Nickel 28 Capital Corp V.NKL

q2 financials soon

[invest234]

q1 financials came out  on june 30, 2022 so q2 fin should be out sept 30.
last year q2 fin was out aug 31 2021, and since they moved fin forward by a month, sept 30 makes sense.

q1 negative earnings must have scared away a lot of people. that was because they sold only a tiny percent of their production in q1 because of covid restricting shipping. all that inventory is still there to be sold. had they sold all they produced, q1 would have been solidly positive earning. ramu is one of the lowest cost nickel-cobalt mines in the world giving nkl an extremely low p/e ratio. their string of strongly positive earnings would have continued had it not been for the blip in q1.

q2 financials will be important to show the world that they continue to be very profitable. they already released their q2 production and sales results, selling nickel at a very high price of $13.13/lb, so q2 should have strongly positive earnings. with around 7000 tonnes of nickel still in inventory, a future q will have explosive earnings when it is sold.

nkl debt also must be scaring people away but it should not. ramu is low cost and generates a lot of free cash. paydown of debt is variable depending on the amount of free cash generated by ramu. the debt does not have a fixed due date, so there is no problem if debt paydown is delayed from things like delayed shipping. once the debt is paid, nkl jv interest increases from 8.56% to 11.3% with purchase option to increase it to 20.55%. nkl is already very profitable at 8.56% with crazy low p/e of 3. when their jv interest more than doubles, earnings will shoot up.

most royalty companies are given very high p/e multiples of 40 and higher. if nkl starts to be recognized as a royalty company, nkl share price would need to shoot up to meet the high p/e multiples of other royalty companies.

[Michiel]

very good analysis. With this one you need some time. I have time...

[Talchior]

Thanks for your feedback. I am curious about the price of the purchase of options. Could them use also a loan is the question.

[invest234]

going from 8.56% to 11.3% is automatic when the debt is paid off. going from 11.3% to 20.55% nkl has the option to purchase at the then "market value" as the filing states, at the time the debt is paid off, so we don't know the exact price yet. their corporate presentation has an estimated time and chart when the debt is paid off. it depends on the nickel price. at $12.50 nickel

[Michiel]

good summary. i understand anthony's attitude not to take out a loan now. The amount may be a bit too high (about 70 million) for such a small company. But once the loan is largely paid off I see it happen that a loan will come after all, borrowing 10 to 20 million is less risk than 70. That way they achieve the promised goal of paying off the debt by the end of next year (or maybe earlier).

[ICNick]

Agree. I would expect that they have done their risk/reward analysis on this. Meanwhile Nickel seems to be moving up past the $11.00 zone. This is all good. 

[Michiel]

ramu is a very profitable mine, largely owned by a powerful Chinese company, MCC. Are they going to let a tiny Canadian company soon get a bigger share of this profitable mine? I find this hard to believe, especially when you know that China desperately needs nickel and cobalt for their growing EV market. So, if I had to be MCC, I'm buying up that tiny Canadian company and I'm going to be

[Nergy]

Seems pretty reasonable, a 300MUSD bid could be enough, and would probably still be considered a bargain.

[Michiel]

however it turns out, takeover or share increases in Ramu, it's all positive for the stock.

[ICNick]

A take over ver might be possible but $300 m US way to small. Soon NKL will have 11% shares, wich means (33,000 mt x 11% = 3,630 mt per year), that is close to 8,000,000 lbs of Nickel alone per year at a gross margin of $9.00/lb ($12 average price - $3.00 cost). That will provide $72 m us per year for how many years to come? Let's say 20. Then $300m is way to small considering also other

[Michiel]

nickel price above US$11/lb again :-)

[Talchior]

yes! And structural increase, not due to a fake event.

[lumpy13]

What are the terms of the purchase option to go to 20%? What is the current estimate to payoff the remaining debt?