This nickel producer’s shares are on the rise today…
The post Here’s why the Western Areas (ASX:WSA) share price is storming higher appeared first on The Motley Fool Australia. –
The Western Areas Ltd (ASX: WSA) share price is on course to end the week on a positive note.
In morning trade, the nickel producer’s shares are up 4% to $2.63.
Why is the Western Areas share price pushing higher?
The catalyst for the strength in the Western Areas share price on Friday has been the release of an update on its 10-year production targets and its expectations for FY 2022.
In respect to the former, Western Areas has firm plans in place to grow its production over the next decade despite the Forrestania operation coming to the end of its life during FY 2025.
According to the release, management expects its Cosmos operation to begin picking up the slack in FY 2023 when Forrestania production starts its decline. And while this is expected to lead to a bumpy few years of production increases and decreases, consistent growth is expected from FY 2027 through to FY 2031.
Western Areas’ Managing Director, Dan Lougher, commented: “The base case consolidated production target clearly demonstrates the steady, long-term nickel exposure that Western Areas offers.”
Mr Lougher also spoke positively in relation to demand for nickel. He explained: “The outlook for nickel demand remains strong with stainless steel and battery metals expected to continue to be in high demand in the medium and long term. Western Areas is one of the few companies that has a clear line of sight toward sustained nickel production into the 2030s.”
The managing director also revealed that he sees scope for its production targets to increase in the future.
“There remains real potential for further growth in the schedule with projects currently well advanced in studies and planning, such as the New Morning project, that we expect will add additional nickel tonnage to the 10-year base case,” he added.
What about FY 2022?
In the meantime, management expects nickel tonnes in concentrate production of 16,000 to 17,000 tonnes in FY 2022. This compares to FY 2021’s production of 16,180 tonnes.
Management explained: “FY22 production guidance remains materially consistent with the prior year and reflects a blended production of flotation concentrate and MREP high grade nickel sulphide precipitate. Spotted Quoll provides approximately 60% of the ore feed at Forrestania, with Flying Fox and lower grade stockpile material providing the balance.”
FY 2022’s production is expected to be achieved with a unit cash cost of production of A$4.25 per pound to A$4.65 per pound. This is in line with the cash costs of A$4.56 per pound that was reported during the first half of FY 2021.
Management explained: “The unit cash cost of production will continue to vary quarter on quarter. Cost increases for rise and fall adjustments have been included to reflect expected cost trends in the resource industry. The mining cost forecasts include mining and processing of Flying Fox ore trending toward reserve grade and treatment of selected low grade stockpile material, where mill capacity allows, noting lower grade material naturally results in a higher unit cost. The mill is expected to process approximately 580kt in FY22.”
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.