Nickel price weigh on Western Areas 2016 results

JOHANNESBURG (miningweekly.com) – A significant reduction in the nickel price has dented Perth-based miner Western Areas’ revenue in the 2016 financial year, pushing the company into an after-tax loss of A$29.78-million.

The 2016 loss compares with a profit of A$35.01-million in the 2015 financial year, Western Areas, which is the only nickel producing pure play company listed on the ASX, reported on Thursday.

Revenue decreased to A$209.12-million, from A$312.68-million in the previous financial year, while sales volumes decreased to 24.79-million tonnes, from 26.04-million tonnes in 2015. Mine production increased to 27.61-million tonnes in 2016, from 26.52-million tonnes in 2015, while mill production remained unchanged at 25.01-million tonnes.

Production is built around two underground nickel mines, Flying Fox and Spotted Quoll, both within Western Area’s Forrestania project area, in Western Australia.

Western Areas has managed to deliver improvements in safety and cost reductions, lowering its cash costs in US dollar terms from $1.94/lb in 2015 to $1.64/lb in 2016, but MD Dan Lougher said that the nickel price environment had failed to reward the company’s efforts.

“Western Areas has clearly demonstrated its resilience and flexibility by seeing through the worst nickel price environment in its operating history.”

The miner realised a nickel price of A$5.69/lb in the financial year, compared with A$7.87/lb in 2015.

“The company took decisive action in October 2015 by announcing the deferral of capital expenditure and some exploration activities into the 2017 financial year. These decisions are only possible due to prior period investments in the business and reflect the operational flexibility we’ve built into the business model,” Lougher said.

“We believe that the company is well set to either operate in a difficult commodity price environment or prosper in an improving nickel price situation by virtue of the actions and decisions taken over the last eighteen months,” he added.

Post year-end, there was an improvement in the nickel price which resulted in the June month experiencing positive quotational price adjustments of A$3.4-million (tax effected), for nickel price movements in July.

Western Areas provided a production guidance of between 22 500 t and 24 500 t of ore for the 2017 financial year. Flying Fox is estimated to contribute between 10 000 t and 11 000 t, while the Spotted Quoll estimate is between 12 500 t and 13 500 t. The group’s nickel-in-concentrate production guidance is between 20 200 t and 22 200 t.