Western Areas produces strong quarter, not deterred by volatile nickel market

24th January 2018 By: Megan van Wyngaardt - Creamer Media Contributing Editor Online

JOHANNESBURG (miningweekly.com) – ASX-listed Western Areas has completed the first half of the year on track to meet all full-year guidance metrics, the base metals producer said on Wednesday.

An increase in production, steady cash costs and improved nickel pricing in the December quarter saw the company generate positive operating cash flow of A$22.1-million, compared with A$9.5-million in the prior quarter.

Total cash and receivables of A$146.5-million was effectively flat quarter-on-quarter, despite payment of a A$5.5-million final dividend and a A$5.5-million capital investment in its mill recovery enhancement project (MREP).

Of the MREP's total construction cost of A$24-million, only A$2.5-million cash expenditure remained, with construction expected to be completed this month.

Western Areas noted that commissioning was on track for the end of the March quarter. "Discussions with potential offtake partners for the new high grade 45% to 50% nickel product continued positively, with strong interest received from counterparties connected to the electric vehicle (EV) battery sector," it highlighted.

December quarter production increased from the September quarter, with the mill achieving record quarterly throughput of 161 218 t of ore. This was aided by increased throughput of low-grade fines from the recent ore sorter project.

On its ongoing Odysseus definitive feasibility study (DFS), Western Areas said that work was delivering a number of positive outcomes, with a larger project and longer mine-life now expected. "The expected increase in nickel tonnes has meant further optimisation work needs be completed, and this includes an analysis of potential shaft hoisting options, versus traditional decline truck haulage, for nickel ore. Accordingly, the DFS is now scheduled to be published prior to release of the June quarterly report," it stated.

Meanwhile, Western Areas pointed out that the nickel market remained volatile from a pricing standpoint, but fundamentally appeared to be positively skewed, given the forecast shortfall in nickel production available for the EV market in the medium to long term.

MD Dan Lougher said the company was pleased to deliver its thirtieth consecutive quarter of full-year guidance metrics being on track.

"Our organic growth projects are progressing well, with the innovative mill recovery enhancement project nearly completed, and commissioning to occur in the March quarter.

"Furthermore, the Odysseus project at Cosmos is now expected to be larger, with a longer mine-life than anticipated in the prefeasibility study, following some excellent work by the project team," he added.