Western Areas NL’s push to become Australia’s next mid-tier nickel producer is expected to begin in the second half of this year, with production from its Flying Fox project at Forrestania rising to 13,500 tonnes a year in 2010.
Major shareholder Terry Streeter and managing director Julian Hanna are currently in the midst of an international road show to raise $110 million for the project, which has an estimated net cash flow from just Flying Fox’s T1 and T5 reserves of more than $500 million.
Mr Streeter told WA Business News the early production was expected to come from the T1 North prospect, which the current decline has to pass through on its way down to the T1 deposit, scheduled for production in March next year.
The high grade Flying Fox deposits – T1 to T5, 400km east of Perth – sit on top of each other from 400 metres below surface down to 1,000 metres.
Ore reserves for T1 and T5 currently contain 64,500 tonnes of nickel, enough to support a 6.5-year mine life starting at 6,000 tonnes/year and rising to 13,500t/year in 2010.
Western Areas has done its sums on a number of nickel and Australian/US dollar price scenarios, the closest to current reality being $US8 per pound and a flat exchange rate of $A1 to $US 0.75, giving a net project cash flow from T1 and T5 of more than $500 million.
The current nickel price is $US9/pound and the exchange rate $A1 to $US 0.77.
Western Areas has an off-take agreement with LionOre (Australia) Pty Ltd for the first 75,000t of either nickel ore or concentrate to be processed at its nearby Emily Ann plant.
Western Area’s construction of a 250,000t/year nickel concentrate plant at Cosmic Boy, about 20km south of Flying Fox, is expected to be ready in time for the first T1 ore.
The comparisons with the highly successful Jubilee Mines NL, the company in which Mr Streeter made his first major investment and to an extent shaped Western Areas, are inescapable.
Jubilee is currently on target to produce 11,000t of nickel this year.
In five years since its first open pit production, it has produced 68,500t of nickel, worth about $1 billion for a net profit of $290 million and providing earnings per share of $2.33.
Through their at times turbulent 15-year association, Messrs Harmanis and Streeter have remained friends.
“Kerry and I always got on ok. I could always be straight with him and he with me. When we argued, it was like brothers. We understand each other. Our relationship is quite unique really,” Mr Streeter said.
