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Nickel Mines Ltd (NIC)
Preferred nickel exposure
Recommendation
Buy (unchanged)
Price
$0.625
Target (12 months)
$1.20 (previously $1.23)
Analyst
David Coates 612 8224 2887

Authorisation
Stuart Howe 613 9235 1856
GICS Sector
Materials
Expected Return
Capital growth 92.0%
Dividend yield 0.0%
Total expected return 92.0%
Company Data & Ratios
Enterprise value $1,087m
Market cap $1,041m
Issued capital 1,665.5m*
Free float 56%
Avg. daily val. (52wk) $2.1m
12 month price range $0.28-$0.75
* Includes 280.3m escrowed shares
Price Performance
BELL POTTER SECURITIES LIMITED

Page 1
(1m) (3m) (12m)
Price (A$) 0.64 0.63 0.26
Absolute (%) -3.9 -3.2 134.6
Rel market (%) -6.9 -8.0 114.6
First quarter at full production and 60% ownership
NIC has released its December 2019 quarter report. This saw the first full quarter at
full production rates, producing 80,015t of NPI grading 13.7% Ni for 10,968t contained
Ni (vs BPe 9,800t Ni, 100%-basis), with 6,581t Ni attributable to NIC. Consolidated
cash costs were US$7,879/t, up 5% qoq (vs BPe US$7,657/t). Total production
represented a 9% increase in Ni production qoq and a 28% increase in Ni production
attributable to NIC, on the first entire quarter of 60% ownership of all four RKEF lines.
We estimate ytd Ni production attributable to NIC at 11,741t. Our estimate (not
reported by NIC) of weighted average cash costs ytd is US$7,728/t. EBITDA of
US$56.8m was reported for the December quarter (100%-basis, September quarter
US$50.2m). Cash on hand increased from US$33.0m to US$49.8m.
No production disruptions anticipated
NIC also released an update regarding current travel restrictions being implemented in
response to the Coronavirus outbreak. These are self-imposed site access controls for
Chinese nationals working at the Indonesia Morowali Industrial Park (IMIP). This
affects 17 of 1,392 employed at NIC’s operations there. In essence, those on site will
remain on site and those in China will remain in China. As a result, at this point, we do
not expect any material impact on operations. Speculation around this issue, however,
has had a material impact on macro sentiment. In our view, operating fundamentals
remain intact and we make no changes to our outlook as a result of this factor.
Investment thesis –Buy retained, TP $1.20/sh (from $1.23/sh)
The lower Ni in NPI price realisation assumption is the key driver behind the 8%
reduction of our forecast FY20 earnings. This is partially offset by higher Ni in NPI
grades, which have remain consistently above ore base-case forecasts. FY21 and
FY22 earnings are essentially unchanged. Our target price is lowered 2% to $1.20/sh.
Now at full production and steady state operations, NIC remains one of our top picks
for CY20 and our preferred nickel exposure.
Absolute Price Earnings Forecast
Year ending 30 June 2019a 2020e 2021e 2022e
Sales (US$m) 65 587 677 718
EBITDA (US$m) 20 241 336 368
Attributable NPAT (reported) (US$m) 66 126 186 211
Attributable NPAT (adjusted) (US$m) 7 126 186 211
EPS (adjusted) (A¢ps) 0.8 11.4 16.0 17.3
EPS growth (%) nm 62% 40% 8%
PER (x) 8.8 5.5 3.9 3.6
FCF Yield (%) -24% 18% 44% 48%
EV/EBITDA (x) 36.0 3.0 2.2 2.0
Dividend (A¢ps) - - - -
Yield (%) 0% 0% 0% 0%
Franking (%) 0% 0% 0% 0%
ROE (%) 37% 55% 55% 46%