PERTH (miningweekly.com) – Nickel miner Western Areas will defer nearly A$32.6-million in capital expenditure (capex) from 2016 to 2017 as it battles the sustained decline in nickel prices.

While mine production expectations have remained unchanged at between 25 000 t and 27 000 t, and nickel-in-concentrate production at 24 000 t to 25 000 t, sustaining capital estimates had been reduced from A$45-million to A$34-million for 2016.

Exploration expenditure for 2016 would also drop from A$15-million to A$11-million, while mill enhancement spend would drop from A$22-million to A$7.4-million and expenditure on the newly acquired Cosmos project would drop from A$7-million to A$4-million.

Western Areas said on Wednesday that, in making the changes, the company had carefully considered the current nickel price environment, expectations for future nickel price improvements, the considerable capital investment made and the balance sheet strength.

MD Dan Lougher noted that the decision to cut back on capex was aimed at maintaining the company’s financial strength while retaining maximum flexibility to respond to any nickel price upswing.

“Since we completed the budget for 2016, we have seen the nickel price fall from around $6/lb to around $4.50/lb. Western Areas is one of the few nickel companies globally that can withstand these low prices, especially with our current debt free balance sheet.

“Many commentators have expressed the view that the current price levels are unsustainable for large segments of the nickel industry; as such, future price upswings cannot be ruled out as the industry structurally adjusts,” he said.

Lougher pointed out that the company had implemented similar types of adjustments in prior financial years.

“They will have the advantage of smoothing our sustaining capital commitments over the coming two financial years, following investments made in the current financial year in both the highly prospective Cosmos nickel complex and the long-lead items for our mill recovery enhancement project.

“Both of these investments set Western Areas up to benefit very strongly from any future nickel price improvements.”