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Australia’s Class Leading Nickel Producer
Western Areas NLJune Corporate Presentation20 June 2012
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This presentation is being furnished to you solely for your information and for your use and may not be copied, reproduced or redistributed to any other person in any manner. You agree to keep the contents of this presentation and these materials confidential. The information contained in this presentation does not constitute or form any part of any offer or invitation to purchase any securities and neither the issue of the information nor anything contained herein shall form the basis of, or be relied upon in connection with, any contract or commitment on the part of any person to proceed with any transaction.
You must not take or transmit this presentation or a copy of this presentation into the United States or Japan or distribute it, directly or indirectly, in the United States or Japan or to any US persons. By your acceptance of this document, you acknowledge that you are a not a “U.S. person” for the purposes of the US Securities Act. Neither this document, in whole or in part, nor any copy thereof may be taken or transmitted to any other person. The distribution of this document to other persons or in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the federal securities laws of the United States and the laws of other jurisdictions. The distribution of this presentation in other jurisdictions may be restricted by law, and persons into whose possession this presentation comes should inform themselves about, and observe, any such restrictions.
The information contained in this presentation has been prepared by Western Areas NL. No representation or warranty, express or implied, is or will be made in or in relation to, and no responsibility or liability is or will be accepted by Western Areas NL, employees or representatives as to the accuracy or completeness of this information or any other written or oral information made available to any interested party or its advisers and any liability therefore is hereby expressly disclaimed. No party has any obligation to notify opinion changes or if it becomes aware of any inaccuracy in or omission from this presentation. All opinions and projections expressed in this presentation are given as of this date and are subject to change without notice.
This document contains forward-looking statements. These statements are subject to certain risks and uncertainties that could cause the performance or achievements of Western Areas NL to differ materially from the information set forth herein, although such information reflects forecasts and projections prepared in good faith based upon methods and data that are believed to be reasonable and accurate as at the dates thereof and although all reasonable care has been taken to ensure that the facts stated herein are accurate and that the forward-looking statements, opinions and expectations contained herein are based on fair and reasonable assumptions. Western Areas NL undertakes no obligation to revise these forward-looking statements to reflect subsequent events or circumstances. Individuals should not place undue reliance on forward-looking statements and are advised to make their own independent analysis and determination with respect to the forecasted periods, which reflect Western Areas NL’s view only as of the date hereof.
The information within this PowerPoint presentation was compiled by Mr. Dan Lougher and Mr. David Southam and the information as it relates to mineral resources and reserves was prepared by Mr. Dan Lougher and Mr. John Haywood. Mr. Southam, Mr. Lougher and Mr. Haywood are full time employees of Western Areas. Mr. Lougher and Mr. Haywood are members of AusIMM and have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr. Southam, Mr. Lougher and Mr. Haywood consent to the inclusion in this presentation of the matters based on the information in the form and context in which it appears.
For Purposes of Clause 3.4 (e) in Canadian instrument 43-101, the Company warrants that Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.
THIS PRESENTATION IS NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE U.S.
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Disclaimer and Forward Looking Statements
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Overview
Operations
Exploration & Growth
People
Nickel Industry
Q&A
“Western Areas has an enviable track record of exploring, finding, developing and producing highly profitable mines..”
Explore Develop
ProduceSales
Agenda
Western Areas is:
A proven explorer, developer and operator led by an experienced management team
An S&P ASX 200 index member
Market cap ~ $800 million at current prices
Profitable, even at current nickel prices
A dividend payer, with a strong balance sheet
Australia’s third largest producer of nickel at 30,000 tonnes of nickel mined and 25,000 tonnes of nickel in concentrate produced
#1 = BHP-B Nickel West and #2 = Glencore (Murrin Murrin)
Australia’s lowest cash cost and therefore highest margin producer of nickel
Employer of approx 500 staff, either directly or through contractors
Into its sixth consecutive year of production, eight consecutive quarter with no downside surprises
First production 26 October 2006
Committed to stable incremental growth from the current solid platform
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Western Areas Overview
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Western Areas Overview – The Business
Production Assets
Flying Fox•1st nickel mine•15,000 Ni tonnes
per annum
Spotted Quoll•2nd nickel mine•10,000 Ni tonnes
per annum
Cosmic Boy•Nickel concentrator
– treats ore from both mines
Exploration & Growth
Forrestania & WA Regional
Canadian Assets
Finland
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%1 T Streeter 14.362 Colonial Group 6.283 M & A Greenwell 5.464 Northward Capital 3.835 Giovanni Santalucia 3.456 Ausbil Dexia 2.917 UBS Asset Management 2.908 Platypus Asset Management 2.099 Goldman Sachs Asset Management 1.86
10 Vanguard Group 1.8311 Independent Asset Management 1.8012 Mt Kellet 1.7013 State Street Corporation 1.6914 Ely Griffiths Group 1.6415 Antares Capital Partners 1.58
TOTAL 53.38
Top 15 ShareholdersListings: ASX & TSX Member of S&P ASX 200
Shares on Issue: 179.7M
Options:(varying strike prices >$7.00)
2.0M
Share Price: ~ A$4.50 (June 2012)
Market Cap:(undiluted)
A$808 million
Cash & Receivables: A$184M at 31 March 2012
Overview – Corporate Summary
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Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12
WSA 23 Month Share Price
Closing Share Price
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Commodity Share Price Performance
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BASE METALS SECTOR OUTLOOK
Base Metal Recovery in the Horizon
Relative Share Price PerformanceLast 2 Years
Source Capital IQ, IRESS
May-120
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May-10 Nov-10 May-11 Nov-11
5%
35%
(11%)
(52%)(41%)
14%
Copper Index Nickel Index Diversified Index Zinc Index Gold Index WSA
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Operations
WSA operations
WSA concentrate exports
WSA concentrate to BHP Billiton
Location
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Summary
Continuous high grade Nickel to 1300m. Open at depth
Ore grades increase at depth from 3.9% to 6.2% Nickel
Announced intersection T7: 34.7m @ 8.9% Nickel
Production
FY2011 – 347,648t @ 4.7% nickel for 16kt nickel
Low cash cost operation <US$3/lb
FY2012 – Production around 17kt nickel in ore
Purchase of Kagara Nickel Assets
Combined Total High Grade Resource now stands at around 115,000t of Nickel
Major drilling program to commence at Lounge Lizard for next 6 months
T5/ T6 & T7 down dip extensions cross into Lounge Lizard and remain open at depth
Flying Fox now approaching a 10 year mine life
Purchase includes 300sqkm of tenements adjacent to Forrestania operations
Flying Fox Mine
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Summary
Ore Reserve – 3.095mt @ 4.20% nickel containing 131,360t nickel
Ore reserve was upgraded in June 2012 by 94% with an exceptional 88% conversion ratio
Remains open at depth
Drilling is ongoing which will result in conversion of inferred resource to indicated to reserve
Already over a 10 year mine life
Production
Stage 1 underground first ore delivered ahead of schedule
10,000tpa nickel on stage 1
Mine optimisation study well advanced for potential increased in production
Mill study to be completed
Spotted Quoll Mine
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Concentrate Supply
Reliable nickel sulphide concentrate supply dwindling
Quality nickel sulphide is difficult to find
Global nickel grades in decline
Tightness in smelter supply to be experienced from 2013
Laterites & Nickel Pig Iron (swing producer) do not fill the void
Offtake Contracts
Long term offtake to BHP – 10ktpa lifting to 12ktpa nickel
New Jinchuan contract signed:o 12 month contract extensiono Improved commercial termso Significant uncommitted offtake beyond 2013
WSA in a unique position being an independent producer
Ability to complete spot/ opportunistic sales
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NOTE: The graph FORRESTANIA – OFFTAKE CONTRACTS is based on Western Areas’ 10 Year Production Targets. These Targets include estimates and assumptions on production rates of existing ore reserves, conversion of existing mineral resources to ore resources and assumptions on potential extensions to existing mineral resources, based on current information. These Production Targets may vary due to future drilling results, nickel prices, costs and market conditions. Refer to Disclaimer and Forward Looking Statement in Presentation
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2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Nic
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Global Smelter Demand vs Global Concentrate Supply
Nickel in Concentrate Supply Smelter Demand
Concentrate Supply & Offtake Contracts
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Concentrator Summary
Current capacity of 550,000tpa of ore
Nickel concentrate output >25,000tpa Ni
Expansion configured for upgrade to 1mtpa of ore
Concentrate grades of around 14.0% Ni
14,000t of concentrate storage capacity ($43M value)
Export Infrastructure and Logistics Access to >1400 sealed shipping containers
Using 25 trucks for concentrate transportation
Shipping contract in place, FOB Esperance Port
Concentrator Expansion
Built to be expandable
Some items of infrastructure (crusher) already capable of 1mtpa
Second mill already on site
Preliminary high grade expansion study completed
Forrestania Nickel Concentrator
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Exploration & Growth
Short Term < 12 Months
Medium Term 2-5 years
Long Term >5 years
Spotted Quoll > 10 years
Flying Fox > 10 years – drilling in progress
New Morning drilling
Mill Expansion feasibility
Cash costs <US$2.50/lb
Strong cashflow
Dividends
New offtake contract – 15ktpa
List FinnAust Mining 1/2
Spotted Quoll & Flying Fox – 30ktpa
3rd mine from Forrestania (New Morning)
Mill expanded 750 ktpa
First quartile cash costs
Sandstone resource
FinnAust in feasibility
Dividends
Mustang prod – 5ktpa
Forrestania discovery
Base Case production 35-40ktpa , plus new mines
Regional asset producing
FinnAust producing
Base Metals exposure
Dividends
Continued exploration upside
Independent producer
Growth Potential
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JkjjljljlkjKawana JV
80%
Bullfinch North JV
70%
Sandstone JV 70%
Lake King JV 70%
East Bull Lake JV
65% Cosmic
Boy Resource
Mt Alexander
JV 25%
New Morning
Mt Jewel 25%
Mt Gibb JV 70%
Hatters Hill
MakwaCanada
DiggersSouth
Spotted Quoll
Underground Upgrade
Cosmic Boy Mill
Expansion
SpottedQuoll
Flying Fox
Cosmic Boy Mill
= International = WA Regional = Forrestania
Koolyanobbing
Finland -Copper
BioheapSouthern
Cross Goldfields -
Other
Finland -VMS
Finland –Black Schist
The Portfolio
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Exploration Budget of A$30M for FY12, majority to be spent on drilling at Forrestania
100km strike length of prospective Forrestania Nickel Project, within 500km long nickel province
Drilling Priority within 8km long zone (below). New discovery would access existing mine infrastructure
Short Term – Near Mine Exploration
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Sandstone JV (70%)
Targeting a major new nickel camp with potential for multiple mines
One of largest areas of untested nickel prospective ground in Western Australia
Major step up in drilling and geophysical program during 2011/12
Southern Cross JV (70%)
WSA has 70% of nickel rights
Initial testing around Trough Well (Bullfinch North) where there is known mineralisation
Geophysical testing (MLEM) has detected anomalies at Trough Well and in adjacent areas.
Drill testing has commenced with continued drilling and geophysical programs for 2012
Assessment of other parts of JV tenure (approx 3000km2) underway
Western Australia – Regional Exploration
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WSA owns 19.9% of Mustang Minerals - a Canadian listed nickel and PGM company
WSA has two of 5 board seats, plus provides technical assistance Makwa Nickel/Copper mine in Manitoba – feasibility in progress targeting 5ktpa Ni in concentrate Potentially significant Palladium & Platinum discovery near Mayville Copper/Nickel deposit in Manitoba
WSA is earning a 65% interest from Mustang at East Bull Lake
80km west of Sudbury Highly anomalous Nickel/Copper and Platinum/Palladium in Gabbro intrusion Drill program to commence in 2012
Mayville drill core: 74.7m @ 0.75% Cu & 0.24% NiEast Bull Lake VTEM targeting
Canada – Mustang Minerals
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79% WSA, planned to list on AIM in 2012
300km long base metal province in Finland
Numerous nickel/copper/zinc mines & occurrences
12 major project areas, many drilling targets
Geophysics proving very effective in defining targets
Significant results from historic and FinnAust drilling
First mineral resource defined at Rautavaara
Major ramp up of drilling has commenced
Talvivaara type sulphide mineralisation – widespread through northern region
Finland – FinnAust Mining PLC Projects
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People
Left to right: Joseph Belladonna (Company Secretary), Dan Lougher (Managing Director), David Southam (Exec Director – Finance), Julian Hanna (Non-Exec Director), Rick Yeates (Non-Exec Director), Terry Streeter (Non-Exec Chairman), Robin Dunbar (Non-Exec Director) & Ian Macliver (Non-Exec Director)
Proven Depth & Experience
Terry Streeter and Julian Hanna founders of Western Areas
Extensive experience in nickel exploration, mining and processing
Global expertise in project sourcing, exploration and mine development
Strong banking, financial, M&A and corporate governance backgrounds
Involvement with other successful nickel companies (Jubilee Mines)
Solid understanding of Chinese markets, project financing and offtakes
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Board of Directors
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Nickel Industry
65% of primary nickel produced used for Stainless Steel
Stainless market dynamics a good proxy for nickel market
Demand growth in Stainless Steel / Nickel mostly driven by China
China still down the curve on stainless steel use per capita, moving to be a net exporter of stainless through finished goods
General growth outlook higher in China
Outlook
Market bottom likely reached – current price uneconomic for many, insufficient to bring on supply
Limited supply of good quality sulphide concentrate for smelters
Nickel Pig Iron constrained due to margin compression
Huge Laterite projects serially underperformers
Indonesian ore export ban and tax increase to bite
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Nickel Market Overview
“The current nickel market appears to be ignoring the
impending impact of Indonesian legislation… As such, the
combination of a tighter market in quarter four through the
implementation of ore export restrictions, plus an increase in
production costs for those remaining NPI producers due to impact of the 20% ore export tax is likely to support nickel prices,
with levels expected to move back above $US20,000/t during
the quarter.
“We therefore favour bullish positions in nickel on a 3-6
month forward basis and in a quarter-four context.”
Citigroup Analysts, 31 May 2012
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China Share of G
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Mill
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Stainless Steel ConsumptionG.R.: + 6.1% p.a.
Post-War Reconstruction Crisis Years Stainless Steel-Boom:
Asia - Europe - USAStainless Steel-Boom:
China
2008 - 2010World-Financial
Crises
© Heinz H. Pariser Alloy Metals & Steel Market Research
Global Stainless Consumption & Usage
© Heinz H. Pariser, Alloy Metals & Steel Market Research
Total Meltshop Feed
External Stainless Scrap
Internal Scrap
Primary Metals
Crude Stainless SteelShipments of
Finished Products
Production Recipe for 304 Stainless – 18% Cr, 8% Ni
(Basis 1,000 t)
540 kg External Stainless Scrap 150 kg
37 kg Primary Nickel 68 kg149 kg Charge & HC Ferrochrome 264 kg
ChinaEurope
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Stainless Steel feedstock
27© Heinz H. Pariser Alloy Metals & Steel Market Research
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Stainless Steel Containing & Fabricated Goods
Chinese finished goods exports rising
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EU 27
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China’s future?
2. Low Grade disseminated sulphide
Mature nickel camps contribute ~45% global production
NO MAJOR NEW DISCOVERIES
1. Conventional Nickel Sulphide
4. Chinese Nickel Pig Iron
Chinese nickel pig iron, 15% global production. Announced cut backs
ENERGY INTENSIVE, HIGH COST
3. Nickel Laterite
Laterite & Ferro Nickel contribute >40% global production
HIGH CAPEX, HIGH ENERGY COST
Increasing reliance on low grade and low quality nickel sulphide production.
HIGH CAPEX, MODERATE ENERGY
Increasing energy intensity and production cost
Increasing energy intensity and production cost
Energy Intensity
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Financial Appendices
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Highlights
Record quarter of concentrate sales of 8,154t vs 1st half of 11,595t:
Improved shipping logistics
2nd Jinchuan offtake contract commenced
Cash costs remain the lowest in class at A$2.48/lb
Cash & receivables increased by A$30m, excluding the purchase of Lounge Lizard
7th quarterly delivered without one downside operational surprise
New Spotted Quoll underground (SQUG) operation ahead of schedule and delivering as planned
Expansion of mill from 550ktpa to 750ktpa and SQUG well advanced
Intensive six month drilling program at the recently acquired Lounge Lizard deposit commenced
FYTD
Tonnes Mined Jun Qtr Sep Qtr Dec Qtr Mar Qtr Total
Flying FoxOre Tonnes Mined Tn's 88,873 95,647 100,647 81,143 277,437 Grade Ni % 4.8% 4.5% 4.9% 5.3% 4.9%Ni Tonnes Mined Tn's 4,236 4,258 4,920 4,278 13,456
Spotted Quoll - Tim King PitOre Tonnes Mined Tn's 69,133 59,955 71,406 57,204 188,565 Grade Ni % 6.3% 5.7% 4.8% 4.0% 4.8%Ni Tonnes Mined Tn's 4,325 3,400 3,455 2,280 9,135
Spotted Quoll - UndergroundOre Tonnes Mined Tn's - - 5,996 23,261 29,257 Grade Ni % 0.0% 0.0% 3.3% 4.5% 4.2%Ni Tonnes Mined Tn's - - 197 1,044 1,241
Total - Ore Tonnes Mined Tn's 158,006 155,602 178,049 161,608 495,259 Grade Ni % 5.4% 4.9% 4.8% 4.7% 4.8%Total Ni Tonnes Mined Tn's 8,561 7,658 8,572 7,602 23,832
Tonnes Milled and Sold Jun Qtr Sep Qtr Dec Qtr Mar Qtr Total
Ore Processed Tns 138,513 134,412 138,360 131,748 404,520 Grade % 5.3% 5.1% 5.2% 5.1% 5.1%Ave. Recovery % 93% 93% 92% 93% 93%Ni Tonnes in Concentrate Tns 6,783 6,413 6,632 6,266 19,311
Ni Tonnes in Concentrate Sold Tns 6,497 4,751 6,487 8,154 19,392 Ni Tonnes in Ore Sold Tns 830 357 - - 357 Total Nickel Sold Tns 7,327 5,108 6,487 8,154 19,749
Stockpiles Sep Qtr Dec Qtr Mar Qtr
Ore Tns 97,334 109,969 146,109 175,971 Grade % 5.1% 4.8% 4.5% 4.2%
Concentrate Tns 8,653 19,903 19,375 11,346 Grade % 14.1% 14.3% 14.1% 14.3%
Contained Ni in Stockpiles Tns 6,169 8,132 9,300 8,934
Financial Statistics Jun Qtr Sep Qtr Dec Qtr Mar Qtr Total
Group Production Cost/lbMining Cost (*) A$/lb 1.72 1.60 1.54 1.86 1.66 Haulage A$/lb 0.08 0.09 0.09 0.09 0.09 Milling A$/lb 0.39 0.35 0.35 0.37 0.36 Admin A$/lb 0.14 0.18 0.19 0.19 0.18 By Product Credits A$/lb (0.02) (0.02) (0.02) (0.03) (0.02)
Cash Cost Ni in Con (***) A$/lb 2.31 2.20 2.15 2.48 2.27
Cash Cost Ni in Con/lb (***) US$/lb (**) 2.45 2.29 2.18 2.62 2.36
Exchange Rate US$ / A$ 1.06 1.05 1.01 1.06 1.04
2010/2011 2011/2012
March 2012 Quarterly
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1st Half Highlights ($'000) 1H 2011/12
Mine Production (tonnes Ni) 16,230
Mill Production (tonnes Ni) 13,045
Recovery 93%
Sales Volume (tonnes Ni) 11,587
Cash Costs (US$/lb) 2.23
Cash Costs (A$/lb) 2.17
Exchange Rate USD/ AUD 1.03
Nickel Price (U$/tn) 18,761
EBITDA ('000) 96,633
EBIT ('000) 52,814
NPAT ('000) 24,102
Cashflow from Operations ('000) 64,412
Cash at Bank 160,856
Dividend (cents) 5.0
Highlights
Low cash cost producer A$2.17/lb
Mill recovery at 93%
NPAT of $24.1m – one of the few profitable nickel companies
Cashflow from operations $64.4m
o capex profile decreasing
o $30m exploration budget
Reliable dividend payer
Flexible balance sheet, strong cash
Undrawn debt facility $125m
3 Convertible Bonds:
o July 2012 @ 8.0% - A$105.5m (converts $7.73)
o July 2014 @ 6.4% - A$110.2m (converts $7.53)
o July 2015 @ 6.4% - A$120.0m (converts $6.46)
2H Sales likely to >13,500t of nickel in concentrate
1st Half Year FY2012 Highlights -Margins