Western Areas Achieved Consistent Quarterly Production Results- A Quick Glance

Australia’s class-leading nickel producer, Western Areas Limited (ASX:WSA) has reported solid progress across the Company’s various activities during 2018 December quarter. The company reported that it has achieved consistent quarterly production results where all operational metrics for H1 FY 2019 are on track to meet full-year guidance. Despite this news, the share price of the company decreased by 3.456 percent as on 23 January 2019.Â

Western Areas Managing Director, Mr. Dan Lougher stated that during the December quarter the company witnessed an increase in both nickel production into concentrate and nickel tonnes delivered into the Company’s offtake contract.

While commenting on the company’s Odysseus project, he informed that the project is entering the exciting development phase, with the project commencing underground activities and optimization work for additional production volumes from AM5 and AM6 continuing.

The early works of Odysseus Project are progressing on time and budget, with the completion of the surface infrastructure component of the early works package, haulage shaft infrastructure secured, and preparations finalized for the commencement of the decline rehabilitation.

After releasing the result of Definitive Feasibility Study results during the December quarter, the company announced its decision to mine the Odysseus project at Cosmos. The company has completed the surface infrastructure component of the ongoing early works and it has commenced the evaluation of the upside opportunities at Odysseus.

The evaluation works include mining optimization assessment for additional production from the AM5 and AM6 deposits, which contain 57.6kt of nickel.

For the December quarter, the company reported Mine production of 5,851 nickel tonnes and Mill production 5,415 nickel tonnes. The unit cash cost of production of nickel in concentrate (excluding smelting/refining charges, concentrate logistics and royalties) was A$3.15/lb (US$2.26/lb) for the December quarter. For the half year ended 31 December 2018, the unit cash cost of production of nickel was A$3.07/lb which is within the full year guidance range of A$2.80/lb to A$3.20/lb.

As per the announcement, the quarter on quarter increase in mining cost per pound is primarily due to a higher proportion of development drive ore production, costs of a one-off ground support refurbishment at Flying Fox, lower average recovery and rise and fall (R&F) charges on mining contracts.

At the end of December quarter, the company had Cash at bank of AUD$134.3 million while cash at bank plus nickel sales receivables totaled A$143.8 million. The significant items during the December quarter included the payment of A$5.5 million final dividends relating to FY18, Odysseus mine development and DFS expenditure of A$18.7 million and Quotation period adjustment repayments of A$2.9 million. In October 2018, Western Areas Limited paid 2 cents per share of fully franked dividend to its shareholders for FY 2018.

Meanwhile, in the last six months, the share price of the company decreased by 33.44% as on 22 January 2019 and is trading at a PE multiple of 50.0x. WSA’s shares traded at $2.095 with a market capitalization of circa $593.47 million as on 23 January 2019 (AEST 3:06 PM).

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