Yuanyuan Xu
Director (Non-Executive)
Chris Shepherd
Director and Chief Financial Officer
Refer to the Remuneration Report contained in the Directors’ Report for details of the remuneration paid or payable to
each member of the Group’s key management personnel for the year ended 31 December 2022. The total remuneration
paid to key management personnel of the Group during the year is as follows:
Key Management Personnel compensation
Short term employee benefits
Termination benefits
Other benefits
31 December 2022
31 December 2021
$
1,811,922
-
29,007
1,840,929
$
1,255,928
224,098
-
1,480,026
Key Management Personnel transactions
A number of key management persons, or their related parties, hold positions in other entities that result in them
having control or joint control over the financial or operating policies of those entities. A number of these entities
transacted with the Group during the year. The aggregate value of transactions and outstanding balances (excluding the
compensation noted above) relating to key management personnel and entities over which they have control or joint
control were as follows:
Transaction with Director related entity
Director Norman Seckold holds an interest in an entity, MIS Corporate Pty Limited (‘MIS’), which provided full
administrative services, including administrative, accounting, company secretarial and investor relations staff both
within Australia and Indonesia, rental accommodation, services and supplies, to the Group. On 1 January 2019 MIS
agreed to provide these services for a fee of A$35,000 per month and this fee was increased to A$37,000 per month
in October 2021 and A$38,000 per month from November 2021. Fees charged by MIS during the year amounted to
A$459,000 (31 December 2021: A$590,500). As at 31 December 2022 $38,000 (31 December 2021: A$3,000) remained
outstanding.
70
Nickel Industries Annual Report 2022
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
Transactions with Shanghai Decent and its associates
On 4 May 2022, following approval by the Company’s shareholders, the Company completed a placement of 108,122,223
Shares to Shanghai Decent and its associates, which increased to a 21.15% equity interest in the Company and
consequently now meets the definition of a related party for accounting purposes.
During the period 4 May 2022 to 31 December 2022 the Group sold NPI totalling $852,887,371 to Shanghai Decent-
related entities. $216,798,943 of raw materials and services and fixed assets were purchased from Shanghai Decent-
related entities. As at 31 December 2022 trade receivables of $109,453,078 from Shanghai Decent-related entities
remained outstanding and was included in the receivables balance, and trade payables of $50,798,204 payable to
Shanghai Decent-related entities remained outstanding and was included in the creditor’s balance.
Decent Resource, an associate of Shanghai Decent has, prior to Shanghai Decent becoming a Related Party of the
Company, provided working capital loans to the Angel Nickel project totalling $16,000,000 ($4,000,000 in 2021 and
$12,000,000 in 2022). Interest is charged at a rate of 2.5% per annum. Total interest incurred by Angel Nickel on the
working capital loan to Decent Resource in 2022 totalled $353,635. In December 2022 $5,600,000 of this working
capital loan was repaid. At 31 December 2022 a working capital loan amount of $10,400,000 and interest totalling
$356,688 remained outstanding and is included in the borrowings balance.
Commencing in October 2022 Decent Resource has also provided working capital loans to the Oracle Nickel project
totalling $3,000,000. Interest is charged at a rate of 2.5% per annum. Total interest incurred by Oracle Nickel on the
working capital loan to Decent Resource in 2022 totalled $19,363. At 31 December 2022 the working capital loan of
$3,000,000 and interest totalling $19,363 remained outstanding and is included in the borrowings balance.
Over the course of the year the Company has acquired a 70% interest in the Oracle Nickel project from associates of
Shanghai Decent. The acquisition took place in three stages:
i. acquisition of a 10% interest in February 2022, following the payment of $23,000,000 to Shanghai Decent, in
addition to the $30,000,000 of deposits already paid;
ii. acquisition of an additional 20% interest in May 2022, following the completion of the Conditional Placement of
108,122,223 new ordinary shares at A$1.37 per share (equivalent to $106M) to Shanghai Decent’s nominee Decent
Resource Limited;
iii. acquisition of an additional 40% interest in September 2022, following the payment of $212,000,000 to Shanghai
Decent.
In addition, the Company has made funding contributions of $92,400,000 to the construction of the power plant during
the year. $81,200,000 of this construction funding was made prior to the Company moving to a 70 % interest in the
Oracle Nickel project and hence consolidating Oracle Nickel, and also prior to Decent becoming a related party of the
Company on 4 May 2022. $11,200,000 were made subsequent to the consolidation of Oracle Nickel. This construction
funding is paid to Oracle Development Pte Ltd (‘ODPL’), the Singaporean entity in which the Company has acquired a
70% direct interest. ODPL then flows the funds to PT Oracle Nickel Industry, which is constructing the Oracle Nickel
project.
During the period 4 May 2022 to 31 December 2022 dividend distributions from the Company’s 80% owned subsidiaries
Hengjaya Holdings Private Limited and Ranger Investment Private Limited to Shanghai Decent’s associate Decent
Investment International Private Limited, totalled $12,818,160.
Shanghai Decent and its associates hold 20% equity interests in the Hengjaya Nickel, Ranger Nickel and Angel Nickel
projects and a 30% equity interest in the Oracle Nickel project, which reflects the non-controlling interest in the Group
amounting to $504,554,617 as at 31 December 2022.
Shanghai Decent and its associates are the Company’s collaboration partner at each of the Hengjaya Nickel, Ranger
Nickel, Angel Nickel and Oracle Nickel projects, and has responsibility for the remaining construction at the Oracle
Nickel project. The Company has to provide additional funding of $61,600,000 towards construction of the Oracle Nickel
power plant by 31 March 2023.
Apart from the details disclosed in this note, no Director or other related party has entered into a material contract with
the Group during the year and there were no material contracts involving Director’s interests subsisting at year end.
Annual Report 2022 Nickel Industries
71
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
31 December 2022
31 December 2021
$
$
NOTE 18 - STATEMENT OF CASH FLOWS
(a) Reconciliation of cash and cash equivalents
Cash and cash equivalents as shown in the Statement of Cash
Flows is reconciled to the related items in the Statement of Financial
Position as follows:
Bank balances
(b) Reconciliation of net loss from ordinary activities after tax to
net cash used in operating activities
Profit from ordinary activities after tax
Non-cash items
Depreciation and amortisation
Foreign exchange loss/(gain)
Interest expense
Net change in fair value of investment in associate
Changes in assets and liabilities
Trade receivables and other assets
Inventory
Provisions
Trade and other payables
Net cash from operating activities
144,242,357
137,861,598
209,367,610
175,976,986
66,598,202
8,671,422
29,241,438
404,812
(142,482,144)
(97,848,145)
94,397
(11,004,420)
63,043,172
35,977,298
2,718,379
13,044,911
(2,450,482)
(14,391,304)
(45,712,105)
344,110
23,512,927
189,020,720
72
Nickel Industries Annual Report 2022
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
(c) Reconciliation of movements of liabilities to cash flows arising from financing activities
Liabilities
Equity
Loans and borrowings
Share capital
$
$
Total
$
Opening balance at 1 January 2022
327,603,532
732,929,135
1,060,532,667
Changes from financing activities
Proceeds from issue of shares
Costs of issue
-
-
212,000,000*
212,000,000
(2,486,308)
(2,486,308)
Proceeds from issue of senior secured notes
225,000,000
Proceeds from borrowings
Costs of issue
Repayment of borrowings
Repayment of interest
Total changes from financing cash flows
Other changes
Finance expenses
Costs of issue expensed – non cash
Total other changes
Closing balance at 31 December 2022
15,000,000
(9,703,439)
(5,600,000)
(26,750,000)
197,946,561
29,617,490
4,120,535
33,738,025
559,288,118
-
-
-
-
-
209,513,692
-
-
-
225,000,000
15,000,000
(9,703,439)
(5,600,000)
(26,750,000)
407,460,253
29,617,490
4,120,535
33,738,025
942,442,827
1,501,730,945
*
$106,000,000 was a non-cash investment in an equity accounted investee as disclosed in Note 15.
Annual Report 2022 Nickel Industries
73
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
NOTE 19 - FINANCIAL INSTRUMENTS DISCLOSURE
The Board of Directors has overall responsibility for the establishment and oversight of the risk management
framework. Risk management policies are established to identify and analyse the risks faced by the Group, to set
appropriate risk limits and controls, and to monitor risks and adherence to limits. These policies are reviewed regularly
to reflect changes in market conditions and the Group’s activities.
The main risks arising from the Group’s financial instruments are credit risk, liquidity risk, currency risk and interest
rate risk. The summaries below present information about the Group’s exposure to each of these risks, their objectives,
policies and processes for measuring and managing risk, the management of capital and financial instruments.
Measurement of fair values
Fair Value Hierarchy
The fair value of assets and liabilities being acquired in the business combinations detailed in Note 16 were determined
by reference to the consideration paid in arm’s length transactions in acquiring the business combination and are
supported by independent expert valuations received prior to seeking shareholder approval for acquisition of the
business combinations. The fair value measurement for the business combinations has been categorised as Level 3 fair
value based on the valuation technique used.
Credit risk
Credit risk arises mainly from the risk of counterparties defaulting on the terms of their agreements. The carrying
amounts of the following assets represent the Group’s maximum exposure to credit risk in relation to financial assets:
Cash and cash equivalents
Trade and other receivables
Loan and interest receivable
31 December 2022
31 December 2021
Note
$
$
18
6
7
144,242,357
235,617,714
5,853,458
385,713,529
137,861,958
125,094,113
3,500,000
266,456,071
Cash and cash equivalents
The Group mitigates credit risk on cash and cash equivalents by dealing with regulated banks in Australia, China,
Indonesia and Singapore.
Trade and other receivables
Credit risk of trade and other receivables is low as it consists predominantly of saprolite and limonite nickel ore and
nickel pig iron and nickel matte sales. Saprolite ore sales are currently all either to the Company’s 80% owned PT
Hengjaya Nickel Industry or the Company’s 80% owned PT Ranger Nickel Industry. NPI trade receivables in 2022 were
all from sales to two customers, Shanghai Decent or PT Indonesia Stainless Steel, a stainless steel producer operating
at the IMIP and a related party of the Group, through Shanghai Decent. Additional amounts are recoverable from
Australian and Indonesian Taxation Authorities. None of the Group’s material trade and other receivables are past due.
Limonite ore sales are to Huayue Nickel Cobalt project located within the IMIP. At 31 December 2022 $1,709,599 was
outstanding. Nickel Matte sales are to Golden Harbour International Pte. Ltd., located in Singapore. At 31 December
2022 $58,359,136 was outstanding.
74
Nickel Industries Annual Report 2022
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation.
The following are the contractual maturities of financial liabilities, including estimated interest payments:
Carrying
Contractual
Less than
Between one
More than
amount
cash flows
one year
and five years
five years
Consolidated
$
$
$
$
31 December 2022
Trade and other payables
(including tax)
Borrowings
31 December 2021
Trade and other payables
(including tax)
Borrowings
198,429,800
198,429,800
198,429,800
-
559,288,118
658,090,304
43,625,000
614,465,304
757,717,918
856,520,104
242,054,800
614,465,304
63,385,777
63,385,777
63,385,777
-
327,606,547
383,634,013
25,186,096
358,447,917
390,992,324
447,019,790
88,571,873
358,447,917
$
-
-
-
-
-
Ultimate responsibility for liquidity management rests with the Board of Directors. The Group manages liquidity risk
by maintaining adequate funding where possible and monitoring of future rolling cash flow forecasts of its operations,
which reflect management’s expectations of expected settlement of financial assets and liabilities.
Currency risk
The functional currency in 2022 was assessed as being United States dollars for all group entities. The Group is exposed
to foreign currency risks due to the fact that the domestic ore sales of its subsidiaries PT Hengjaya Mineralindo, PT
Hengjaya Nickel Industry and Ranger Nickel Industry are in Indonesian Rupiah (although the underlying sale price is
denominated in US dollars), liabilities of the Group are denominated in both Indonesian Rupiah and Australian dollars
and the issues of shares during the year were denominated in Australian dollars.
The Group’s gross financial position exposure to foreign currency risk at 31 December is as follows:
31 December 2022
31 December 2021
Foreign currency
USD
Foreign currency
USD
IDR
Cash at bank
IDR646,527,777,428
$41,098,962
IDR 246,669,671,023
$17,310,152
Accounts receivable
IDR880,464,457,205
$55,970,025
IDR 631,784,620,256
$44,335,763
Other current assets
IDR2,338,019,497,637
$148,624,976
IDR 749,426,825,993
$52,591,356
Provisions and accrual
IDR159,516,969,271
$10,140,294
IDR 52,059,372,471
$3,653,289
Taxes payable
IDR244,760,923,332
$15,559,146
IDR 85,150,325,803
$5,975,461
Trade and other payables
IDR1,272,144,392,570
$80,868,628
IDR 706,499,031,786
$49,578,879
AUD
Cash at bank
Receivables
Prepayment
Trade and other payables
SGD
Cash at bank
A$343,150
A$55,844
A$776,960
A$226,846
$233,822
$38,052
$529,421
$154,573
A$12,277,507
$8,913,470
A$86,073
$62,489
-
-
A$70,352
$51,091
SGD$634,100
$473,102
SGD$105
$78
Annual Report 2022 Nickel Industries
75
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
The following significant exchange rates applied during the year:
Average rate
Reporting date spot rate
USD
IDR
AUD
SGD
12 months to
12 months to
31 December 2022
31 December 2021
31 December 2022
31 December 2021
14,906
1.445
1.377
14,313
1.339
1.343
15,731
1.468
1.340
14,250
1.377
1.349
The following sensitivity analysis is based on the exchange rate risk exposures at balance date. At balance date, if the
exchange rate between the United States dollar and the Indonesian Rupiah, the Australian dollar or the Singaporean
dollar had moved, as illustrated in the table below, with all other variables held constant, the post-tax loss and equity
would have been affected as follows:
Judgement of reasonable possible movements:
Post tax loss
Total equity
Post tax loss
Total equity
(Higher)/Lower
(Higher)/Lower
(Higher)/Lower
(Higher)/Lower
31 December
31 December
31 December
31 December
2022
$
2022
$
2021
$
+ 10% higher USD to IDR exchange rate
13,912,589
13,912,589
5,502,964
- 5% lower USD to IDR exchange rate
(6,956,295)
(6,956,295)
(2,751,482)
+ 10% higher USD to AUD exchange rate
- 5% lower USD to AUD exchange rate
+ 10% higher USD to SGD exchange rate
- 5% lower USD to SGD exchange rate
64,672
(32,336)
47,310
(23,655)
64,672
(32,336)
47,310
(23,655)
892,488
(446,244)
8
(4)
2021
$
5,502,964
(2,751,482)
892,488
(446,244)
8
(4)
Interest rate risk
The Group’s exposure to market interest rate relates to cash assets.
At balance date, the Group had the following mix of financial assets and liabilities exposed to variable interest rate risk:
Financial assets
Cash and cash equivalents
Financial liabilities
Borrowings
31 December 2022
31 December 2021
$
$
19
13
144,242,357
137,861,958
-
-
Sensitivity analysis
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) profit for the
period by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis is
performed on the same basis for the comparative period.
31 December 2022
30 December 2021
$
$
Profit for the year
1,410,522
2,221,536
76
Nickel Industries Annual Report 2022
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
Capital management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to
sustain future development of the business.
The Board ensures, where possible, costs are not incurred in excess of available funds and will seek to raise additional
funding through issues of shares for the continuation of the Group’s operation. There were no changes in the Group’s
approach to capital management during the year.
The Group is not subject to externally imposed capital requirements.
NOTE 20 - PARENT ENTITY DISCLOSURES
As at, and throughout the financial year ended 31 December 2022, the parent entity of the Group was Nickel Industries
Limited.
Result of the parent entity
Net loss
Other comprehensive income
Total comprehensive loss
Financial position of the parent entity at year end
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net Assets
Equity
Share capital
Retained profits*
Total Equity
Parent Entity
Parent Entity
31 December 2022
31 December 2021
$
$
(41,775,344)
(19,346,274)
-
-
(41,775,344)
(19,346,274)
31 December 2022
31 December 2021
$
$
36,077,591
1,258,870,240
1,294,947,831
8,513,944
537,739,379
546,253,323
748,694,508
56,012,772
921,698,458
977,711,230
5,708,090
318,322,283
324,030,373
653,680,857
942,442,827
(193,748,319)
732,929,135
(79,248,278)
748,694,508
653,680,857
*
During 2022 the Company made dividend payment totaling $72,724,697 (2021: $75,088,707) which is included within retained profits for
the 2022 financial year.
At balance date, the Company has no capital commitments or contingencies (31 December 2021: $nil), other than as
outlined in Note 25.
Annual Report 2022 Nickel Industries
77
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
NOTE 21 - SEGMENT INFORMATION
Segment information is presented in respect of the Group’s management and internal reporting structure.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be
allocated on a reasonable basis. Unallocated items comprise interest bearing loans, borrowings and expenses, and
corporate assets and expenses. Segment capital expenditure is the total cost incurred during the period to acquire
segment assets that are expected to be used for more than one period in that geographic region.
Operating segments
For the year ended 31 December 2022, the Group had two segments, being nickel ore mining in Indonesia and the RKEF
projects in Indonesia and Singapore.
Nickel ore
mining
$
RKEF
Projects^
Unallocated
Total
$
$
$
31 December 2022
External revenues
14,666,929*
1,202,374,891
-
1,217,041,820
Reportable segment profit/(loss) before tax
48,117,774
201,972,377
(33,044,218)
217,045,933
EBITDA#
53,859,346
298,692,648
(13,368,583)
339,183,411
Interest income
Interest expense
165,804
320,384
521,325
-
-
29,647,274
1,007,513
29,647,274
Depreciation and amortisation
3,598,279
62,996,831
3,092
66,598,202
Reportable segment assets
87,243,576
2,549,195,856
36,080,262
2,672,519,694
Reportable segment liabilities
25,522,097
286,199,835
546,253,323
857,975,255
31 December 2021
External revenues
1,117,340*
644,818,299
-
645,935,639
Reportable segment profit/(loss) before tax
18,746,146
182,315,704
(20,022,315)
181,039,535
EBITDA#
21,995,650
224,892,496
(4,367,163)
242,520,983
Interest income
Interest expense
125,550
-
189,967
20,468
-
11,566,771
335,985
11,566,771
Depreciation and amortisation
3,301,584
32,674,077
1,637
35,977,298
Reportable segment assets
53,566,916
1,655,726,903
61,325,003
1,770,618,822
Reportable segment liabilities
17,870,628
130,805,784
324,030,371
472,706,783
*
^
#
Revenue number for sales of limonite ore only. Sales of saprolite nickel ore are internal to the Group and so are eliminated on
consolidation, whilst limonite ore sales are to a party external to the Group.
As disclosed in Note 16, the Group has four separate CGUs (RKEF plants). They are considered as an aggregate portfolio and therefore are
included within the one segment here.
EBITDA is defined as profit/(loss) for the period, plus depreciation and amortisation costs, plus net financial income/(costs), plus tax
expenses.
78
Nickel Industries Annual Report 2022
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
Reconciliations of reportable segment revenues and profit or loss
Profit or loss
Total profit for reportable segments
250,090,151
201,061,850
31 December 2022
31 December 2021
$
$
Unallocated amounts:
Net other corporate expenses
Consolidated profit before tax
Reconciliations of reportable assets and liabilities
Assets
Total assets for reportable segments
Unallocated corporate assets
Consolidated total assets
Liabilities
Total liabilities for reportable segments
Unallocated corporate liabilities
Consolidated total liabilities
Geography of reportable segment assets
(33,044,218)
217,045,933
(20,022,315)
181,039,535
2,636,439,432
1,709,293,819
36,080,262
61,325,003
2,672,519,694
1,770,618,822
(311,721,932)
(546,253,323)
(857,975,255)
(148,676,412)
(324,030,371)
(472,706,783)
Indonesia
Singapore
$
$
Total
$
31 December 2022
Reportable segment assets
2,630,881,643
5,557,788
2,636,439,431
31 December 2021
Reportable segment assets
1,705,675,338
3,618,481
1,709,293,819
Revenue
All sales during the year were to customers located in either China, Indonesia or Singapore. All NPI sales by Hengjaya
Nickel and Ranger Nickel were in Indonesia, all NPI sales by Angel Nickel were exported to China and all nickel matte
sales by Hengjaya Nickel were exported to Singapore. For the year ended 31 December 2022 the value of total NPI, to a
customer based in China was $485.8 million, to customers based in Indonesia was $626.0 million and the total value of
nickel matte sales to a customer based in Singapore was $90.5 million. Limonite ore revenue totaling $14.7 million was
all to customers located in Indonesia.
Major customers
All sales of nickel pig iron during the year ended 31 December 2022 were either exported sales to Shanghai Decent in
China, or sales within to PT Indonesia Stainless Steel, a stainless steel producer operating within the IMIP. All sales of
nickel matte were to Golden Harbour, based in Singapore.
All sales of saprolite nickel ore during the year ended 31 December 2022, were to the Company’s subsidiaries PT
Hengjaya Nickel Industry and PT Ranger Nickel Industry, under a series of offtake agreements to supply between 70,000
to 100,000 wmt per month to each entity. In April 2022 PT Hengjaya Mineralindo also re-commenced the supply of
limonite ore to HPAL projects operating within the IMIP. During the year limonite ore was delivered to both the Huayue
Nickel Cobalt project and the QMB HPAL nickel project.
Annual Report 2022 Nickel Industries
79
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
NOTE 22 - REVENUE
Disaggregation of revenue from contracts with customers
In the following table, revenue from contracts with customers is disaggregated by major production and timing of
revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the Group’s reportable
segments.
Nickel pig iron
Nickel matte
Saprolite ore
Limonite ore
31
31
31
31
31
31
31
31
December
December
December
December
December
December
December
December
2022
$
$
$
2021
2022
2021
2022*
2021*
2022
2021
Major products
1,111,831,675
644,818,299
90,543,216
Timing of revenue
recognition
Products transferred
at a point in time
Revenue from
1,111,831,675
644,818,299
90,543,216
contracts with
1,111,831,675
644,818,299
90,543,216
customers
$
-
-
-
$
$
$
$
119,109,876
82,968,747
14,666,929
1,117,340
119,109,876
82,968,747
14,666,929
1,117,340
119,109,876
82,968,747
14,666,929
1,117,340
*
Sales of saprolite nickel ore are internal to the Group and so are eliminated on consolidation.
The extent to which an entity’s revenue is disaggregated for the purposes of this disclosure depends on the facts and
circumstances of the entity’s contracts with customers.
NOTE 23 - AUDITOR REMUNERATION
During the year ended 31 December 2022 KPMG, the Company’s auditor, has performed other services in addition to
their statutory audit duties.
Details of the amounts paid to the auditor of the Group, KPMG, and its related practices for audit and non-audit services
provided during the year and prior period are set out below:
Auditors of the Company
Audit and review of financial reports – KPMG Australia
Audit and review of financial reports – KPMG Indonesia
Other assurance services – KPMG Australia
Advisory services – KPMG Australia
31 December 2022
31 December 2021
$
$
300,249
105,462
47,360
10,350
463,421
222,654
117,747
234,914
-
575,315
80
Nickel Industries Annual Report 2022
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2022
NOTE 24 – SUBSEQUENT EVENTS
On 18 January 2023, the Company signed an Electric Vehicle Battery Supply Chain Strategic Framework Agreement
with Shanghai Decent, and entered into binding agreements with Shanghai Decent to acquire 10% interests in two
producing nickel assets, that being an additional 10% interest in the Oracle Nickel project and a 10% interest in the
HNC project. Additionally, the Company had acquired options to collaborate with Shanghai Decent on future battery
nickel opportunities for $40 million. To fund these transactions at the same time the Company announced a $471 million
capital raising, comprising a $185 million (~A$264 million) fully underwritten, institutional placement, a $286.4 million
conditional placement and $20 million (~A$29 million) non-underwritten share purchase plan.
On 24 January 2023 the Company issued 259,103,642 shares to complete the institutional placement component of the
raising at A$1.02 per share, raising A$264.3 million ($185.0 million), before costs.
Other than the matters outlined above, there has not arisen in the interval between the end of the financial year and the
date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of
the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of
the Group, in future financial years.
NOTE 25 – COMMITMENTS AND CONTINGENCIES
There are no contingent liabilities existing at 31 December 2022 (31 December 2021: $nil).
Under the terms of Oracle Nickel Definitive Agreement Nickel Industries Limited committed to provide construction
funding totalling $154 million (70% of $220 million) for construction of the Oracle Nickel power plant. At 31 December
2022 a further $61.6 million is to be provided to the Company’s 70% owned subsidiary Oracle Development Pte Ltd, who
will in turn providing the funds to PT Oracle Nickel Industry who is constructing the power plant.
Annual Report 2022 Nickel Industries
81
DIRECTORS’ DECLARATION
1.
In the opinion of the Directors of Nickel Industries Limited (‘the Company’):
(a)
the consolidated financial statements and notes set out on pages 40 to 81 and the Remuneration report on
pages 33 to 37 in the Directors’ report, are in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 31 December 2022 and of its performance
for the year ended on that date; and
(ii)
complying with Australian Accounting Standards, (including the Australian Accounting Interpretations) and
the Corporations Regulations 2001; and
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in note 2.
(c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
2.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the
chief executive officer and chief financial officer for the financial year ended 31 December 2022.
Signed at Sydney this 28th day of February 2023 in accordance with a resolution of the Board of Directors:
Robert Neale
Chairman
Norman Seckold
Deputy Chairman
82
Nickel Industries Annual Report 2022
INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s Report
To the shareholders of Nickel Industries Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Nickel Industries Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
•
•
giving a true and fair view of the
Group’s financial position as at 31
December 2022 and of its financial
performance for the year ended on
that date; and
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
The Financial Report comprises:
• Consolidated statement of financial position as at 31
December 2022;
• Consolidated statement of profit or loss and other
comprehensive income, Consolidated statement of
changes in equity, and Consolidated statement of
cash flows for the year then ended;
• Notes including a summary of significant accounting
policies; and
• Directors’ Declaration.
The Group consists of the Company and the entities it
controlled at the year-end or from time to time during
the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (including Independence Standards) (the Code) that are relevant to our
audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in
accordance with these requirements.
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated
with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and
logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by
a scheme approved under Professional Standards Legislation.
82
Annual Report 2022 Nickel Industries
83
INDEPENDENT AUDITOR’S REPORT
Key Audit Matters
The Key Audit Matters we identified are:
• Consolidation of subsidiaries; and
• Oracle Nickel Project Business
Combination.
Consolidation of Subsidiaries
Refer to Note 16 Controlled Entities
Key Audit Matters are those matters that, in our
professional judgement, were of most significance in
our audit of the Financial Report of the current period.
These matters were addressed in the context of our
audit of the Financial Report as a whole, and in forming
our opinion thereon, and we do not provide a separate
opinion on these matters.
The key audit matter
How the matter was addressed in our audit
Nickel Industries Limited consolidates its
investments in subsidiaries as outlined in Note
16 to the financial statements. The Group has
operations in Indonesia, a corporate head office
in Australia and other registered entities in
Singapore. There are also non-controlling
interests held in certain subsidiaries of the
Group.
Consolidation of subsidiaries is a key audit
matter due to the complexity of the manual
consolidation process, significant number of
components in the Group, non-controlling
interests held by the Group, diverse accounting
systems used by the Group and the
consolidation process susceptibility to error, the
impacts of which are potentially significant.
Our procedures included:
• We assessed the appropriateness of the
Group’s consolidation accounting policies
against the requirements of the
accounting standards and our
understanding of the business and
industry practice;
• We obtained an understanding of the
components in the Group, and their
ownership structure, to scope
components into our audit, based on size
and level of risk;
• We held discussions with management,
and used our knowledge of the Group’s
operations to assess the consolidation
process;
• We tested manual consolidation journals
to underlying documentation given the
facts and circumstances of intra-company
transactions entered into by the Group;
• Obtained the Group’s manual
consolidation spreadsheet and tested:
•
•
•
the individual financial information for
entities included in the consolidation
for consistency with the reporting we
received from component auditors;
elimination of intercompany balances
and transactions;
sources for each journal and
relevance for inclusion in the
84
Nickel Industries Annual Report 2022
83
INDEPENDENT AUDITOR’S REPORT
consolidation; and
•
recognition of non-controlling
interests journals and compared
against the percentage of non-
controlling interests held by the
Group.
Oracle Nickel Project Business Combination ($371 million)
Refer to Note 16 Controlled Entities
The key audit matter
How the matter was addressed in our audit
The Group’s investment in Oracle Development
Private Limited (‘Oracle Development’), a
Singaporean holding company which holds
100% of the shares (directly and indirectly) of
PT Oracle Nickel Industry (‘Oracle Nickel’), was
acquired during the financial year ended 31
December 2022. The Group equity accounted
the investment during part of the year and was
consolidated effective 27 September 2022.
This was a key audit matter due to:
•
Size of the acquisition: the fair value of
the Oracle Development Project was
assessed as $750 million at the date of
acquisition, comprising $530 million for
the net assets of the business acquired
and $220 million for estimated
construction costs to build a 380MW
Power Plant (commitment to fund the
construction of supplementary assets
380MW Power Plant); and
• Complexity: The terms and conditions
of the acquisition were complex due to
the allocation of fair values between
the business combination and
commitment to fund the construction
of supplementary assets. This
allocation involves the existence of
significant judgements by the Group
due to the assets being at varying
percentages of completion at
acquisition date.
Our procedures included:
• Reading the Collaboration Agreement to
understand the key terms and conditions
of the acquisition and the obligations and
rights of each party to the contract;
•
Evaluating the acquisition accounting by
the Group against the requirements of the
accounting standards. Using our
knowledge of the transaction, and
working with our accounting specialists,
this included;
• Challenging the Group’s assessment of
the date of gaining control of Oracle
Development based on the obligations
and rights of each party; and
• Assessing the implications of the
commitment to fund the construction
of supplementary assets (380MW
Power Plant) and its impact on the
allocation of consideration transferred
and the identification of assets and
liabilities acquired.
• Understanding the Group’s methodology
for calculating the fair value of the
transaction, including the consideration
transferred and the associated purchase
price allocation to identified assets and
liabilities acquired, including the
consideration of the existence of
intangible assets. Using our knowledge of
the transaction and working with our
Annual Report 2022 Nickel Industries
85
84
INDEPENDENT AUDITOR’S REPORT
We focused on these significant judgements
made by the Group in the transaction:
•
•
•
•
The date of gaining control of Oracle
Development due to the rights and
obligations of each party under the
Collaboration Agreement;
The accounting treatment for the
acquisition including assessing the
implications of the commitment to
fund the construction of supplementary
assets (380MW Power Plant);
The determination and allocation of the
fair value of the consideration
transferred, including non-controlling
interests; and
The determination and allocation of
provisional fair values assigned to the
identifiable assets and liabilities
acquired.
These conditions require significant audit effort
and greater involvement by senior team
members and our valuation specialists.
valuation specialists this included:
• Assessing the fair value of $750
million assigned by the Group for the
total project, against the feasibility of
achieving assumptions included in the
underlying estimated net present value
of future cash flows for the project as
a whole;
Testing the acquisition date balance
sheet of Oracle Development to the
underlying accounting records of each
entity acquired and assessing
compliance of those accounting
records with the accounting standards;
Testing the allocation of the
consideration transferred against
provisional fair values assigned to the
identifiable assets and liabilities. This
included testing the allocation
between the net assets of the
business acquired and the
commitment to fund construction
costs of a separate 380MW Power
Plant. We assessed the Group’s
methodology for estimating the
allocation based on a percentage of
completion method. We tested this by
re-calculating the percentage of
completion against underlying
accounting records;
Testing of the post-acquisition financial
performance and position of Oracle
Development, including as at 31
December 2022, and ongoing
compliance with accounting standards;
and
•
•
•
• Re-calculating the goodwill balance
recognised as a result of the business
combination against the amount
recorded by the Group.
•
Evaluating the adequacy of the Group’s
disclosures in the financial report using
our understanding obtained from our
testing and against the requirements of
accounting standards.
86
Nickel Industries Annual Report 2022
85
INDEPENDENT AUDITOR’S REPORT
Other Information
Other Information is financial and non-financial information in Nickel Industries Limited’s ’s annual
reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors
are responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other
Information. In doing so, we consider whether the Other Information is materially inconsistent with
the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
•
•
implementing necessary internal control to enable the preparation of a Financial Report that
gives a true and fair view and is free from material misstatement, whether due to fraud or
error
assessing the Group and Company’s ability to continue as a going concern and whether the
use of the going concern basis of accounting is appropriate. This includes disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting
unless they either intend to liquidate the Group and Company or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our
Auditor’s Report.
86
Annual Report 2022 Nickel Industries
87
INDEPENDENT AUDITOR’S REPORT
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of Nickel Industries Limited for the year
ended 31 December 2022, complies with
Section 300A of the Corporations Act
2001.
The Directors of the Company are responsible for the
preparation and presentation of the Remuneration
Report in accordance with Section 300A of the
Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in
pages 35 to 39 of the Directors’ report for the year
ended 31 December 2022.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
KPMG
Stephen Board
Partner
Brisbane
28 February 2023
88
Nickel Industries Annual Report 2022
87
ADDITIONAL ASX INFORMATION
Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is
as follows. The information is current as at 31 January 2023.
DISTRIBUTION OF EQUITY SECURITIES
ORDINARY SHARES
Range
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
Above 100,001
Number of Holders
Number of Shares
3,562
5,471
2,571
4,081
623
16,308
2,347,994
15,567,894
20,638,755
127,073,401
2,824,749,094
2,990,377,138
The number of shareholders holding less than a marketable parcel is 808.
TWENTY LARGEST SHAREHOLDERS
The names of the twenty largest holders of quoted shares are:
N°
SHAREHOLDER
Number of Shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
HSBC Custody Nominees (Australia) Limited
Decent Investment International Private Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
PT Harum Energy TBK
Shanghai Decent Investment (Group) Co., Ltd
Decent Resource Limited
BNP Paribas Noms Pty Ltd
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