PT Vale Indonesia Tbk (INCO) reported an increase in operational performance throughout 2023. INCO produced 70,728 metric tons of nickel in matte in 2023. The production increased by 18% from 2022's production of 60,090 tons of nickel matte.

"Despite facing various challenges throughout the year, we managed to exceed our production target for 2023," explained Febriany Eddy, CEO and President Director of Vale Indonesia in information disclosure on the Indonesia Stock Exchange (IDX), Sunday (11/12).

The production in the fourth quarter of 2023 reached 19,084 tons of nickel in matte. This amount was 6% higher than the production volume recorded in the third quarter of 2023 which amounted to 17,953 tons of nickel matte. The realization was also up 18% year-on-year (YoY) at 16,183 tons in the fourth quarter of 2022.

According to Febriany, the production increase was the outcome of an effective maintenance strategy and improved performance at the mine area and processing plant throughout 2023. This led to higher production quarterly.

INCO estimates nickel matte production this year at 70,000 tons. This figure is unchanged from last year's production estimate.

Bernardus Irmanto, Chief Financial Officer of Vale Indonesia, said that there are two factors why production tends to be similar. First, the maintenance level of mining equipment, in which the number of days used for equipment maintenance will increase this year. This condition will affect the equipment availability for mining production.

Second, the levels of production also consider the nickel grade in the mining area affecting the output. "[If normalized,] we have the chance to produce more. But given these two factors, the feasible production level is at 70,000 tons," explained Irmanto.

Irmanto claimed that INCO is striving to maintain its equipment optimally to increase the utilization rate of its equipment, which will lead to higher production in the coming year. INCO also strives to obtain better nickel ore grades for better production output.

Mirae Asset Sekuritas Indonesia analyst Rizkia Darmawan gives a buy trading recommendation on INCO shares with a price target of IDR 4,900 per share. Such a target price implies an 11.7 times price-to-earnings (P/E) ratio for 2024.

Rizkia sees INCO's upside potential to be limited in the short term until the completion of its smelter projects in 2026. However, Rizkia is positive about the development of INCO's projects, which will meet the needs of Indonesia's downstream nickel industry and will support the electric vehicle (EV) supply chain.

Mirae Asset Sekuritas estimates nickel prices will remain high, although they will not rise higher. According to the firm, Indonesia has a large supply of grade II nickel, and global economic activity is still slow, mainly in China.

The average selling price (ASP) historically reflects around 75% of the London Metal Exchange (LME) benchmark price. Therefore, Mirae Asset assumes that INCO's ASP will be around USD 13,850 per ton this year.

However, risks are looming over this recommendation, including delays in project implementation, further nickel price declines coupled with rising fuel and energy prices, and changes in government regulations.

Image source: Antara Foto / Jojon

Source: https://investasi.kontan.co.id/news/produksi-nikel-matte-vale-indonesia-inco-naik-18-sepanjang-2023