PERTH (miningweekly.com) – Nickel miner Western Areas on Tuesday announced that it would raise about A$89-million in a share placement and a further A$15-million in a share purchase plan (SPP) to reduce its debt.

Under the placement, Western Areas would issue some 29.5-million ordinary shares, at an underwritten price of A$3 each.

The placement price represented a 3.3% discount to the five-day volume-weighted average price of Western Areas shares, and an 8.5% discount to the closing price prior to the placement.

Under the SPP, eligible shareholders could invest up to a maximum of A$15 000 into Western Areas, with the plan capped at A$15-million.

Assuming the SPP raised the full A$415-million, the combined A$104-million would be set aside for a July 2014 convertible bond maturity. However, Western Areas noted that depending on the prevailing market conditions, the company could elect in the interim to selectively repurchase some or all of these bonds on market.

MD Dan Lougher said on Tuesday that the equity raisings were part of prudent balance sheet management. “Ultimately, these raisings will be accretive to our shareholders with improved free cash flows and earnings expected going forward.

“Western Areas has displayed exemplary consistency - with delivery of operational results and with renewed balance sheet strength we’ve enhanced our ability to consider major capital projects designed to improve productivity.”

Lougher said that one such project included increasing mill recovery to achieve in excess of 90% recovery through tank leaching.

Engineering studies would start within the next quarter to evaluate this potential, but early estimates indicated that capital expenditure of between A$15-million and A$20-million would be required, with a three-year pay-back period.

Meanwhile, Western Areas on Tuesday also announced that it had swung back to profit during the six months ended December, with a net profit after tax of A$2.7-million, compared with a net loss after tax of A$96.2-million in the previous six months.

Earnings before interest, tax, depreciation and amortisation also increased to A$65.4-million, compared with the A$58.3-million reported in the previous second half of 2013, despite sales revenue being down to A$143.3-million, compared with the A$152.7-million achieved in the previous half-year.

Lougher said that it was satisfying to be one of the few nickel miners to report a profit.

“The standout financial measure for the half [year] was the A$19.2-million in free cash flow we generated, which was a A$24.2-million turnaround from the previous half.

“The quality of our assets and how the team at Forrestania manage them on a daily basis drives these results. The most pleasing outcome of these efforts was a reduction in our unit cash costs by 10%, to A$2.41.”

During the six months under review, the Forrestania assets delivered 15 697 t of nickel, compared with the 14 872 t reported in the previous six months, while sales volumes decreased to 12 963 t, compared with the 14 067 t sold in the second half of 2013.