A 71% production cut at the world's biggest nickel mine - NC1 owns one of the biggest undeveloped nickel projects globally...

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 1,785,838 NC1 Shares at the time of publishing this article. The Company has been engaged by NC1 to share our commentary on the progress of our Investment in NC1 over time. This information is general in nature about a speculative investment and does not constitute personal advice. It does not consider your objectives, financial situation, or needs. Any forward-looking statements are uncertain and not a guaranteed outcome.

Three weeks ago, we said:

"Our new Investment in Nico Resources (ASX:NC1) is essentially like a leveraged bet on the nickel price surging, and the economics of NC1's asset improving significantly in parallel"

We also said:

"We think countries could soon rethink selling/sharing their nickel supply for strategic and military reasons"

Well... yesterday, Indonesia made the biggest supply intervention the nickel market has seen in years.

Indonesia ordered the world's largest nickel mine to slash its production quota by 71%.

(source)(source)(source)

More broadly, Indonesia has now put in place nickel production quotas countrywide for 2026 of 260-270 million tonnes... down from 379 million tonnes last year.

That's roughly a one-third cut to production from the country that controls ~50-60% of the world's nickel supply.

Supply disruptions from the world’s biggest producer?

They are now happening in the nickel market...

Nickel prices which have been depressed due to oversupply out of Indonesia are now up around 20% from 6 months ago and over 26% since mid December...

(source) (source)(source)(source)

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

And that’s before any of the producers have actually responded to the quotas and cut production.

We expect the full impact to be felt in the market over the next 10 months.

We think the short-term macro outlook is getting a lot stronger for our Investment NC1.

(not to mention the longer term demand outlook for nickel from the billions of AI humanoid robots that are coming - more on that in a second).

NC1 owns 100% of one of the largest undeveloped nickel projects on the planet.

In fact it's one of the four biggest - and of those four projects, NC1’s has the highest grade:

(source)

NC1’s project has an initial reserve of 1.56 million tonnes of contained nickel, capable of producing approximately 40,000t of nickel and 3,000t of cobalt annually.

NC1’s asset is genuinely “Tier 1” in terms of size/scale - that term gets thrown around a fair bit with small caps, but this is a real monster - once built, it will produce nickel for over 40+ years...

NC1’s project also sits amongst the group of assets that would be operating in the lowest cost quartile of any asset globally.

Which we hope makes it an attractive new source of supply when the world goes looking for it...

(Source)

NC1’s project has already had a Pre-Feasibility Study (PFS) completed in December 2022 and returned project economics of:

● Net Present Value (NPV) = $3.34BN.

● Payback period of 4.9 years

● Internal Rate of Return (IRR) = 18.02%

All from CAPEX of ~$2.9BN, using a nickel price of ~US$20,000 per tonne.

The same study also showed that if nickel prices traded at US$30,000 per tonne, the project’s NPV would almost double to $6.5BN...

(Source)

We think NC1’s asset offers the most leverage to nickel prices in the junior end of the market.

(source)

The reason we are backing NC1 is because if the nickel price ever goes to US$25,000, $35,000 or $40,000 per tonne...

If any of those price scenarios come into play, NC1 could become the quickest and easiest way to get leveraged nickel exposure.

And in the next nickel bull market it will hold a giant asset, that’s been optimised for bear market scenarios...

NC1, over the last few years has been forced to cut costs wherever possible and make the project capital efficient enough for it to stand on its two feet in the toughest of nickel markets.

(NC1 has a Definitive Feasibility Study (DFS) on the way that should reflect all of that work).

Hopefully that means that when the good times come for the nickel market - NC1 will own the asset everyone has their eyes on...

Now we wait for nickel prices to run...

Will the “Robot Metals” thematic drive nickel prices higher?

We have written about how macro thematics can often be the biggest drivers of share prices for micro-cap companies before.

🎓 Check out our educational article here: Why do shares prices go up?

Share prices are simply a function of supply and demand.

For a share price to rise there must be more buyers (demand) than sellers (supply).

The easiest way for new demand to come into the market is for macro fundamentals to improve which then ultimately leads to more investor interest in companies with exposure to that theme.

Take the battery materials boom for example.

Big share price rises in battery metals stocks were driven not only by individual investors...

...but when the following groups started buying:

• Global car companies
• Global resource companies (M&A)
• Ultra high net worth investors
• Large fund managers
• Superannuation funds
• Banks (lending)

It was the massive influx of capital off the back of battery materials macro strength that turned some small caps into billion dollar behemoths.

We think the same dynamics could play out again - but this time for the “robot metals”.

We think that over the next 5-10 years nickel demand, price and sentiment around the metal will be driven by the Robot Metals macro thematic.

Nickel is a key ingredient in batteries - for electric vehicles, autonomous AI robots and general energy storage.

After 3 years in the proverbial “sin bin” of investor portfolios, we think battery metals like nickel are about to make a big comeback...

Though this time the underlying driving force won't just be Electric Vehicles and grid scale batteries.

It will be autonomous AI robots...

Autonomous AI robot armies can’t be built without thousands of tonnes of nickel...

Here’s a video from Chinese company UBTECH’s “World’s First Mass Delivery of Humanoid Robots” released a few weeks ago:

So whether the guys in this video will end up holding a vacuum cleaner in the home, carrying a box in a warehouse or waving around an AK-47 on the battlefield....

The autonomous AI robots are coming...

And they are going to need a lot of metals - especially nickel.

... billions of autonomous robots are expected to be built over the coming decade.

Robots that are expected to soon be in the home, in factories and in the military...

The country to win the AI and AI robot race will likely become the new global superpower, both from robot driven productivity gains and robot driven military dominance.

(So securing metals supply domestically OR from allies has become urgent and of strategic importance).

According to Elon Musk “Billions and billions” of autonomous robots will get built...

Elon’s company Tesla has a “late 2026 or early 2027” launch date planned for his Optimus robot.

Tesla is just one of many US companies entering the AI robot market - the West's answer to what appears to be China’s head start in mass producing autonomous AI robots.

Elon isn’t the only one who thinks “the robots are coming” either:

(Source)

Where does nickel fit in the robot metals thematic?

Tesla’s choice of battery chemistry for its robot strategy could mean that those billions of robots need millions of tonnes of nickel...

Currently (before the robots take over), the majority of nickel demand goes into stainless steel (64-70% of demand), EV batteries take about 15%, and 9-12% if taken up by high performance alloys for aerospace, defence, energy, and marine applications.

Even if robots added 10-20% more demand for nickel - it would put the market in a big supply/demand imbalance.

As we said earlier, our Investment in NC1 is basically a bet on the nickel price surging, and global supply not keeping pace with new demands such as autonomous robots...

Billions of robots will mean nickel production will need to increase to keep up with demand...

Which might be the tailwinds needed to get NC1’s Tier 1 nickel asset out of the development stages and into production.

Especially given NC1 has already proven its nickel can be turned into battery grade product (MHP):

(source)

Here is what NC1’s major shareholder’s CEO ($1.15BN Metals X CEO Brett Smith) said with respect to NC1’s asset on a recent podcast:

“it's a great asset”, “one of the best undeveloped nickel-cobalt assets in the world”

“like all of the laterite jobs, it just requires a huge amount of CAPEX to get it started”

And of course the line that is rent free in our heads:

"it'll eventually get built”...

IF/when it does, we expect NC1’s valuation could be materially higher than where it is today.

9 reasons why we Invested in NC1

A few weeks ago we added NC1 to our Portfolio.

Check out our full initiation note here: Our latest Investment - Nico Resources (ASX: NC1)

Also from that note, here are the 9 reasons why we Invested in NC1:

(note these reasons were published on the 20th of January)

1) NC1 has one of the biggest undeveloped nickel-cobalt projects in the world

NC1 has a JORC resource of ~1.68 million tonnes of nickel and 132k tonnes of cobalt, making it one of the top four largest undeveloped projects in the world. NC1’s project was granted Major Project Status by the Australian government in 2024.

2) Current market cap is only ~$41M.

During the 2022 nickel and battery metals bull run NC1’s share price was close to $2 per share and its market cap ~$160M+. Now NC1’s market cap is ~$41M and its share price 30c per share.

We also think NC1 currently trades at a steep discount to its comparable peers such as Alliance Nickel, Ardea Resources, and Australian Mining based on project reserves and grade.

UPDATE: NC1’s market cap has since come down to now sit at ~$38M.

3) We are backing mining legend Peter Cook (“Cookie”) here.

Before today’s placement industry legend Peter Cook owned ~11.8% of NC1 shares and is the Non-Exec Chairman.

NC1 came out of his other success story Metals X (more on Metals X below).

Another spin out from Metals X was Westgold Resources, now capped at over $6BN.

Cookie is also Non-Exec Chairman of one of our best performers from 2025 (TTM) which was up ~132% over the last 12 months.

We are backing Cookie in NC1 to deliver as he has for decades in a string of companies.

UPDATE: After the recent capital raise, Peter Cook owns 10.7% and Metals X owns 6.75% of NC1. (source) (source)

4) Lowest cost quartile once in production

NC1’s project, once developed, would have operating costs in the first quartile of projects around the world on a nickel equivalent basis. This means the project would be among the 25% cheapest producers once in production.

5) We think future demand for nickel will be underwritten by a mega thematic (humanoid AI robots)

We think “robot metals” will be the next big investment thematic in the resource sector.

The age of the robots is upon us, and billions of humanoid robots are expected to live, work (and fight?) alongside us over the coming years.

They are all powered by similar batteries to Electric Vehicles. We also think securing strategic nickel supply from allies to build AI robot armies will soon be a thing.

6) We think NC1 is the most leveraged nickel exposure on the ASX (basically a giant call option on nickel prices)

When commodity prices run, it's the companies with the biggest resources that are usually leveraged the most to the underlying price moves.

If nickel prices were to go parabolic, we think NC1 will be the preferred nickel development exposure the market looks for (which could re-rate the company’s share price from where it is today).

7) Project is advanced with a PFS completed in 2022 and a DFS on the way

NC1’s Pre Feasibility Study (PFS) showed a Net Present Value of ~$3.34BN using ~US$20,000 nickel prices.

We think that NC1 has had to streamline and make its project as efficient as possible which should mean the upcoming Definitive Feasibility Study is NC1’s best foot forward from an achievable development plan perspective.

8) Spin out from ~$1BN tin miner Metals X

NC1 was born as a spin-out from Metals X, which means the asset was “vend” out by a corporate and not by private vendors.

Metals X still hold their shares in NC1 which tells us the capital structure for NC1 is fairly tight (with a sticky vendor).

9) Tight and clean capital structure

NC1 only has 136M shares on issue (post cap raise) and very few options on issue, which means the share price can move quickly, plus several large and (presumably) sticky shareholders (Chairman Peter Cook with ~11.8% and MetalsX with ~7.5%)

Ultimately, we hope the above reasons contribute to NC1 achieving our Big Bet which is as follows:

Our NC1 Big Bet:

“NC1 re-rates to $500M+ market cap in a market where the nickel price is rising & as a result, NC1’s project is being considered a takeover target by majors looking for nickel exposure”

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is no guarantee that our Big Bet will ever come true. There is a lot of work to be done, many risks involved, including development risk, country risk and commodity price risk - just some of which we list in our NC1 Investment Memo.

Success will require a significant amount of luck. Past performance is not an indicator of future performance.

What do we want to see NC1 do next?

Drill out and upgrade defined resources

We want to see NC1 drill out and upgrade its current resources.

We are especially looking for increases to the categories of the resources.

Milestones:

🔲 Drilling commences

🔲 Drilling completed

🔲 Resource upgrade completed

Definitive Feasibility Study (DFS)

We want to see NC1 deliver its DFS - and hopefully improve on the numbers released in the PFS in 2022.

Milestones:

🔲 Processing flowsheet optimisation

🔲 Mine plan/infrastructure optimisation

🔲 Definitive Feasibility Study completed

Project funding solution

Ultimately, we want to see NC1 reach FID and finance the build of its project.

Between now and then, a cornerstone coming in and backing the company could de-risk financing materially.

(similar to what we saw happen with our Investment Canyon Resources and Eagle Eye Asset Management).

Milestones:

🔲 Final Investment Decision

🔲 Project Debt

🔲 Project Equity

🔲 Strategic partner comes into NC1 or NC1’s project

What are the risks?

In the short term the key risk for NC1 is “commodity price risk”.

NC1’s valuation is heavily leveraged to the nickel price and market sentiment.

As a result NC1’s share price trades around fluctuations in the nickel price.

If the current supply glut from Indonesia persists or demand from the battery sector softens, nickel prices may remain suppressed.

This could impact the project's economics and potentially re-rate the stock lower.

Commodity price risk

The performance of commodity stocks are often closely linked to the value of the underlying commodities they are seeking to extract. Should nickel prices remain low for extended periods of time, it could hurt NC1’s share price.

Source: “What could go wrong?” - NC1 Investment Memo 20 January 2026

Other risks

Like any small cap development company, NC1 carries significant risk, here we aim to identify a few more risks.

The company’s flagship project will require a large capital expenditure spend to get into production. There is no guarantee NC1 is able to raise those funds.

There is no guarantee that the upcoming Definitive Feasibility Study (DFS) will deliver the economic metrics required to secure financing, or that the project can be built within the estimated costs given the current inflationary environment either.

NC1’s project utilises High Pressure Acid Leach (HPAL) technology, which historically carries technical execution risks and complex ramp-up periods. Additionally, operating in the remote Musgrave region introduces logistical and infrastructure challenges, such as securing water and energy, that could cause delays.

Finally, while the project has "Tier 1" potential, there is no guarantee that a major partner or acquirer will step in.

Investors should consider these risks carefully and seek professional advice tailored to their personal circumstances before investing.

Our NC1 Investment Memo

You can read our NC1 Investment Memo in the link below.

We use this memo to track the progress of all our Investments over time.

Our NC1 Investment Memo covers:

● What does NC1 do?

● The macro theme for NC1

● Our NC1 Big Bet

● What we want to see NC1 achieve

● Why we are Invested in NC1

● The key risks to our Investment Thesis

● Our Investment Plan