Nickel Industries (ASX:NIC) has announced that its Excelsior Nickel Cobalt (ENC) project in Central Sulawesi, Indonesia, is experiencing significant operational constraints due to unusually dry conditions. The project, an integrated high-pressure acid leach and refinery within the Indonesia Morowali Industrial Park, had reached approximately 50% of its nameplate capacity within four weeks of commissioning. However, the severe drought has reduced water availability, forcing the plant to operate at an estimated 30% of nameplate capacity if current conditions persist.
August 2026 saw less than 4 millimeters of rainfall near the Hengjaya Mine, a drastic drop compared to the historical average of approximately 222 millimeters for the month. This water scarcity is directly impacting ENC's refinery operations, which rely on water to process limonite ore into mixed hydroxide precipitate (MHP), nickel cathode, and nickel and cobalt sulphate. Despite this setback, Nickel Industries anticipates water availability to normalize with the onset of the wet season, projected to begin by December 2026.
While the ENC project faces challenges, Nickel Industries' established RKEF processing operations have not been affected and continue to operate normally. Furthermore, the dry weather has positively impacted mining and haulage productivity at the nearby Hengjaya Mine, leading to record nickel ore sales of 1.6 million wet metric tonnes in August, following 1.4 million wet metric tonnes in July. Combined July and August sales totaled 3.1 million wet metric tonnes, generating an Adjusted EBITDA of $53.2 million, with August alone contributing a record $28.2 million.
The company also reported approximately $90 million in combined Adjusted EBITDA from its operating businesses during July and August 2026, excluding any contribution from ENC as it had not commenced commercial sales during this period. A key regulatory win for ENC is an exemption from recent regulations restricting MHP exports, which, combined with an expected October IUI, will enable the project to sell its full range of products into the EV battery supply chain from Q4 2026. This structural change is seen as more significant than the temporary weather-related constraint by some analysts.
