WA nickel miner, Western Areas, has had a strong start to FY20 as it continues ramping up toward production at Odysseus, hitting all major guidance targets across its Forrestainia operations, while reporting some exciting results from its extensive exploration portfolio.
For the September quarter, Western Areas reported mill production at 5259t (FY20 guidance between 21,000 and 22,000t), at a cost of $3.06 (FY guidance oat $2.90/lb to $3.30).
Its net cash flow was up $21.6m to $165.9m, receiving a $33.1m boost from the sale of Kidman Resources to Wesfarmers.
Nickel prices have surged to a five-year high, jumping almost 70pc since the start of the year, peaking at $US18,153/t off the back of increased interest in nickel for the EV market.
Currently, only 3pc of the world’s nickel is used for EVs with the remainder used in the production of stainless steel, but that figure is expected to skyrocket while a global shortfall in production could be just around the corner.
Indonesia has banned the export from 2020 as it aims to develop a domestic battery industry with the backing of Chinese stainless-steel giant, Tsingshan Group.
The bullish sentiment toward the metal has even seen BHP hold on to its Nickel West mine and smelter operations, an area of the business it was unable to sell over the two years.
Managing director Dan Lougher told the Australian Mining Review that the price increase could not come at a better time for Western Areas.
“It’s been very welcome in terms of where we’re sitting at the moment,” he said.
“We’re keeping on with our operations at Forrestania, mining safely and producing good cash flow.
“We’re putting a big effort into developing Odysseus, we still have a bit to go yet.
“We’re looking forward to starting our new contracts with whoever wins the offtake.
“It’s really quite exciting how nickel sulphate concentrates are being looked at in the market, obviously the electric vehicle hype is getting stronger and going toward 2020, there will be some significant changes in terms of nickel sulphate volumes out of Asia – we will be a part of that.
“Keeping our two operations going, developing our third and getting involved in strategic downstream processing of nickel sulphate for the EV market will keep plenty of work on the plate, I think.”
Forrestania
Production from Western Areas’ two operating mines, Flying Fox and Spotted Quoll, were both consistent with the forecast FY20 guidance.
Flying Fox produced 6414t of ore at about 3.7pc nickel which translated into 2280t nickel.
Ore was mined predominantly with long-hole stoping (75pc), and the remainder from ore development.
No additional resource extension was completed during the quarter, and the massive sulphide resource currently stands at 1.65mt of ore at 4.7pc nickel for 76,597t nickel.
Spotted Quoll produced 85,942t of ore at about 4.1pc nickel, translating into 3525t, predominantly mined from ore drive development (53pc) with the remainder from long hole stoping.
No underground drilling took place, but Stage 3 surface drilling to test a thicker north-east trending plunge commenced early in November.
The mineral resource, including depletion to the end of September 2019, currently stands at 1.43mt of ore at 5.3pc nickel for 75,469t nickel.
The Cosmic Boy concentrator processed 149,729t of ore at an average grade of 3pc, which produced 35,606t nickel concentrate at 14.8pc.
Western Areas delivered 35,737t of concentrate for sale.
Odysseus
The massive deposit at Cosmos, north of Leinster in WA, will underpin Western Areas’ operations as the company moves into the new decade and onto the next.
With a 10-year minelife identified in the feasibility study, Mr Lougher said that it was by far the largest operation in the portfolio.
“We have some upsides that we will pass down early next year, which are the EM5 and EM6 deposits, which we didn’t actually have in the feasibility study,” he said.
“This will be over and above the 10-year minelife, and it will boost it significantly so we’re very excited about that.
“The area is being fully manned up, we’re putting in a haulage shaft system purchased from South Africa, and the equipment will be arriving on the shores of Australia in March/April next year.
“It will be one of, if not the only or at least very few shaft hauling systems installed in Australia in recent timed.
“It will have a significant impact on the costs associated with bringing material and ore and waste to the surface, rather than using trucks – it’s much cheaper so all of that is a part of the pre-production CAPEX.”
In the September quarter, the company continued with infrastructure developments such as a pumping reticulation system and an underground ventilation shaft, while contracts were awarded to commence civil earthworks around the shaft collar.
With key offtake agreements set to expire early in 2020, Western Areas is also looking to re-negotiate contracts and, on return from the LME week in London, Mr Lougher said it was an exciting time for the company.
“Our contracts are due to expire at the end of January 2020, so February 1st is when we start our new contracts, we’re currently in shortlisting mode,” he said
“We’re very, very encouraged by the market responses that should add more value to those contracts, I can’t really say too much more than that.”
Exploration
The company has continued to invest heavily in both greenfields and brownfields exploration, and Mr Lougher said that exploration was vital to the long-term prosperity of the company.
“The way we deal with exploration is that we always have a greenfields area, which is a bit more long-term, and that’s Western Gauller in South Australia,” he said.
“In terms of potentially a new discovery the Western Gauller is literally the mirror image of the Fraser Range which holds the last best discovery, the Nova deposit, in recent times. That’s always quite exciting looking.
“And we’ve got two brownfields sites, one at Forrestania and one at Cosmos – the money’s basically spent equally between the three projects.
“The Cosmos project is looking good, the nickel we’re seeing might not be in the highest grade at the moment, but it does show that there is a lot of nickel in the system.
“Historically, Cosmos’ tenements has basically held the highest grade pretty much across the planet, the old Jubilee pit was running 9pc.”
