Western Ar­eas

Western Ar­eas has a lot to look for­ward to with de­vel­op­ment push­ing ahead at its new Odysseus prospect, and con­tin­ued ex­plo­ration op­por­tu­ni­ties across its For­resta­nia op­er­a­tion, and newly ac­quired Western Gawler ten­e­ments.

The Australian Mining Review - - CONTENTS - JES­SICA CUM­MINS

NICKEL-fo­cused miner, Western Ar­eas, al­most dou­bled its net profit from $4.8 mil­lion to $8.3 mil­lion in the sec­ond half of FY18 in line with im­proved nickel prices.

With free cash flow of $19.1 mil­lion as of 30 June, Western Ar­eas man­ag­ing di­rec­tor and chief ex­ec­u­tive Dan Lougher said the com­pany’s midterm out­look was to utilise cash on hand to ac­cel­er­ate ex­plo­ration.

Mr Lougher also had high hopes for its newly com­mis­sioned Mill Re­cov­ery En­hance­ment Project (MREP) at For­resta­nia, with in­creased mar­ket in­ter­est in its new high-grade nickel prod­uct.

Mill Re­cov­ery En­hance­ment Project

The com­pany’s MREP project, suc­cess­fully com­mis­sioned in April, will cre­ate a prod­uct for the EV bat­tery sup­ply chain from a spe­cific cut of the live tail­ings stream that was pre­vi­ously dis­carded.

“We ba­si­cally take that prod­uct out of the milling stream and put it through bac­te­ria tanks to pro­duce a su­per high-grade 50 to 55 per­cent nickel sul­phide,” Mr Lougher said.

Mr Lougher said once the bag­ging fa­cil­ity was com­pleted later this year, the prod­uct would be sold to Ja­pan, Korea and China, where in­ter­est was ex­tremely high.

The prod­uct is set to at­tract pre­mium pric­ing above its ex­ist­ing con­cen­trate terms and would open doors for the com­pany into the EV mar­ket.

“With sig­nif­i­cant in­ter­est in this new prod­uct, in­clud­ing par­ties re­lated to the elec­tric ve­hi­cle sec­tor, we have hosted many site vis­its in re­cent months,” he said.

“We will soon com­mence dis­patch­ing sam­ples to a se­lect group of po­ten­tial cus­tomers as part of se­cur­ing a new off­take agree­ment.”

Mr Lougher said Western Ar­eas was also ad­vanc­ing test and study work on the New Morn­ing heap leach project, util­is­ing its BioHeap process.

“The crude nickel sul­phate so­lu­tion pro­duced from the heap leach can be pro­cessed at the back end of the MREP plant, which has in-built ca­pac­ity for around 4000 tonnes of con­tained nickel,” he said.

“We are now work­ing through the re­quired en­vi­ron­men­tal ap­provals and stud­ies, with a goal for New Morn­ing to be an op­er­a­tional mine in the com­ing years.”

Cos­mos Nickel Project

Then there was Western Ar­eas’ Cos­mos nickel project, 40km north of Le­in­ster.

Orig­i­nally dis­cov­ered by Ju­bilee Gold mines in 1997, Cos­mos be­gan with an open pit mine be­fore tran­si­tion­ing into an un­der­ground op­er­a­tion.

In 2015, Western Ar­eas ac­quired the project from Glen­core sub­sidiary Xs­trata for $24.5 mil­lion.

Mr Lougher said the ac­qui­si­tion could not have come at a bet­ter time in the com­mod­ity cy­cle with pos­i­tive for­ward fore­casts for nickel.

The project, which con­tains the high-grade Odysseus de­posit, is set to be­come the com­pany’s sec­ond min­ing op­er­a­tion.

“The Cos­mos nickel com­plex will com­ple­ment our ex­ist­ing For­resta­nia nickel op­er­a­tions, and is an ex­cel­lent, pru­dent and low cost in­vest­ment which is con­sis­tent with our brown­fields ac­qui­si­tion strat­egy,” Mr Lougher said.

In March 2017, the Odysseus Pre-Fea­si­bil­ity Study (PFS) con­firmed com­mer­cial vi­a­bil­ity of the project.

Then, in April this year a $32 mil­lion early cap­i­tal works pro­gram kicked off, which in­cluded the con­struc­tion of 520 rooms at the mine camp, the re­fur­bish­ment of ex­ist­ing ponds, in pit pump­ing, evap­o­ra­tion ponds and de­cline de­wa­ter­ing and re­ha­bil­i­ta­tion.

Once this was com­plete, Mr Lougher said Odysseus will be de­vel­op­ment ready – with a mine life beyond 10 years and av­er­age pro­duc­tion of about 12,000 tonnes per an­num of con­tained nickel in con­cen­trate.

High-grade drill re­sults were re­ceived dur­ing the June quar­ter at its Odysseus North tar­get, which saw M5 and AM6 ore­bod­ies con­tain­ing 53,000t nickel, and mas­sive sul­phide suc­cess be­neath Odysseus.

Mr Lougher said the re­sults demon­strated con­fi­dence the project would be­come the com­pany’s third op­er­at­ing mine.

The De­fin­i­tive Fea­si­bil­ity Study (DFS) was sched­uled for re­lease at the end of Septem­ber, which is set to de­liver a larger and longer mine life.

Western Gawler Project

In late July, Western Ar­eas also strength­ened its re­gional ex­plo­ration foot­print in South Aus­tralia through a strate­gic agree­ment with Iluka Re­sources.

The farm-in joint ven­ture agree­ment en­abled Westerns Ar­eas to earn up to a 75 per cent in­ter­est in base and pre­cious metal rights and all ad­di­tional base­ment-hosted min­eral and rare earth el­e­ments across five ten­e­ments in the Western Gawler re­gion, cov­er­ing 5070sqkm.

The ten­e­ments are ad­ja­cent to its ex­ist­ing ten­ure within the re­gion, where it has been ac­tive in ex­plo­ration for sev­eral years.

The key fo­cus for Western Ar­eas was to gain ac­cess to the re­main­der of the Fowler Do­main that falls within Iluka’s Eu­cla Basin project area.

“We were al­ready ex­plor­ing in that area three years ago when we looked across po­ten­tial ex­plo­ration ar­eas in Aus­tralia and the at­trac­tion for us was that the area was un­ex­plored and it was sim­i­lar ge­o­log­i­cally to the Fraser range in WA, which holds some in­ter­est­ing ex­plo­ration tar­gets,” Mr Lougher said.

“Iluka was ex­plor­ing min­eral sands in the area and they had ad­ja­cent ten­e­ments to ours so when they de­cided they were chang­ing their ex­plo­ration strat­egy we de­cided to have a con­ver­sa­tion and come up with a Joint Ven­ture.”

The Fowler Do­main, at the western end of the Gawler Cra­ton, was con­sid­ered highly prospec­tive for nickel, iron ox­ide, cop­per and gold.

Mr Lougher said the prospec­tive green­fields ex­plo­ration as­set of­fers great dis­cov­ery po­ten­tial.

“We are cur­rently in the process of re­view­ing Il­luka’s data­base, which con­tains air­borne style data, to ac­cess the best ar­eas or tar­gets that re­main within their ten­e­ment ar­eas.”

Mr Lougher said with the com­pany’s pos­i­tive cash flow gen­er­a­tion, Western Ar­eas has al­ways looked to ac­cess op­por­tu­ni­ties where the ini­tial in­vest­ment was rel­a­tively low, but the po­ten­tial re­wards are high.

“Our ex­plo­ration team is ready to be­gin a work pro­gram aimed at iden­ti­fy­ing high-pri­or­ity drill tar­gets build­ing on the sig­nif­i­cant geo­phys­i­cal pro­grams and tar­get gen­er­a­tion work that Iluka has com­pleted over the last four years,” he said.

Mr Lougher said that com­bin­ing the Iluka Joint Ven­ture ground with its ex­ist­ing ten­e­ment hold­ings max­imised the po­ten­tial for a sig­nif­i­cant dis­cov­ery.

Air­borne EM sur­veys will be com­pleted in FY19, with an in­te­grated se­ries of belt scale ex­plo­ration cam­paigns planned.

Prospects on its ex­ist­ing ten­ure in­cluded Thun­der­dome, Atomic Cafe and Citadel, which host nu­mer­ous prospec­tive mafic and ul­tra­mafic in­tru­sive bod­ies.

Mr Lougher said ini­tial work aimed to test th­ese prospects, along with its as­so­ci­ated prospec­tive cor­ri­dors along strike, which ex­tend into the Iluka Joint Ven­ture ground.

Work would also fo­cus on ad­vanc­ing sev­eral untested geo­phys­i­cal tar­gets pre­vi­ously iden­ti­fied by Iluka.

The Year Ahead

Look­ing for­ward, Western Ar­eas ex­pected pro­duc­tion to be marginally higher in FY19 with For­resta­nia’s Spot­ted Quoll con­tribut­ing to 60 per cent of over­all pro­duc­tion.

The com­pany aimed to in­vest more in ad­di­tional ex­plo­ration pro­grams at Cos­mos and Western Gawler; the first re­source ex­ten­sion drilling pro­gram will also take place at Spot­ted Quoll, which has not been drilled since 2009.

“We are look­ing to push ex­plo­ration at our New Morn­ing and Odysseus projects as well as push our align­ment with the EV and bat­tery ve­hi­cle mar­ket,” Mr Lougher said.

“With the nickel stock mar­ket com­ing down our view is we will see im­prove­ments with pric­ing.

“We are con­fi­dent that the EV mar­ket will be­come more dom­i­nant but we still need a strong stain­less steel mar­ket.

“30 per cent of nickel mar­ket in the world is stain­less steel and we don’t want that to fall by the way­side.”

“We are con­fi­dent that the EV mar­ket will be­come more dom­i­nant but we still need a strong stain­less steel mar­ket - 30 per cent of the nickel mar­ket in the world is stain­less steel and we don’t want that to fall by the way­side.”

Fly­ing Fox at night. Al­lim­ages:WesternAreas.

Lo­ca­tion of Western Area’s key ten­e­ment hold­ings.


Panorama view of Western Ar­eas Fly­ing Fox pro­cess­ing plant.

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