Western Areas capitalises on growing nickel price


Cosmos open-pit. Image: Western Areas

Western Areas has boosted its financial position in the 2019 financial year off the back of a higher nickel price and increased sales from the Forrestania operations.

The company’s flagship asset delivered another reliable year of production in line with guidance, leading to increased nickel sales of 21,483 tonnes in the 2019 financial year.

This, coinciding with a recent surge in the nickel price led to a particularly strong second half, resulted in increased revenue of $268.7 million and a 20 per cent uplift in net profit after tax to $14.2 million for the full year.

Equipped with $144.3 million cash on hand at the year end, Western Areas revealed it was well positioned to continue investing in growth and funding the Odysseus mine development.

Having completed the project’s definitive feasibility study during the year and confirming a ‘decision to mine’, Western Areas has ramped up development at the site.

This includes the mill recovery enhancement project, which despite lower than anticipated production rates, has allowed for the production and sale of a new premium high-grade nickel sulphide precipitate product.

Western Areas reported the new product was in demand with customers due to its suitability for direct feed into nickel refineries, bypassing the traditional smelter process and therefore attracting higher payability rates.

The company has, however, remained modest about the nickel market despite the recent increase in price and the impact of this on earnings and cashflow.

In its report, Western Areas stated that it “recognises that the nickel market remains unpredictable, at time being influenced by both political and macro-economic factors.”

Despite this, Western Areas remains confident that the fundamental outlook in both the medium and long-term is positive, due to stainless steel demand continuing to grow and the new electric vehicle battery market moving towards using higher nickel content batteries.

The company also highlighted the reported reduction in London Metal Exchange warehouse nickel stocks, which it stated confirmed the nickel supply deficit was real and sustained.

Western Areas managing director Dan Lougher said the company was encouraged by the improvement in the nickel price and its positive impact on the financial results and earnings.

“Strong cashflow from our operating assets enables both continued investment in organic growth projects, such as Odysseus, and the maintenance of reasonable returns to shareholders,” Lougher said.

“We continue to focus on operating our Forrestania assets as safely and efficiently as possible, while also entering the exciting development phase of the Odysseus mine at Cosmos.”

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