Western Areas has signalled its intentions to ramp up nickel production in response to signs of “tightening supply” of the commodity.
Given the company’s key offtake agreements expire in early 2020, Western Areas is looking to commence renewed discussions with customers to capitalise on supply shortages.
This includes today’s announcement of an offtake sale and purchase agreement with Japanese mining and refining conglomerate Sumitomo Metal Mining for the delivery of premium high-grade nickel sulphide precipitate.
The agreement involves receiving material from Western Areas’ mill recovery enhancement project located at the Forrestania nickel operations until June 2020.
Western Area’s desire to renew offtake agreements comes in response to the London Metals Exchange stockpile falling to its lowest level in seven years, reporting at 150,000 tonnes of available nickel, according to Western Area’s most recent activity report.
The company commented that continued strengthening in the market provides encouragement that “more favourable terms” can be achieved in upcoming offtake negotiations.
These intentions follow another strong year of production for the nickel miner, which completed early works at its Odysseus project during the June quarter.
The completion of the early works package was completed on time and on budget, which includes the rehabilitation of the decline down to the 10,000-metre pump station.
Western Area’s Forrestania operations also continued to operate as planned, producing 21,700 tonnes of nickel in concentrate for the full year.
The June quarter represented the highest sales for the year of 5890 tonnes of nickel concentrate, which comes off the back of the drawdown of the material awaiting shipment at the end of the previous quarter.
A stronger second half nickel price, alongside high quarterly nickel sales has led to Western Areas also achieving its highest operational cashflow figure for the year, totalling $49.3 million, a significant increase on the $6 million in the March quarter.
Western Areas managing director Dan Lougher said the June quarter produced another consistent performance in line with plans across the operations that generated strong cashflow and delivered on guidance metrics.
“It is also very exciting to see completion of the Odysseus project early works on time and on budget, which underpins the development of our next long-life nickel sulphide operation,” he said.