Western Areas NL

Published : October 26th, 2015

Quarterly Activities Report

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Quarterly Activities Report


Activity Report

For the period ending 30 September 2015

Western Areas is an Australian-based nickel miner listed on the ASX. The main asset is the 100% owned Forrestania Nickel Project, 400km east of Perth. Western Areas is Australia's second largest sulphide nickel miner producing approx. 25,000 tonnes per annum nickel in ore from the Flying Fox and Spotted Quoll mines.

Flying Fox and Spotted Quoll are two of the lowest cost and highest grade nickel mines in the world.

Western Areas is an active nickel explorer in Western Australia and holds significant exploration interests in Canada and Finland through shareholdings in Mustang Minerals and FinnAust Mining Plc.

The total Mineral Resource Estimate at Spotted Quoll now stands at 2.6Mt at an average grade of 5.6% nickel containing 150k nickel tonnes. The total Ore Reserve Estimate at Spotted Quoll comprises 2.6 Mt at 4.1% nickel containing approximately 107k nickel tonnes.

The total Massive Sulphide Mineral Resource Estimate at Flying Fox now stands at 1.9Mt at an average grade of 5.2 % nickel containing 99k nickel tonnes. The total Ore Reserve Estimate at Flying Fox comprises 1.5Mt at an average grade of 4.2% nickel containing approximately 62k nickel tonnes.

The Cosmic Boy concentrator consistently produces around 25,000 tonnes per annum of nickel contained in concentrate.

Western Areas has offtake agreements with BHP Billiton for 12,000tpa nickel in concentrate and 13,000tpa with Jinchuan for a total 25,000tpa nickel in concentrate.

The Board remains focused on the core business of low cost, long life nickel production, new nickel discoveries and generating returns to shareholders.

ASX code: WSA

Shares on issue: 233.1m shares

Market capitalisation:

Approx A$620m @ $2.66 per share

Level 2, 2 Kings Park Road West Perth, WA 6005 www.westernareas.com.au


Western Areas (WSA or the Company) is pleased to report a strong quarterly performance and start to the financial year on safety, production, costs and positive cashflow from operations despite the challenges of the low nickel price environment. There were no lost time injuries for the quarter and the Company is proud to continue to report a lost time injury frequency rate (LTIFR) of ZERO.

Mine production was 148,102 tonnes of ore at an average grade of 4.8% for 7,062 nickel tonnes, being the highest nickel in ore output since the December 2013 quarter. Spotted Quoll underground production was a record at 3,905 nickel tonnes. Mill production was on trend with 6,252 nickel tonnes produced. Unit cash cost of production has commenced the year well at A$2.26/lb (US$1.64/lb) which is slightly better than the lower end of FY16 guidance of A$2.30/lb to A$2.50/lb.

The Company became debt free for the first time since 2004 with the repayment of A$125m of convertible bonds on 2 July 2015. Consolidated cash at bank (which includes FinnAust Mining) was A$60.3m.

Financial results for FY15 were released on 20 August 2015 which highlighted the Company's robustness with a 37.5% increase in net profit after tax despite a reduced nickel price. A final fully franked dividend of 4 cents per share was declared and subsequently paid in October 2015.

The nickel price trended down for the quarter following weaker than anticipated Chinese trade data and stainless steel demand. Given the sustained decline in nickel price, post quarter end the Company announced various prudent actions to smooth its capital expenditure profile over the balance of FY16 and FY17. Mine plans remain unaltered with no impact on production or unit cost guidance for FY16.

September Quarter 2015 Highlights:

  1. There were ZERO lost time injuries for the quarter which continued the zero LTIFR achieved at the end of April. The Company has now operated for over 17 months without an LTI.

  2. Flying Fox mine production was 67,400t of ore mined at 4.7% for 3,155 nickel tonnes (7.0M lbs).

  3. Spotted Quoll mine production was a record at 80,702t of ore at 4.8% for 3,905 nickel tonnes (8.6M lbs).

  4. Mill throughput was 153,540t of ore at an average grade of 4.6% nickel with recovery of 89.2%.

  5. Unit cash cost of production of nickel in concentrate was A$2.26/lb.

  6. Pre-consolidated cash at bank (excluding FinnAust) of A$59.0m following repayment of the convertible bonds (A$125.0m) and the final interest payment (A$4.0m).

  7. Encouraging shallow drill results from New Morning.

  8. Prospective mafic intrusions have been identified from the first round of RC drilling at the Western Gawler project in South Australia.

Activity Report

For the period ending 30 September 2015



    Pre-consolidated cash at bank was A$59.0m at the end of the quarter (June quarter A$193.7m). The repayment of the final $125.0m of convertible bonds plus a further $4.0m in interest on 2 July was the primary reason for the fall in the reported cash balance for the quarter. In addition, other more material cash outflows, which were higher in this quarter, included:

    • Progress payments for the long lead items for the Mill Recovery Enhancement Project of A$2.0m;

    • Higher development costs at Flying Fox of approximately A$2.5m; and

    • Quotational pricing adjustments from the prior financial year (A$6.1m)

      The consolidated group's cash position was A$60.3m, which included the majority-owned FinnAust Mining Plc cash at bank of A$1.0m. Group cash at bank plus nickel sales receivables was A$66.7m.

      The December quarter cashflow will include the following significant payments:

    • The first instalment for the purchase of the Cosmos Nickel Project (A$11.5m);

    • The payment of the 4 cent per share final dividend (A$9.3m);

    • The final FY15 tax payment (~A$10.0m); and

    • Completion of long lead items for the Mill Recovery Enhancement Project (~A$5.0m).

      Following these one-off payments in the December quarter, the impact of the capital expenditure deferrals announced earlier this month will take effect given their movement from the second half of FY16 into FY17.


      Western Areas declared a fully franked final dividend of 4 cents per share (A$9.3m) on 20 August 2015. The dividend was paid to shareholders on 8 October 2015. Regular returns to shareholders remains a core value of the Company and the payment of this final dividend results in the total dividends returned to shareholders exceeding A$107m over the life of the Company to date.

      Capital Management

      Following repayment of the final tranche of convertible bonds, the Company is now debt free for the first time since 2004. This provides balance sheet strength and ensures flexibility in funding options for future growth opportunities whilst providing a level of resilience to unsustainably low nickel prices. The $125m ANZ loan facility remains undrawn. The facility is not due to expire until March 2017 and provides a readily available and low cost debt financing option. The Company has commenced discussions to assess the optimum flexible funding package going forward.


      When required and the pricing is supportive, the Company manages nickel sales price risk with a combination of short term quotation period (QP) hedging and a set limit of medium term nickel hedging. The policy allows the use of forward sales, bought options and collar style options:

    • QP hedging is used to manage the risk of price fluctuations for nickel already shipped to offtake partners that is yet to have its nickel price finalised.

    • Medium term hedging is used to manage the risk of nickel price fluctuations with a maximum 25% of expected nickel sales per month hedged out for a maximum of 12 months.

      Page 2

      Activity Report

      For the period ending 30 September 2015

      At quarter's end, the hedge book consisted of a small proportion of forecast US$ sales. Details of hedges as at 30 September 2015 are as follows:

      Hedging Details

      FY 2016

      US$ Hedging - Collar Options

      US$ Sold


      Average US$ FX Cap


      Average US$ FX Floor




    There were no lost time injuries (LTI) recorded for the quarter and the LTI frequency rate remains at ZERO. This is an excellent achievement considering the Company operates a concentrator, two deep underground mines and a surface exploration program, 24 hours a day/seven days a week. At the end of the quarter, the Company had operated 546 days without an LTI and the focus on reducing injury severity is filtering across other safety measures, with only one medical treatment and one restricted duty injury during the quarter.

    Our contractors, employees and Employee Health & Safety (EHS) representatives were actively involved in ensuring that workplace hazards and risks were identified and controlled through site inspections, hazard reports and safety meetings. Managers and safety representatives conducted 24 separate inspections generating over 80 corrective actions and the workforce reported over 12,000 hazards, a 20% increase over the previous quarter. This shared culture and vision continues to deliver into the exceptional safety, production and cost results.

    A Memorandum of Understanding was recently signed with the Department of Fire and Emergency Services (DFES) for site operations to continue as a Volunteer Fire Brigade. Western Areas has the only Volunteer Fire Brigade in the local area with the skills and equipment for hazardous materials spills and with plans to invite surrounding brigades to attend Company training days. Other recent training has included underground and surface rope rescue scenarios and hazardous materials response.

    Decontamination exercise after hazmat contact

    Page 3

    Activity Report

    For the period ending 30 September 2015


    One procedural environmental incident occurred during the quarter when an exploration vehicle entered a restricted environmentally sensitive area without the necessary authorisation. However, the vehicle remained on the existing track and caused no environmental damage to the area.

    Compliance and Approval

    New compliance actions undertaken during the quarter included an annual environmental and monitoring and compliance report. This was submitted in accordance with the approvals and licensing requirements of the Office of the Environmental Protection Authority (EPA), Department of Mines and Petroleum (DMP) and the Department of Environment Regulation and Department of Water.

    New approvals received during the quarter included:

    • Clearing permits for Flying Fox north and North Ironcap exploration areas; and

    • Clearing permit and Mining Proposal approval to establish a sand pit near Flying Fox for paste-fill.


The Company entered into a formal three year sponsorship renewal agreement with the Perth Zoo to enable the continued support of the Western Quoll enclosure at the Zoo's nocturnal house.

The Company provided sponsorship to Hyden Primary School in support of their Red-tailed Phascogale (small carnivorous marsupial) conservation initiative. This involved the construction of nest boxes to improve the breeding success of the endangered Phascogale in the local area.

Western Areas is a proud supporter of the Starlight Children's Foundation (Starlight). In July the Company entered two teams into the Great Adventure Challenge which was conducted over a weekend in Dwellingup. Through various fundraising activities conducted at site, in the Perth office, in our employees' homes and with the support of Company service providers, Western Areas raised the most funds for Starlight of any participant at just over $36,000.

Parents and children at the Hyden Primary School making Western Areas Team members at the Great Adventure Challenge Red-tailed phascogale nesting boxes

Page 4

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Western Areas NL

ISIN : AU000000WSA9
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Western Areas NL is a nickel and gold producing company based in Australia.

Western Areas NL holds various exploration projects in Australia.

Its main assets in production are FORRESTANIA, FLYING FOX MINE and KOOLYANOBBING in Australia, its main asset in development is SANDSTONE - LORD NELSON in Australia and its main exploration properties are MT FINNERTY NICKEL JV, LAKE KING, MT ALEXANDER, MT JEWELL and SPOTTED QUOLL in Australia and EAST BULL LAKE in Canada.

Western Areas NL is listed in Australia and in Canada. Its market capitalisation is AU$ 931.2 millions as of today (US$ 672.1 millions, € 588.7 millions).

Its stock quote reached its highest recent level on April 15, 2011 at AU$ 6.78, and its lowest recent point on March 27, 2020 at AU$ 1.66.

Western Areas NL has 272 280 000 shares outstanding.

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Corporate Presentations of Western Areas NL
2/17/2014Half Year Results Corporate Presentation
11/21/2013Areas AGM Corporate Presentation
2/21/2013Half Year Results Corporate Presentation
Annual reports of Western Areas NL
Annual Report to shareholders
Annual Report to shareholders
2009 Annual Report
Option Grants of Western Areas NL
2/14/2012Maintains Strong Profits and Declares Dividend
Nominations of Western Areas NL
1/3/2012appoints new Managing Director
Financials of Western Areas NL
2/24/2016Half Year Financial Results Press Release
8/20/2015Areas Full Year Financial Results Presentation
Project news of Western Areas NL
1/28/2014Revised Resource Table - December Quarterly Report
12/6/2013RBR: Drilling to Commence at Caesar Hill JV
12/4/2013Drilling to Commence at Musgrave Tenements
11/22/2013Final Director's Interest Notice
9/6/2013Assays Increase New Morning High Grade Nickel Intersection
8/30/2013High Grade 8% Nickel Intersection at New Morning
7/19/2013Further High Grade Intersections at New Morning
7/1/2013TKL: Musgrave project farm-in by Western Areas
3/27/2013New Morning Exploration Update
3/14/2013Exploration Strategy and Activities Update
1/24/2013(Forrestania)New High Grade Nickel Discovery at Forrestania
1/24/2013GTE:Encouraging gold results intersected in drilling Mt Gibb
7/18/2012(Forrestania)Announces New High Grade Nickel Sulphide Discovery at Forres...
5/11/2012Production Guidance Update
3/14/2012Completed the Acquisition of Kagara Nickel
10/5/2011(Flying Fox Mine)Major Nickel Intersection Below Flying Fox Mine
Corporate news of Western Areas NL
8/11/2017Advance Notice - Full Year Results Conference Call
8/2/2016Diggers and Dealers Presentation
6/15/2016Final Director's Interest Notice
6/9/2016Western Areas Board Change
4/22/2016Quarterly Activities Report
4/5/2016Western Areas - Security Purchase Plan Booklet
4/5/2016Western Areas - Section 708A Cleansing Statement
3/31/2016Successful Completion of Western Areas Placement
1/28/2016Change in substantial holding
1/27/2016Quarterly Activities Report
1/11/2016Becoming a substantial holder
12/21/2015Western Areas Reduces Standby Bank Facility Fees
12/1/2015Change in substantial holding from NAB
11/25/2015Annual General Meeting - MD Presentation
11/25/2015Chairman's Address to Shareholders
10/26/2015Quarterly Activities Report
10/23/2015Notice of Annual General Meeting/Proxy Form
10/12/2015MOX: Western Gawler Craton Drilling Recommenced
10/12/2015Western Gawler Craton Update
10/7/2015Western Areas Revised FY16 Capital Expenditure Plans
10/1/2015Cosmos Nickel Complex Acquisition Completed
9/29/2015Western Areas to Commence Drilling at Fowlers Bay Nickel JV
9/28/2015STA: Western Areas to Commence Drilling at Fowlers Bay Nick
9/28/2015Prospective Mafic Intrusions Confirmed at Western Gawler
9/22/2015Becoming a substantial holder
9/14/2015Change in substantial holding
9/1/2015Change in substantial holding
8/28/2015Change of Director's Interest Notice x 3
8/20/2015Western Areas Report Increased Full Year Profit and Dividend
8/20/2015Appendix 4E & Full Year Statutory Accounts
8/20/2015Western Areas Full Year Financial Results Presentation
8/20/2015Dividend/Distribution - WSA
8/18/2015Full Year Results Conference Call Details
7/30/2015Change in substantial holding from NAB
7/21/2015Quarterly Activities Report - Revised
7/19/2015GNG: Contract Award
7/5/2015Major Drilling Program Commenced at Western Gawler Project
6/18/2015Western Areas to Acquire the Cosmos Nickel Complex
4/1/2015Change in substantial holding
3/25/2015Change in substantial holding from NAB
3/11/2015Change in substantial holding from NAB
3/5/2015Ceasing to be a substantial holder
2/18/2015Change in substantial holding from NAB
2/17/2015Becoming a substantial holder from MS
2/16/2015Becoming a substantial holder from CBA
2/12/2015Half Year Results Conference Call Details
2/12/2015Ceasing to be a substantial holder from MS
1/21/2015Western Gawler Craton Project Update
11/6/2014Western Areas to Commence Major Exploration at Fowlers Bay
2/28/2014On Market 2014 Convertible Bond Purchase
2/25/2014Areas Share Purchase Plan Offer Document
2/24/2014Cleansing Statement - Notification under section 708A(5)(e)
2/18/2014Successful Completion of Western Areas Raising
2/18/2014Areas Ltd Capital Raising and SPP
2/17/2014Half Year Results Press Release
2/10/2014Areas Upgrades Full Year Guidance
1/28/2014Competent Person Statement
1/9/2014Becoming a substantial holder
12/17/2013Ceasing to be a substantial holder
12/17/2013Managing Director Interview by Market Professional
12/4/2013TKL:Western Areas proceeds to Stage 2 of JV and begins drill
11/21/2013Areas 2013 AGM Results
11/21/2013WSA 2013 AGM Chairman Address
11/21/2013Areas Chairman to Step Down
11/13/2013Finland Exploration Assets - London AIM Listing
10/21/2013Notice of Annual General Meeting/Proxy Form
10/15/2013TKL: Musgraves project - new targets on WSA JV tenements
9/24/2013Becoming a substantial holder
9/12/2013(Spotted Quoll)Spotted Quoll North High Grade Mineral Resource and Reserve
9/6/2013Substantial Shareholder - Restatement from CBA
8/27/2013Preliminary Final Report and Full Year Financial Statements
8/27/2013Areas Full Year Results Press Release
8/27/2013Areas Full Year Result Presentation Pack
8/21/2013Conference Call: Full Year Results for the Year Ended 30 Jun...
7/31/2013Announces Anticipated Non-Cash Impairment
7/23/2013Quarterly Activities Report
7/4/2013Areas Exceeds Full Year Guidance
7/1/2013Strategic Agreement with Traka at Musgraves
6/24/2013GTE: Rights Issue Entitlement
5/31/2013Areas Upgrades Full Year Guidance
4/23/2013Quarterly Activities Report
4/5/2013Chairmans Letter to Shareholders
4/4/2013Becoming a substantial holder
2/21/2013Half Year Accounts and Appendix 4D
2/21/2013Half Year Results Press Release
2/21/2013Results of Meeting
1/29/2013New Offtake Agreement
1/18/2013Notice of General Meeting/Proxy Form
1/14/2013WSA Announces Successful Completion of Share Purchase Plan
1/14/2013Areas Announces New Constitution
1/14/2013Areas Announces Change of Name and Company Type
12/10/2012Section 708A - Cleansing Notice
10/22/2012Notice of Annual General Meeting/Proxy Form
10/16/2012Takes Top Honours at WA Industry & Export Awards
9/21/2012Weekly Summary Alert
8/15/2012Conference Call-Full Year Results for the Year Ended 30 June...
7/25/2012Announces June 2012 Quarterly Activities Report
7/13/2012Weekly Summary Alert
7/2/2012Retires Convertible Bond From Cash Reserves
6/29/2012Weekly Summary Alert
6/15/2012Weekly Summary Alert
6/7/2012(Spotted Quoll)Spotted Quoll Underground Ore Reserves Increase by 94%
6/1/2012Weekly Summary Alert
5/18/2012Weekly Summary Alert
5/4/2012Weekly Summary Alert
4/20/2012Weekly Summary Alert
4/6/2012Weekly Summary Alert
3/23/2012Weekly Summary Alert
3/9/2012Weekly Summary Alert
3/5/2012Acquires 100% of Lounge Lizard and Kagara's Nickel Assets
2/24/2012Weekly Summary Alert
2/10/2012Weekly Summary Alert
1/27/2012Weekly Summary Alert
1/23/2012Announces December 2011 Quarterly Activities Report
1/13/2012Weekly Summary Alert
12/30/2011Weekly Summary Alert
12/22/2011Closes Out Royalty Obligation To Outokumpu
12/16/2011Weekly Summary Alert
12/2/2011Weekly Summary Alert
11/30/2011Agrees One Year Offtake Contract with Jinchuan
10/12/2011Clarification: Lounge Lizard Nickel Deposit
9/23/2011Weekly Summary Alert
9/8/2011Announces Update on Nickel Concentrate Tender Process
8/26/2011Weekly Summary Alert
8/22/2011Strong Financial Results for Year Ended 30 June 2011 & Full ...
8/12/2011Weekly Summary Alert
8/2/2011Considering Nickel Offtake Tender
5/6/2011Weekly Summary Alert
4/15/2011Announces March 2011 Quarterly Activities Report
4/8/2011Weekly Summary Alert
3/25/2011Weekly Summary Alert
2/25/2011Weekly Summary Alert
2/14/2011ALERT: New Western Areas Financial Report
2/11/2011Weekly Summary Alert
11/7/2008Weekly Summary Alert
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