Western Areas: A bright future

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 03 Jul 2017   Posted by admin


An aerial shot of the Spotted Quoll mine.


BY CAMERON DRUMMOND


AUSTRALIA’S only pure-play nickel producer Western Areas has been increasing its reputation as one of the world’s best low cost, high grade operators with its own innovate BioHeap technology.


Volatile nickel prices have been fair-weathered by Western Areas. The company has utilised its position as a low cost, high grade nickel producer to increase cash in the bank and explore organic growth opportunities in WA.

Located 400km east of Perth, Western Areas’ flagship project is Forrestania which comprises two producing nickel mines, Spotted Quoll and Flying Fox, as well as the Cosmic Boy concentrator which treats the high grade ore to produce about 25,000 tonnes (t) of nickel concentrate per annum.

The concentrate is sold into offtake agreements with BHP Billiton for 12,000 tonnes per annum (tpa) and 13,000tpa with China-based Jinchuan for a total 25,000tpa.

Commencing production in 2006, Flying Fox is Western Areas first mining operation, and is one of the highest grade nickel mines in the world, containing a reserve ore grade of more than 4 per cent nickel. It is also a low cash cost operation, producing the commodity at under $US3 per pound (lb).

In FY16 Flying Fox produced 12,426t of contained nickel.

Western Areas’ second mine, Spotted Quoll, was discovered in 2007 and produces about 13,000tpa of nickel concentrate.

It rivals, and in cases, exceeds the nickel grades of Flying Fox, also making it one of the world’s highest grade nickel mines. It is an even lower cash cost operation, with nickel produced under $US2/lb.

Forrestania’s concentrator, Cosmic Boy, treats raw nickel bearing ore to produce concentrate grading at about 14 per cent nickel.

At current capacity, Cosmic Boy can treat up to 600,000tpa of ore, and has the potential expand to up to 1 million tonnes per annum.

It consists of a three-stage crushing circuit, followed by a single closed circuit ball mill and a system of flotation tanks and thickening / filtration system.


Recent Activities

The March 2017 quarter was extremely productive for Western Areas.

At $2.23 per pound (lb) the nickel miner produced its lowest concentrate unit cost since June 2015.

Nickel production in ore and concentrate was in line with forecast for the quarter, leaving the company on track to deliver physical production results toward the upper end of the FY17 guidance range.

Also during the quarter, exploration drilling had increased Spotted Quoll’s mineral resource by 12,650 nickel tonnes, and a pre-feasibility study (PFS) was completed at the Odysseus project.

The board approved progress to a definitive feasibility study (DFS) at an estimated cost of between $5m and $7m.

Western Areas managing director Dan Lougher said it was another strong quarterly performance for the company.


“There were a number of highlights this quarter, including two successful shipments to our new customer Tsingshan which followed a detailed integration plan,” Mr Lougher said.


“Our ability to reduce unit costs to their lowest level since June 2015 mostly through innovative operational improvement, such as the ore sorter, is pleasing.

“At the same time we have increased the mineral resource at Spotted Quoll, delivered a positive pre-feasibility study (PFS) and had one of the highest grade nickel intersections ever recorded globally over significant width at Odysseus.”



MREP

Another highlight for the quarter was gaining board approval for the construction of the Mill Recovery Enhancement Project (MREP) at Cosmic Boy.

The MREP upgrade is aimed at improving product grade to between 45 and 50 per cent, which could be utilised in the electric vehicle battery market.

Western Areas said it had been in discussions with major global companies active in the EV market and expected to improve the commercial terms for the new high grade product generated by the MREP.

“The MREP will utilise our internal bio-leaching technology that allow us to extract an extra 1400 nickel tonnes per year in addition to our current nickel output,” Mr Lougher said.

Western Areas said its BioHeap process utilises special bacterial cultures to leach or liberate valuable metals from sulphide ores.

The leaching can occur in either tanks or on large heaps and is applicable mainly to low grade ores.

Small batches of high grade nickel sulphate had been produced at laboratory scale with further optimisation work, focussing on reducing impurity levels, to continue further into 2017.

Site works for the MREP were expected to commence in the September quarter, with commissioning and production scheduled for March 2018.


Financials

On 9 June, Western Areas divested its 18.8 per cent share in Finland-based Bluejay Mining (previously FinnAust) for $27m.

Mr Lougher said the transaction would return material value back to Western Areas, capitalising on a period of significant growth and value generation by Bluejay.

Western Areas has eight other nickel exploration projects across WA, ranging from Ravensthorpe in the south up to its Sandstone nickel project west of Leinster in the Northern Goldfields.

“The funds return can be applied to fund our organic development and growth projects, such as the MREP at Forrestania and the Odysseus DFS study at Cosmos,” Mr Lougher said.

He also noted that the company had strong cash flow generation and zero debt to bolster its position.

“Our labour and contract cost improvements in the last 18 months have been more successful than others, and we are also in the lowest cost quartile in terms of production.”

“This has meant we have been able to put money in the bank in the first half of the year and sustain operations through the depressed nickel price cycle as we look to further developments.”