Miner Western Areas says it is looking forward to a continued rebound in nickel prices and will not be curbing its operations or expansion plans despite a decline in profit.
Lower nickel prices and lower sales volumes led Western Areas to report a $24.1 million net profit in the six months to December 31, down 64 per cent from the previous corresponding period.
The company says that despite the drop it is still pleased with the result, claiming it may be the only nickel company to announce a profit for the six months period.
Fellow Australian Securities Exchange-listed nickel producers Panoramic Resources and Independence Group have already flagged after-tax losses for the half.
Nickel prices fell by between 25 and 30 per cent during the half and the result showed the company could ride out any price cycle by focusing on what it could control, unit cash costs and production, Western Areas managing director Dan Lougher said.
“Our main customer is China, there are fundamentals from demand of China and nickle is a steel metal required in future urbanisation,” he said.
The nickel price averaged $US8.51 ($A7.95) per pound in the six months to December, down from $US11.61 ($A10.85) per pound in the comparative six-month period.
Mr Lougher said prices would not fall below $US8 per pound, which would provide only upside for shareholders as prices in had already risen in January to $US9.50 ($A8.88) per pound.
Western Areas said it still planned to increase production to 15,000 tonnes of nickel concentrate within the next 20 months.
This would cost an estimated $10 million, with $30 million to be spent on capital expenditure in the current financial year.
The miner reported nickel sales of 11,230 tonnes in the first half, down 4.4 per cent from the previous corresponding period.
Mr Lougher said he was not concerned about mining giant BHP Billiton’s recent curbing of its Nickel West business in Western Australia, including a possibly 155 job cuts in reaction to the depressed nickel price and a strong Australian dollar.
He said Western Areas’ WA-based nickel mines were far better assets, including higher quality concentrate and lower unit cash costs at an average $2.17 pound.
“You can see they (Nickel West’s mines) are in need of capital injection … you are talking about 0.6 per cent nickel (Western Areas averaged about five per cent at its three mines),” he said.
“We are not curtailing or slowing down any of our operations and projects.”
Cashflow of $64.4 million had funded all of its exploration, capital expenditure and development costs.
Western Areas has a one-year offtake agreement with China’s Jinchuan Group to sell up to 15,000 tonnes of nickel-in-concentrate.
It would again negotiate short-term offtake agreements of less than two years before the end of the current half, Mr Lougher said.
Western Areas shares closed 19 cents, or 3.3 per cent, lower at $5.56.
