WESTERN AREAS FY21 INTERIM FINANCIAL RESULT & GUIDANCE UPDATE
Western Areas Ltd (ASX: WSA, “Western Areas” or the “Company”) announces the Company’s interim financial
results for the half year ended 31 December 2020 (“1HFY21”) and revised full year guidance metrics:
Key Activities & Metrics – 1HFY21
• Sales revenue of A$122.7m (A$156.2m)
• Average realised price of nickel (before payability) of A$9.83/lb (A$10.57/lb)
• Balance Sheet strength maintained – cash at bank of A$98m and no debt
• Nickel produced in concentrate 7.3kt (10.7kt), nickel in concentrate sales 7.4kt (9.0kt). Lower nickel
production as a result of lower average grades mined, caused by operational issues encountered at
Forrestania in the first half of FY21
• A$75m Revolving Credit Facility term sheet agreed with CBA – long form documentation commenced
• EBITDA A$24.0m (A$69.7m) and EBITDA margin of 19.6% (44.6%)
• Net Loss After Tax of A$12.0m (NPAT A$24.7m)
• Odysseus Project advancing to plan with 1.5km of underground development completed
• Shaft haulage equipment delivered to Australia – significant civil concrete works completed
• AM6 Ore Reserve of 47kt nickel announced – adding a third mining area to the Odysseus project.
Integrated mine plan now being developed
(Comparisons in brackets refer to the corresponding period 1HFY20)
Western Areas Managing Director, Dan Lougher, said he is excited by the progress achieved at the Cosmos
Nickel Operation during the period and acknowledged the tough first half at Forrestania was now behind the
“The Odysseus underground mine development is progressing well with excellent advance rates being
achieved. The surface construction team have completed significant civil and concrete foundation works in
preparation for the shaft winder house assembly. It is exciting to own the long-life Odysseus project,
providing Western Areas a clear nickel mining plan into the 2030’s and beyond” Mr Lougher said.
“The Forrestania Nickel Operation has encountered operational challenges during the half that negatively
impacted the average grade of ore mined for the period and resulted in lower production and sales volumes.
With mature mines, there is limited redundancy in other working areas to provide better grade ore tonnes.
Forrestania’s performance is already demonstrating improvement early in the second half of FY21, and
fortunately the higher-grade material we were originally scheduled to access this year will still be accessed
in later periods,” Mr Lougher added.
Construction activities at the Cosmos nickel operation accelerated during the first half of FY21. All rehabilitation and
dewatering activities were completed early in the half allowing new underground mine development to commence.
On 29 August 2020 the first firing of the Odysseus decline was initiated and is now the priority heading in the mine.
Excellent advance rates have been achieved at the project with over 1.5km of underground development completed
to date, including 636m of advance in the decline towards the Odysseus ore bodies.
Significant surface civil works have been completed for construction of the ore haulage shaft headframe and winder
installation. Importantly the shaft headframe was safely transported to Australia in November, with most of the shaft
equipment transported to site by the end of the half (all assets were delivered to site by the end of January). The
arrival of the equipment at site is viewed as further de-risking the delivery of the project.
WESTERN AREAS LIMITED ASX: WSA www.westernareas.com.au ABN 68 091 049 357 Page 2 of 4
The main shaft raisebore pilot hole was completed during the period. Importantly the pilot hole was completed well
inside the required tolerance for the haulage shaft installation. Following confirmation of the pilot being within
tolerance, reaming of the 5.7m raisebore was commenced early in the second half and to date no issues have been
During the period the maiden AM6 Probable Ore Reserve of 2.1Mt at 2.2% Ni for 47.1kt of nickel was released. The
preparation of the AM6 Reserve offers significant opportunity to optimise and integrate the additional nickel production
from AM6 into the current Odysseus production profile. Integration studies are well advanced to determine the best
combination of production from the three ore bodies (Odysseus North, Odysseus South and AM6) including the
potential for increased annual production tonnages compared to the original mine plan.
Importantly the overall project remains on schedule to mine the first ore drives in the September quarter of calendar
year 2021. The processing plant remains currently scheduled to produce first concentrate late in calendar year 2022.
The Forrestania Operations produced 7.3kt of nickel and sold 7.4kt of nickel in concentrate to offtake customers. The
Forrestania Nickel Operation production and sales results were impacted by the mining of lower grade areas at the
Flying Fox mine and dilution encountered at the Spotted Quoll mine. Production at Flying Fox was impacted by mine
schedule resequencing, due to seismicity, requiring deferral of the higher-grade areas of the mine, and increased ore
being mined from lower grade zones. During December, higher grade areas of the Flying Fox mine were re-entered,
and grade is expected to improve going forward. At Spotted Quoll, nickel production was impacted by lower grades
due to a pegmatite intrusive unit increasing unplanned dilution in the scheduled mining areas.
As previously discussed, the resequencing at Forrestania will see the higher-grade areas of the mine accessed in
later periods. Mining in January 2021 has seen the head grade trend higher across both underground mines.
Full Year Highlights 1H FY 2021 1H FY 2020
Mine Production (tonnes Ni) 7,665 11,654
Mill Production (tonnes Ni) 7,291 10,658
Recovery (%) 84% 89%
Sales Volume (tonnes Ni) 7,400 9,042
Cash Costs (US$/lb) 3.29 2.11
Cash Costs (A$/lb) 4.56 3.07
Exchange Rate USD/ AUD 0.72 0.69
Nickel Price (US$/lb) 7.09 7.29
Realised Price Before Payability (A$/lb) 9.83 10.57
Revenue ($'000) 122,712 156,203
EBITDA ($'000) 24,038 69,708
(LBIT)/EBIT ($'000) (14,855) 34,630
(NLAT)/NPAT ($'000) (11,964) 24,701
Cashflow from Operations ($'000) 27,474 74,937
Growth & Development 42,933 40,027
Sustaining Capex ($'000) 26,435 21,344
Cash at Bank ($'000) 97,972 184,905
Total Dividends (cents) 0.0 1.0
WESTERN AREAS LIMITED ASX: WSA www.westernareas.com.au ABN 68 091 049 357 Page 3 of 4
The financial result of the Company was impacted by the lower mined grade for the half, with most comparative
metrics lower due to the reduced sales tonnes delivered to customers, increased unit costs naturally occur when
processing lower grade material and spreading fixed costs over a smaller production tonnage. Revenue totalled
A$122.7m to produce an EBITDA of A$24.0m. Net earnings was a loss of A$12.0m. Western Areas continues to
maintain a robust balance sheet with closing cash at bank of A$98.0m and zero debt. Operating cashflow of A$27.5m
was produced and capital invested into the new long-life Odysseus project increased in line with the accelerated
construction activities, totalling A$34.2m, mostly invested into mine development and shaft haulage equipment
deliveries and installations. Sustaining capital expenditure at Forrestania totalled A$23.7m and group exploration
expenditure was A$8.2m.
During the half a credit approved term sheet was agreed to establish a secured A$75m Revolving Credit Facility
(“RCF”) with Commonwealth Bank of Australia (“CBA”). Western Areas has been working with its lenders to refresh
its banking facilities in order to provide financial flexibility and working capital options to the Company as it continues
to develop the Odysseus mine at Cosmos. The credit approved term sheet will now move forward to full
documentation and completion of all condition’s precedent to financial close. The RCF remains subject to completion
of due diligence, documentation and customary conditions precedent.
Western Areas remains positive on the outlook for nickel, and its strong fundamental demand drivers over the medium
and long-term remain supportive. The strong growth in electric vehicle (EV) manufacturing and sales provide real
evidence that the new EV battery market will drive significant additional nickel demand as the increased use of high
nickel content batteries continues to gain momentum.
In light of the first half performance, the Company has adjusted guidance to account for the nickel production that
has been deferred into FY22, primarily from Flying Fox. Spotted Quoll mined grade is expected to progressively
improve as material mined via ore drives is mostly completed by the end of the June quarter 2021 and an increased
proportion of ore is sourced from stoping operations.
Category Prior FY21
Nickel tonnes in Concentrate Production 17,000 to 19,000 16,000 to 17,000 (6%)
Unit Cash Cost of Production (Nickel in Concentrate) A$3.50/Ib to A$4.00/Ib A$3.75/Ib to A$4.25/Ib (6%)
Mine Development A$25m to A$30m Unchanged -
Capital & Growth A$7m to A$10m Unchanged -
Cosmos & Odysseus Development A$90m to A$110m Unchanged -
Exploration A$14m to A$17m Unchanged -
Commentary on FY21 Guidance is provided as follows:
▪ Nickel in Concentrate – As explained above, the Forrestania Nickel Operation has encountered operational
challenges that have reduced the nickel produced in the first half of the financial year. While access to higher
grade areas at Flying Fox has been re-established for production in the second half of the financial year, the
deferral of significant tonnage in the first half has resulted in a reduction in current guidance. Ultimately the
balance of the deferred nickel will now be mined in FY22.
▪ Unit Cash Costs – The increased revised unit rates are as a result of the lower grade forecast for the mines.
Also, the lower total tonnage of ore mined during the first half of the financial year increases the overall mining
cost per tonne, as the fixed costs of maintaining the mine (power, dewatering, ventilation, etc) are incurred
over a smaller production base. Increased production in the second half will unwind some of this impact.
All other guidance remains unchanged.
courtesy of Bell Direct
i hold WSA
hasn't been one of my better picks , ( down 52% )
seems to excel in promises