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.
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.