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Western Areas Reacts to Nickel Price Decline; Reduces Expenditure

Western Areas Reacts to Nickel Price Decline; Reduces Expenditure
Oct 07, 2015 By Simon Herrmann Tags: WSA

Western Areas Ltd. (ASX:WSA) has provided an update on its planned capital expenditure for FY16 after completing an optimisation review for the entire Company.

The optimisation review process is regarding the company’s response to a sustained decline in the nickel prices since the completion of its FY16 budgets in the previous year. Western Areas has decided on no change in regards with the production costs and volumes associated with mine plans.

The company has reported a smoothing $32.6 million of the capital expenditure program over the next 20 months starting FY16 until FY17. This includes reduction in mining development worth $11 million and regional exploration expenditure reduced by $4 million.  Mill Recovery Enhancement Project has been deferred until July 2016, however all long lead items worth $7.4 million have been ordered.  Feasibility and exploration expenditure on its recently acquired Cosmos Nickel Complex has been reduced between $3.0 million to $4.0 million.

Western Areas has however mentioned its flexibility to restart the deferred programs with a special priority given to the Mills Recovery Projects should the nickel prices start to improve. The current changes have been proposed after a careful consideration of the current nickel price fluctuations future expectations. The company has made these changes in the light of its previous year investments in mining developments resulting a substantial open reserve position at the current stage.

Western Areas Managing Director, Mr. Dan Lougher, said” Since we completed the budgets for FY16, we have seen the nickel price fall from around US$6.00/lb to around US$4.50/lb. Western Areas is one of the few nickel companies globally that can withstand these low prices, especially with our currently debt free balance sheet. Many commentators have expressed the view that the current price levels are unsustainable for large segments of the nickel industry.”

Western Areas Ltd. has announced strong financial results for FY15 with Net Profit After Tax of A$35.0 million, 37.5% higher than FY14 along with increased dividends of 7 cents per share, 42.8% higher than FY14. Despite the strong financial results, the company’s share price has decreased 33.5% year-to-date.

 

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Simon Herrmann Author: Simon Herrmann Oct 07, 2015

Simon is a financial analyst at independent research firm Wise-owl who wants to change the world by disrupting the cliché approach to investment decision making with convergent thinking. Wise-owl’s goal is plain and simple: Find the best opportunities for our members by following a proven methodology and to create long-term value through high-quality advice, innovation, technology and education. We combine industry experience and the agile mentality of a start-up. Wise-owl is the future of stock market investing.

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