Western Areas Aims Deposit Integration to Boost Odysseus Production Profile

Summary

• The nickel price surge is drawing ASX-listed nickel mining companies out of hibernation with many such as Nickel Mines Limited (ASX:NIC), Western Areas Limited (ASX:WSA) unveiling development plans to lock-in the high prices.
• Western Areas has now completed a pre-feasibility study (or PFS) of its AM6 tenement at Odysseus prospect and plans to integrate the deposit with key production area to boost the productivity and provide an impetus to the total return profile.

Nickel prices are showing a strong recovery on the global front, prompting many ASX-listed stocks to develop their key assets over improved investors’ sentiment, especially around the base metals space in the status quo.

To Know More, Do Read: Nickel Mines Fasttrack Debt Repayment Over Recovery in Base Metals Prices

While some ASX-listed nickel miners such as Nickel Mines Limited (ASX:NIC) is fast-tracking debt repayment over improved outlook concerning the nickel market, some such as S&P/ASX 200 listed Western Areas Limited (ASX:WSA) are focusing and prioritising the development of key assets for production in the coming future.

At present, the Company is focusing on the development of its Odysseus prospect to bring it into the production; however, WSA suggested that the current DFS and PFS concerning various tenements at the prospect suggests better returns via integration, which the miner is planning to take up post its Odysseus prospect reaches production phase.

Western Areas Limited (ASX:WSA)

Western Areas Completes PFS and Announces Maiden Ore Reserve

The Integration of AM6 Deposit With Odysseus production

On October 2018, WSA made the final investment decision on the Odysseus project and gradually proceeded to a definitive feasibility study (DFS), demonstrating a strong financial return, and a robust 10-year operation based on mining the Odysseus North and South deposits.

• At present, the priority of the Company is to reach commercial production of those deposits with the first concentrate expected for late 2022.
• For aligning the target of commercial production, WSA completed a pre-feasibility study (or PFS) at the AM6 deposit, which is located 600m southwest of the Odysseus deposit at a vertical depth of 900–1,200m, to optimise and integrate the additional production from AM6 into the current Odysseus production profile.
• The integration of the AM6 deposit to determine the best combination of production from the three ore bodies, i.e., Odysseus North & South, AM6, is currently underway, which also include the potential for increased annual production tonnages compared to the original mine plan.
• However, the Company anticipates that the deposit would be without production for the first few years of Odysseus production.

AM6 Resource Profile

WSA has now upgraded its Mineral Resource profile of the AM6 deposit with total resource now reaching 2,764,924 tonnes at an average grade of 2.43 per cent of nickel, hosting 67,235 tonnes of contained nickel.

AM6 Deposit Updated Resources Profile (Source: Company’s Report)

AM6 Ore Reserve Profile

Western Areas have updated ore reserves of the deposit as well and suggested that the Probable Ore Reserve has been estimated using only tonnes within the mine design that have been categorised as Indicated in the resource block model.

The deposit now holds total reserves of 2.1 million tonnes at an average grade of 2.2 per cent of nickel, hosting 47,100 tonnes of contained nickel.

The Current Mining Plan

The Company now plans on accessing the AM6 deposit as a single decline development, commencing from the base of the existing AM5 decline which is located directly above the deposit. Additionally, rehabilitation and dewatering activities would be required within the AM5 portion of the decline post commencing fresh rock development.

As per the Company, AM6 – which is the part of the Cosmos System of orebodies adjacent to Odysseus, would leverage most of the Odysseus infrastructure which is currently in development.

For example, AM6 could leverage the new decline access ramp to the loading station, the hoisting shaft, the expanded Cosmos mill, and new paste fill plan; thus, allowing it to leverage the capital investment in Odysseus, which in turn, further improves the returns for both Odysseus and AM6.

WSA mentioned that the mine operation would be supported by the existing Cosmos surface infrastructure, including the existing office and accommodation complex.

The mining method selected for AM6 in the PFS is single-lift, long hole open stoping, with pastefill.

AM6 PFS Production Profile

The PFS production profile is yet to be optimised and would require further work; however, the Company stated that further work would be carried out in conjunction with the evaluation of combined Odysseus-AM6 production scenarios.

As per WSA, the optimisation studies would incorporate a number of options, which include the potential to incrementally increase the hoisting and milling capacity above the 900kt capacity.

At present, the Odysseus development is the key priority of the Company; thus, the Company suggests that it is likely that the AM6 fresh airway intake will commence after the critical underground infrastructure for Odysseus has been completed.

Furthermore, the optimisation work would determine the ultimate sequencing of AM6 ore tonnes; however, WSA believes that AM6 would commence production post Odysseus is in production.

AM6 Estimated Production Profile (Source: Company’s Report)

Capital Cost Estimates

WSA anticipates the total cost for AM6 development (PFS) to stand at $111 million, comprising of 30m of pre-production capital and $81m of sustaining capital, based on a combination of rates from existing group contracts, quotes from established Western Australian suppliers and current costs from the Odysseus development.

Furthermore, the Company anticipates that the estimated cost would not be incurred until the completion of Odysseus development.

Development Cost Estimates (Source: Company’s Report)

Likewise, the Company anticipates the total operating cost to stand at $133 per tonne along with a total cash cost (C1) of $3.95 per pound.

Operational Cost Estimates (Source: Company’s Report)

The stock of the Company last traded at $2.270 (as on 2 September 2020 15:11 AEST), up by 4.12 per cent against its previous close on ASX.

Just like nickel miners, ASX-listed copper miners are also currently super active on the development front to lock-in the high base metals prices.

Also Read: Copper Miners Ballooning on Exchange As Copper Surge Lifts Market Sentiments