Moody's Ratings assigns B1 rating to Nickel Industries' proposed notes

(Sydney, September 23, 2025)-- Moody's Ratings (Moody's) has today assigned a B1 rating to the proposed senior unsecured notes due 2030 to be issued by Nickel Industries Limited (NIC). We have also conducted a review of NIC's existing ratings, including its B1 Corporate Family Rating (CFR) and senior unsecured ratings through a rating committee. These ratings and stable outlook remain unchanged.

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The expected use of proceeds for the bond issue is the repayment of NIC's outstanding $400 million bonds due in October 2028, with the remainder for general corporate purposes.

The rating of the proposed notes assumes that the final transaction documents will not be materially different from draft legal documentation reviewed by us to date and assume that these agreements are legally valid, binding and enforceable.

RATINGS RATIONALE

The B1 rating assigned to the proposed senior unsecured notes will rank pari passu with all other unsecured, unsubordinated indebtedness of the Company. The rating is at the same level as the existing CFR of Nickel Industries Limited.

NIC's B1 rating continues to reflects (1) the solid operating performance of its rotary kiln-electric furnace (RKEF) assets and competitive unit costs owing to its vertically integrated nickel operations, (2) increasing product diversity, with earnings derived from the production of Nickel Pig Iron (NPI), nickel matte and mixed hydroxide precipitate (MHP), an intermediate product used in the production of nickel cathode and nickel sulfate, and (3) the company's staged approached to growth funding.

The company's credit profile remains constrained by (1) exposure to commodity price fluctuations with significant exposure to nickel and derivative products; (2) its reliance on, and concentrated exposure to Tsingshan group, a private entity; and (3) ongoing focus on growth spending and acquisitions, which constrains free cash flow.

NIC delivered a solid operating performance in 1H2025, although overall Group EBITDA remained relatively flat. This outcome reflects the company's integrated nickel operations, where rising nickel ore prices supported stronger results from Hengjaya Mine, offset by weaker profitability from its RKEF operations.

Over the next 12-18 months, NIC's credit profile will be, supported by a material uplift in earnings and operating cash flow. This improvement is underpinned by higher saleable production from the Hengjaya Mine—contingent on the approval of the RKAB extension—which is expected to lift output to 19Mt in 2025. Further upside is anticipated from the commissioning of the ENC HPAL plant in early 2026.

NIC's 44% interest in the ENC Project is backed by robust contractual protections, including a capital expenditure guarantee, a nameplate capacity guarantee of 72,000 tonnes of nickel metal per annum, and a commissioning guarantee from Shanghai Decent. These provisions enhance visibility over project execution and operational performance, positioning the ENC Project to deliver meaningful incremental earnings and cash flow contributions from 2026 onward.

Liquidity headroom reduced in the first half of 2025, with reported cash reserves of $145 million as at 30 June 2025. Over the next 12 months, the company faces debt amortisation obligations of $209 million and our estimate of $50 million of capex. The company has demonstrated flexibility with respect to the remaining ENC payments totalling $253 million, which have been deferred from 1 January 2026 and 1 April 2026, to 1 July 2026 and 1 October 2026.

We expect that completing the proposed notes issuance would allow the company to maintain adequate liquidity headroom consistent with its B1 rating. The successful execution of this transaction will reduce near-term funding requirements, better positioning the company to navigate its short-term obligations while preserving sufficient liquidity buffers.

While we understand the company has secured liquidity backstop facilities totaling $100 million, liquidity headroom will become inadequate in the event the company fails to successfully issue the proposed notes, or execute on other potential liquidity enhancing transactions.

Moody's adjusted Debt/ EBITDA registered at 3.5x for the last twelve months (LTM) ended June 2025, and we expect this to register between 1.5x and 1.9x over the next 12–18 months, supported by earnings contributions from ENC. NIC's historically low financial leverage and its use equity to fund growth further support its credit profile.

A comprehensive review of all credit ratings for the respective issuer(s) has been conducted during a rating committee.

OUTLOOK

The outlook reflects our expectation that the company's liquidity headroom will be supported by the proposed notes issue and that the company's upcoming payment obligations will be manageable over the next several quarters under the agency's base case.

Further, the outlook also reflects the rating agency's expectation that NIC's credit metrics will remain consistent with the parameters we expect for its B1 rating.

LIQUIDITY

Today's rating action reflects our expectation of an improvement in the NIC's liquidity profile following the proposed bond issue.

The company reported cash and cash equivalents of $145.4 million as of 30 June 2025. We expect this to be applied in conjunction with operating cash flows and expected bond proceeds to meet its funding obligations in the near term.

At 30 June 2025, the company's current financing obligations included debt amortisation obligations of $209 million and our estimate of $50 million of capex. The company has demonstrated flexibility with respect to the remaining ENC payments totalling $253 million, which have been deferred from 1 January 2026 and 1 April 2026, to 1 July 2026 and 1 October 2026.

We expect the company to apply the bond proceeds to repay its outstanding October 2028 bonds to improve its debt amortization profile, with any remaining proceeds to be used for general corporate purpose to support its liquidity profile

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING

We may consider an upgrade to the credit ratings if the company diversifies its revenue base to other customers such that the concentration risk associated with Tsingshan is reduced.

The rating could also be upgraded if NIC maintains a track record of consistent operating performance and maintenance of its low-cost position across its key currently producing RKEF facilities. Further, the agency would expect NIC to maintain a strong financial profile with credit metrics consistent with a higher rating, and a materially improved liquidity profile.

The ratings could be downgraded if the company fails to successfully issue the proposed notes and/or is unable to execute on other potential liquidity enhancing transactions.

The rating could also be downgraded as a result of material delays to the granting of the anticipated RKAB mine license extension, delays in the commissioning of its ENC plant, or operating challenges at the company's existing operations that result in further liquidity pressure.

The rating could be downgraded if realised NPI prices, and consequently NIC's NPI margins, fall well below our base sensitivity assumptions on a sustained basis and/or the company's cost and operating performance deteriorates meaningfully.

Specifically, financial metrics that we would consider for a downgrade include EBIT/interest expense below 3.0x and/or debt/EBITDA above 4.0x on a consistent basis. The rating could also be downgraded if NIC's free cash flow generation turns negative for a protracted period and/or liquidity deteriorates meaningfully.

The principal methodology used in this rating was Steel published in September 2025 and available at https://ratings.moodys.com/rmc-documents/450336. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

The net effect of any adjustments applied to rating factor scores or scorecard outputs under the primary methodology(ies), if any, was not material to the ratings addressed in this announcement.

PROFILE

Nickel Industries Limited (NIC) is an Australian Securities Exchange-listed company with assets in Indonesia, primarily producing nickel pig iron (NPI) but also nickel matte. NIC is now transitioning its production to focus on the electric vehicle (EV) battery supply chain. NIC operates in partnership with the world's largest stainless-steel producer, Tsingshan, which is also the largest shareholder in NIC. (ends)