Western Areas Releases FY2019 Half Year Financial Results

20-Feb-2019 Intellasia | | 5:16 PM Print This Post

Western Areas Ltd (ASX: WSA, “Western Areas” or the “Company”) is pleased to announce the Company’s financial results for the half year ended 31 December 2018 (“1HFY19”). Western Areas continued to deliver reliable and consistent production from the Forrestania operations, while also making excellent progress toward advancing the Odysseus Project (“Odysseus”) following release of the definitive feasibility study (DFS) and announcement of a decision to mine in October 2018. The half year financial results reflect a volatile nickel price during the period and the expected increase in unit cost of nickel production in line with guidance provided for financial year 2019 (FY19). The Company remains in a strong, debt free, financial position to continue to fund its active growth projects, such as Odysseus, and exploration in the near term.

Key Metrics for 1HFY19:

* Nickel production into concentrate 10.8kt (10.9kt);

* Strong, debt free, balance sheet with cash at bank of A$134.3m, plus A$16.6m in receivables;

* Increase in sales revenue to A$123.7m (A$115.8m);

* Average realised price of nickel (before payability) of A$7.45/lb (A$6.81/lb);

* EBITDA of A$30.6m (A$36.4m);

* NPAT of A$0.2m (A$3.5m);

* Odysseus Project DFS completed and decision to mine announced for a long life, low all‐in sustaining cost project;

* Bagging facility completed for the Mill Recovery Enhancement Project (MREP), enabling spot sales to commence during the half.

(Comparisons in brackets refer to the corresponding period 1HFY18)

The 1HFY19 nickel production and sales volumes remained relatively consistent when compared to 1HFY18, with sales revenue increasing by 7% due to a higher realised (pre‐payable) nickel price of A$7.45/lb (1HFY18 A$6.81/lb). The Company generated EBITDA for the half of A$30.6m at an EBITDA margin of 25%, reflecting the guided increase in cost of production, partly offset by a higher nickel price, compared to the prior corresponding half. Unit costs of production remain in line with guidance, noting that cost inflation has been experienced across the entire Western Australian mining sector over the past 18 months, and that the comparative 1HFY18 period unit cost of production included processing of free carry, low grade stockpiles that followed a highly successful ore sorting campaign.

The Company’s balance sheet remains strong with cash at bank of $134.3m and no debt. The Company generated positive cashflow from operations of $43.0m for the half. As planned, 1HFY19 saw significant investment into our growth assets, with A$21.5m spent on feasibility and the early works programme for Odysseus, and a further A$10.8m invested into exploration and feasibility studies across the portfolio. Forrestania mine development expenditure trended lower over 1HFY19 following completion of Spotted Quoll’s final major capital item, the primary return airway ventilation shaft. Mine development activities have returned to their normal sustaining levels. The final A$5.5m dividend relating to FY18 was paid in October 2018.

The Company believes that the forecast demand and price outlook for nickel in the medium term remains positive as the electric vehicle (EV) and energy storage sectors continue to gain momentum. Governments around the world continue to favour and incentivise longer range EV’s, which require high energy density batteries, using increased quantities of nickel. The nickel market has moved into a supply deficit which is clearly visible via the falling LME and SHFE nickel stockpiles. While remaining volatile throughout 1HFY19, the nickel price has commenced the second half of FY19 on a positive note, currently trading around A$8.00/lb. Western Areas is of the view that, while new demand from the EV market develops, the nickel price is likely to remain volatile over the near term.

Given the recent nickel price volatility and near term capital requirements for the Company’s growth projects, the Board has decided to defer any dividend decision to the end of FY19. No interim dividend was declared for 1HFY18.

Western Areas’ Managing Director, Dan Lougher, said that it has been an exciting half with the Company making excellent progress toward its growth objectives, significantly increasing Ore Reserves at Cosmos post‐completion of the Odysseus DFS, announcing a decision to mine and moving into the mine development phase of the project.

“By maintaining focus on Western Areas’ core operating assets at Forrestania, another consistent production outcome has been achieved in line with plan. Maintaining stable and predictable operations remains a key performance indicator, which allows us to receive the full benefits of favourable nickel price movements as they occur.

“The robust and positive DFS results released for the Odysseus project during the first half of the financial year is a credit to the dedicated team that completed the study. Refurbishment of the mine decline has now commenced, as this long life, low cost, mining project is prepared for construction to commence. Importantly Odysseus establishes the Company’s pathway to long‐term sustainable nickel production.

“The nickel market has started the calendar year with an increasing price trend, and future demand appears strong, both from the existing stainless steel market and the emerging EV battery sector. Significant offtake interest remains for both our nickel concentrate and high grade MREP product, which is a good indication that favourable outcomes may be achieved when offtake contracts are put out to tender and negotiated later in the year” said Mr Lougher.

To view the full ASX Announcement please click here.

To view the Investor Presentation please click here.


(Source: FTI Consulting, Strategic Communications Perth)



Category: FinanceAsia

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