Western Areas flags cost rise in FY19
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Shares in Western Areas have fallen more than 6 per cent today, after the nickel producer posted an $11.8 million net profit for the year to June but forecast a rise in costs in 2019.
Western said its underlying net profit after tax result was a $23.3 million turnaround on the previous year’s loss of $11.5 million.
The company reported an increase in revenue to $248.3 million, while the nickel price also rose to $7.53 per pound.
Western’s cash costs increased from to $2.63/lb in FY18, compared to $2.38/lb last year.
The company has commenced early works on its Odysseus project, with a definitive feasibility study expected in the September quarter.
Managing director Dan Lougher said the positive results followed a number of challenging years for the company.
“Western Areas continues to efficiently operate its core assets and has an exciting period ahead with the upcoming Odysseus definitive feasibility study, a new offtake agreement to be secured for our high nickel grade MREP product, plus the commencement of more formal discussions on our existing concentrate offtake contracts with BHPB Nickel West and Tsingshan Group, which expire towards the end of CY19,” he said.
“Whilst our balance sheet is in a strong position to facilitate funding organic growth initiatives, we remain disciplined in our capital management and must balance the improved financial results and future capital requirements with dividends to shareholders.”
However, Western said it was also forecasting a further rise in costs in FY19, providing guidance of between $2.80/lb and $3.20/lb.
“Contributing factors include increases in contractor rates, plus rise and fall allowances based on forward trends in the resource industry,” the company said in a statement to the ASX.
“Furthermore, given the improved nickel price and outlook, certain major contractor rate discounts, negotiated during the last two years of low nickel prices, have now ceased.
“WSA’s labour costs will marginally increase as the company implements additional retention strategies.”
Shares in Western finished down 6.06 per cent at $2.79 each today.
The company also declared a 2 cents per share fully franked dividend, which represents a payout ratio of 46 per cent on FY18 profit.
Western has forecast an exploration spend of between $12 million and $15 million in FY19.