DESPITE a 64 per cent fall in Western Area’s half-year profit, the nickel producer’s newly-installed managing director Dan Lougher maintained that the company was well situated to weather the volatile nickel price.
A 25 per cent fall in nickel prices and the Australian dollar’s strength again the US dollar were the main reasons given for the after-tax profit drop from $67.2 million in the December 2010 half year to $24 million in the corresponding 2011 period. “During the six-month period, the nickel price (in line with other base metals) trended down and averaged US$8.51 per pound, compared with US$11.61 per pound in the comparative six-month period.
Consequently NPAT [net profit after tax] for the half includes a negative quotation price movement of $13.3 million,” Mr Lougher said. Revenue from nickel sales slumped 35 per cent to $149.1 million for the December 2011 half year, compared to the same 2010 period.
Despite the slump in revenue and falling nickel prices, Mr Lougher said Western Areas had been pursuing disciplined management of controllable costs and was still posting strong profits. The disciplined cost management resulted in a 4.5 per cent reduction in cash costs to $2.17 per pound of nickel concentrate, compared to the first six months of 2011.
“Nickel prices for January have already trended up significantly, heading towards US$9.50 per pound. If this continues over the rest of the year, Western Areas shareholders can expect a strong finish to the financial year.”
Western Areas mined 16,230 tonnes of nickel for the December 2011 half year, selling nickel for an average US$18,761 per tonne.
The company forecasted full-year production of 26,000t of nickel in ore and 24,000t nickel in concentrate for the 2011-2012 financial year. Mr Lougher added that Western Areas would be pursuing a $30 million exploration campaign aimed at upping resources and reserves at its Forrestania nickel project in WA.
During the December 2011 half-year period, drilling at the Spotted Quoll mine, part of the Forrestania nickel project, resulted in a 78 per cent increase in contained nickel to 179,000t.
By Lorna Seatter