Fitch Ratings has affirmed Nickel Industries Limited's (NIC) Long-Term Issuer Default Rating (IDR) at 'B+'.

The Outlook is Stable. Fitch has also affirmed NIC's senior unsecured notes at 'B+' with a Recovery Rating of 'RR4'.

The affirmation reflects our expectation that NIC will maintain EBITDA leverage below its negative sensitivities of 3.5x through to 2027 following the final investment decision for the Excelsior Nickel HPAL Project (ENC). The project's total capex is USD1.3 billion, with USD316 million paid before 2024. The remaining portion will be funded through equity and debt capital sourced by NIC in 2023.

The Stable Outlook is further supported by NIC's robust liquidity, sufficient to repay its 2024 debt obligations and funding commitments related to the ENC project.

Key Rating Drivers

Manageable Liquidity Risk: NIC had robust liquidity in December 2023, consisting of cash and term deposits of USD779 million in total and undrawn credit facilities of USD210 million. These are sufficient to cover its liquidity needs in 2024, including repayments for the remaining USD245 million senior unsecured notes due 2024 and USD696 million committed to the ENC stage 1 project.

NIC would still need to access external funding for operations in 2025 if it uses up all its available cash to meet its obligations. However, it has a proven record of capital raising, with around USD1.9 billion sourced through a combination of equity, bonds and loan facilities in 2023.

Short-Term Regulatory Risks Subside: Fitch believes the recent renewal of NIC's Rencana Kerja dan Anggaran Biaya Indonesian mining licence (RKAB licence) at its Hengjaya mine for a period of three years has reduced its exposure to regulatory risks over the short term. NIC's operations were affected in January and February 2024 by the implementation of new regulations in Indonesia, delaying licence renewals. Deliveries have resumed following the renewal. The company has stated that EBITDA could fall by around 40% in 1Q24 compared with the prior year as a result.

Fitch expects that NIC will be able to absorb this within the sensitivities for its current rating. The rating incorporates its exposure to higher-risk mining jurisdictions, with the risks also demonstrated by the imposition of export bans on Indonesian miners. However, any further regulatory reforms in the country that affect operations for a longer period could have a more material impact on its operations and credit profile.

Cost Position Protects EBITDA Margin: Fitch expects NIC's solid cash cost position at its nickel pig iron (NPI) facilities and ownership of power stations at the Angel Nickel Project (ANI) and Oracle Nickel Project (ONI) will help it absorb the impact of soft nickel prices and the delayed licence renewals. As a result, we forecast the 2024 EBITDA margin to remain at around the same level as in 2023. We expect full-year operations at ONI and the recently completed power station to drive an increase in EBITDA margins to 23%-30% over 2025-2027 under our nickel price assumptions.

Rising Capex Fully Funded: NIC made a positive final decision in 2023 on the ENC project, with USD696 million to be spent in 2024 and USD253 million in 2025. NIC has already secured funding for its commitment through a USD628 million placement to a subsidiary of PT United Tractors Tbk, and established loan facilities of USD400 million. The equity component in the funding structure limits the impact on NIC's leverage. We forecast NIC's EBITDA leverage to peak at 2.9x in 2024, before declining to below 2.5x by end-2025.

Improving Diversification: The acquisition of 10% of the Huayue Nickel Cobalt Project, the completed conversion of Hengjaya Nickel to Class 1 nickel, and the completion of the under-construction ENC will increase NIC's product diversification, exposure to higher-grade nickel and reduce dependence on Tsingshan Holdings Group as NIC's sole off-taker. NIC estimates Class 1 nickel output can rise to 50%-78% of total attributable production after the projects are completed, and expects all the higher-grade metal to be sold to customers not affiliated with Tsingshan.

Derivation Summary

NIC's business profile is supported by its low-cost operations, which have placed it in a better position on the industry cost curve compared to that of Cleveland-Cliffs Inc. (BB-/Stable) and Guangyang Antai Holdings Limited (B/Stable). NIC's financial profile is also stronger than that of highly leveraged Guangyang Antai.

However, NIC's higher-rated peers are typically significantly larger in operational scale and revenue generation, including Cleveland-Cliffs. The production of the most sophisticated grades of advanced high-strength steels and value-added stainless steel products also supports Cleveland-Cliff's stronger business profile.

NIC is also smaller in operational scale than JSW Steel Limited (BB/Stable), along with its smaller proportion of value-added products and assets concentration in one country. In contrast, JSW is the largest steelmaker in India, but it also has assets in the US and Italy. NIC's profitability and leverage are somewhat stronger due to a sharp decline in JSW's margin in 2023; however, their financial profiles are largely similar on a through-the-cycle basis.

Key Assumptions

Fitch's Key Assumptions Within the Rating Case for the Issuer:

Nickel spot prices of USD17,000/tonne (t) in 2024, USD16,000/t in 2025, and USD15,000/t thereafter;

NPI price is around 25% to LME nickel price on average in 2024-2027;

Stable production of NPI at RNI, ANI, and ONI and nickel matte at HNI in 2024-2027;

Capex on the ENC project of USD949 million and first mixed hydroxide precipitate (MHP) production in 2026;

EBITDA margin of between 25% and 35% in 2024-2027;

Dividend payout ratio at 40% in 2024, before gradually increasing to 60% by 2027.

Recovery Analysis

The recovery analysis assumes NIC would be reorganised as a going concern in bankruptcy rather than liquidated.

We assume a 10% administrative claim.

Our going-concern EBITDA estimate of USD500 million reflects our view of a sustainable, post-reorganisation EBITDA level on which we base the enterprise valuation as well as the mid-cycle nickel price and stable lateritic nickel rotary kiln operations at HNI, RNI, ANI and ONI. We do not include the ENC project in the going-concern calculation, as the project will be under construction over the next two years.

We use a multiple of 5x to estimate a value for NIC, because of its geographical concentration in Indonesia and smaller operational scale compared with peers. This is despite stronger growth prospects following ONI's production commencement.

The going-concern enterprise value corresponds to a 'RR3' Recovery Rating for NIC's senior unsecured bonds after adjusting for administrative claims and secured credit facilities. Nevertheless, we rate the senior unsecured notes at 'B+' and 'RR4', because NIC's operating assets are located in Indonesia. Under our Country-Specific Treatment of Recovery Ratings Criteria, Indonesia is classified under the Group D of countries in terms of creditor friendliness and Recovery Ratings are subject to a cap at 'RR4'.


Factors that could, individually or collectively, lead to positive rating action/upgrade:

An increase in production scale, while demonstrating improved customer diversification;

EBITDA leverage sustained below 2.5x.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

An increase in EBITDA leverage to above 3.5x for a sustained period;

A decrease in EBITDA interest coverage to below 4.0x for a sustained period;

Weakening funding access;

Weakening of Tsingshan's ability to make timely payments to NIC.

Liquidity and Debt Structure

Sufficient liquidity. NIC had USD288 million in cash and a term deposit of USD491 million with an Australian bank as of end-2023. This is sufficient to repay NIC's USD245 million notes maturing in April 2024. The longer-term debt consists of USD400 million notes due 2028 and USD190 million loan draw down from its USD400 million credit facilities due in 2028. Still, NIC's long-term debt includes annual amortisation translating into around USD150 million in repayments, on average, in 2025 and 2027.

Issuer Profile

NIC is a producer of Class 2 and Class 1 nickel, with four smelter assets and one mining asset in Indonesia. NIC's ownership interest in all four smelters, HNI, RNI, ANI, and ONI, is 80%, with the remaining 20% owned by Shanghai Decent Investment (Group) Co., Ltd, a Tsingshan group company. NIC is progressing with the construction of ENC, where the company's interest will be 55%. NIC also holds an 80% share in PT Hengjaya Mineralindo, a nickel and cobalt deposit in the Morowali area.

Sources of Information

The principal sources of information used in the analysis are described in the applicable criteria.


The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit

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