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Western Areas proves viability of 2nd nickel production center

A pre-feasibility study has demonstrated the commercial viability of Western Areas Ltd.'s Odysseus deposit and the potential re-start of nickel mining operations at the larger Cosmos operation in Western Australia.

Western Areas said March 30 that the findings indicate robust economic and nickel production metrics together with further significant upside opportunities, as well as very low all-in sustaining cash costs.

The re-opening of Cosmos and mining of Odysseus, which will create a second production center for Western Areas, is expected to have a pretax net present value of A$292 million and generate surplus pretax net cash flow of A$580 million with a 3.5-year payback from production start.

"We are particularly pleased to have an operation that will have very low all-in sustaining unit cost at US$2.77 [per pound], but also a project that does not require a significant capital investment over the next two years, which provides optionality and flexibility in development decisions," Managing Director Dan Lougher said.

Pre-production CapEx is forecast to be between A$190 million and A$210 million and near-term capital requirements are expected to be low at A$7 million for 2017 and A$34 million for 2018.

The mine will have an initial life of 7.5 years producing 4.9 million tonnes at 2.3% nickel during that time. This will deliver an average of 12,000 tonnes of contained nickel metal each year for a total of 87,000 tonnes.

First ore is set to be mined in the fourth quarter of 2020, with first concentrate delivered in the first quarter of 2021.

Western Areas now plans to start a definitive feasibility study and is working toward an upgrade of a major portion of the inferred resource to the higher confidence indicated category. A resource delineation program in the Odysseus North zone is currently underway.