Nickel Industries plays down Indonesia royalty concerns after selloff
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The news: Nickel pure-play Nickel Industries has provided more detail on potential royalty increases for mining companies by the Indonesian government, after the miner saw nearly 20% slashed of its share price on Tuesday.
The numbers: Nickel Industries is currently subject to a 10% royalty on its nickel ore sales in Indonesia. The Indonesian government recently announced a public consultation on proposed royalties between 14% and 19% on a number of commodities, including nickel.
The miner said that if the change was legislated last year, it would have seen royalties from its Hengjaya Mine increase by around USD8 million ($12.7 million), on 2024 sales revenue of USD205 million.
The company added that its 80% owned rotary kiln electric furnace operations are not subject to any royalties, nor are products from its Excelsior nickel cobalt HPAL project.
Nickel Industries shares were up 1.7% to 61.5 cents in early trading.
The context: The miner noted that the public consultation is likely to run for between three to six months, with no guarantee that the proposed royalties will be implemented.
Bell Potter retained its 'buy' rating and $1.47 target price on the stock. Analyst David Coates said the key driver for Tuesday's selloff was a block trade by Nickel Industries' third largest shareholder Harum Energy, which sold around 4.2% of the company's issued capital at a 9% discount to its previous closing price.
Coates noted that the Indonesian government's potential increases to nickel ore mining royalties would have "minimal impact" on Bell Potter's valuation and earnings forecast.
The sources: ASX, Bell Potter research
