Western Areas
A low-cost nickel producer
Western Areas has been built around the Forrestania Nickel Project, which covers two high grade nickel sulphide mines about 400 km east of Perth. The Forrestania mines feed ore into a concentrator called ‘Cosmic Boy’ with the concentrate being sold to downstream users. Western Areas intends to bring a new nickel mine called Odysseus into production in FY23. The company also has 10,000 sq km of nickel exploration ground.
An established and low-cost foundation nickel operation
The Flying Fox and Spotted Quoll mines with Cosmic Boy is expected to produce 16,000-17,000 nickel tonnes in concentrate in FY21 at a unit cash cost of A$3.75-4.25 a pound. This makes the Forrestania operation one of the lowest cost and highest-grade nickel operations in the world.
Odysseus takes Western Areas to the next stage
Western Areas acquired the Cosmos Nickel Operation from Xstrata in 2015. The company is now bringing into production a new nickel mine at Cosmos, called Odysseus, where first production is expected in calendar 2022. At full production in 2024 this mine will produce an average 14,500 nickel tonnes in concentrate at an All-In Sustaining Cost of just A$3.50 per pound. Mine life at Odysseus will be in excess of 10 years.
Nickel demand is set to be very strong in the future
Nickel recovered in 2020 and into 2021 from under US$11,000 per tonne in March 2020 to over US$19,000 in February 2021. After a brief sell-off, which took nickel back to US$16,000, the metal has stabilised. Currently, world demand for nickel is about 2 million tonne a year, mainly for use in the manufacture of stainless steel. However, Electric Vehicles need a lot of nickel in their lithium-ion batteries, so it’s reasonable that nickel demand can double over the next decade or two. As a low-cost producer, we expect Western Areas will benefit from this demand.
Key risks:
- Declines in the nickel prices from the current US$16,000 per ton
- Delays to commissioning of Odysseus
Read the most recent article on WSA here