Leading nickel producer, Western Areas (WSA) has chopped its planned investment spending over the next two years to help offset the weak world nickel price.
The company, one of the country’s biggest nickel miners, said its cuts would save around $32 million.
The company said it no longer intended to begin upgrading the processing mill at its Forrestania nickel mine in Western Australia this financial year.
That will see the $22 million of planned spending on the project — known as the Mill Recovery Enhancement Project — fall to just $7.4 million in the year to June 30, 2016.
The company will cut its spending to maintain its existing operations by 24% cent to $34 million in 2015-16, without cutting back on planned exploration spending.
WSA 1Y – Western Areas cuts into capex
“Since we completed the budgets for FY16, we have seen the nickel price fall from around $US6.00/lb to around $US4.50/lb,” managing director Dan Lougher said in yesterday’s statement.
"In making these changes, Western Areas has carefully considered the current nickel price environment, expectations for future nickel price improvements, the considerable capital investments made and balance sheet strength built up by the Company,” western Areas said yesterday..
"Western Areas has the ability to make these responsible changes due to prior year investments in mine development resulting in the mines currently having a substantial open reserve position, combined with a sustaining capital expenditure profile that was materially reducing in FY17 following a significant discretionary spend in the back half of FY16.
“The Company has seen these price cycles before and so has implemented this plan to prudently address the current position.
"The capital expenditure profile for the operations will now be smoothed over the next 20 months resulting in a prudent deployment of capital in the current nickel price environment. Importantly, this amended capital expenditure profile does not change the current mine plans and has no impact on production or unit cost forecasts.any positive movements in the nickel price,” the company said.
Western Areas said its target of producing between 24,000 and 25,000 tonnes of nickel in concentrate at a cost of up to $2.50/lb remains unchanged.
The news was greeted positively by investors and the shares rose 2% to $2.51.
