Policy Outcomes A Wild Card For Western Areas

Brokers acknowledge Western Areas (WSA) has worked hard to maintain its profitability after a long period of sluggish nickel prices and, with the recent rally in prices on the back of the Philippines policy announcements, wonder just what lies in store for the producer. The company advised back in August that mine grades for both Flying Fox and Spotted Quoll (Forrestania) would trend lower to reserve higher grade material pending price improvement and this was evident in the September quarter production numbers.

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WSA – Citi rates the stock as Buy

Commodity analysts at Citi are now self-declared "nickel bulls" and if their predictions prove correct, investors in the sector are yet to see the true nature of the term "commodities boom". Citi continues to see lots of upside, despite the 50+% rally in prices year-to-date. Nickel is projected to peak at US$26,500/t in 2016.

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WSA – Credit Suisse rates the stock as Outperform

Western Areas is receiving its second rating upgrade in less than a month. The reason is Credit Suisse’s increasing confidence that nickel prices are on the way up. The company is likely to have already retrieved its Cosmic Boy expansion plans from the archive, in the broker’s opinion. Joint ventures with cash-strapped base metal juniors and M&A speculation are also in focus again.

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WSA – UBS rates the stock as Neutral

September quarter production was ahead of UBS’ expectations by 3%. Cash costs at $2.28/lb also beat expectations. The UBS commodity team has made deep cuts to nickel forecasts, with an average decline of 16% over the next three years. The broker strongly believes that the nickel sector lacks significant positive catalysts for the next six to 12 months.

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