FY18 ends with strongest mining and cashflow quarter & Odysseus DFS update

23-Jul-2018 Intellasia | | 3:06 PM Print This Post

June Quarter 2018 Highlights:

* One lost time injury, resulting in a LTIFR of 0.91
* Mine production of 6,381 and 24,442 nickel tonnes for the quarter and FY18 respectively
* Mill production 5,368 and 21,060 nickel tonnes for the quarter and FY18 respectively
* Unit cash cost of nickel in concentrate of A$2.80/lb and full year of A$2.63/lb
* Strongest quarter of cash flow generation with cash at bank increasing by A$15.9m to A$151.6m
* Mill Recovery Enhancement Project (MREP) commissioned with first product to specification produced
* Early capital works program of A$32.0m at Odysseus commenced with major contracts awarded
* Significant definitive feasibility study (DFS) progress for the now larger Odysseus Project at Cosmos
* More encouraging exploration results at the Neptune prospect at Cosmos

Western Areas (“WSA” or the “Company”) (ASX: WSA) is pleased to report its strongest quarter of cashflow generation for the year with cash at bank increasing by A$15.9m to A$151.6m, after capital expenditure, feasibility study and exploration costs of A$12.5m. With cash and receivables of A$172.0m, no debt and a substantial equity investment in Kidman Resources Limited, the Company’s balance sheet is in a strong position to assist with its organic growth plans.
It was a solid finish to the year, being the highest quarter of mine production and all FY18 guidance metrics achieved against the updated figures from March. This included nickel in full year concentrate production of 21,060 nickel tonnes, despite an unplanned Western Power infrastructure outage which halted mill production for nearly 2 days in June.
The increased level of activity at Cosmos with exploration and Odysseus early works saw camp infrastructure reinvigorated with 120 rooms being made available. The Odysseus DFS progressed well with several workstreams now complete. A new major workstream centred on shaft haulage using specialist shaft designer, RSV. The DFS is expected to be released late September, which is planned to be followed by an optimisation study, focussed on assessing options to include the adjacent orebodies at AM5 and AM6 (which contain over 60kt of nickel classified in the Indicated Category) into the production profile. With Odysseus now having an expected mine life greater than 10 years, the potential addition of AM5 and AM6 would make Odysseus one of the few long-life, high grade nickel sulphide mines currently being developed. A new long section for the Odysseus project is detailed later in the report.
The MREP produced small batches of the new nickel sulphide product to specification, grading between 45-50% nickel. With specification now achieved, the next step is ramping up production and ironing out minor technical issues that are usual for the start-up of a new hydrometallurgical facility. Capital works have also commenced on constructing new filtration and bagging facilities to ultimately allow the product to be sold into separate, new offtake contracts. Construction of these new facilities is expected to be completed by the end of the September quarter.
The nickel market remains volatile from a pricing standpoint with outside geo-political factors putting downward pressure on the nickel price post quarter-end, from a recent three year high in June. Nickel fundamentals continue to be extremely robust, with supply deficits continuing, as evidenced by the sharp decline in LME stockpiles to around 262kt, versus a peak of approximately 465kt in June 2015. Furthermore, high grade stainless steel demand in China remains strong, with our offtake partner, Tsingshan Group, continuing to expand production of high nickel content stainless steel.
Managing Director, Mr Dan Lougher, said the June quarter was about delivering guidance and focussing on the next generation of organic growth projects.
“Pleasingly the MREP delivered its first product to the high-grade specification of between 45-50% nickel, with go forward efforts now focussed on ramping up volumes.”
“The commencement of early works and the awarding of major contracts at Odysseus were significant milestones for the Company. The DFS remains on schedule for delivery late September and our expectation is that Odysseus will have a mine life in excess of 10 years.”


(Source: FTI Consulting)


Category: FinanceAsia

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