Western Areas profit up 37%

Nickel miner Western Areas has reported a 37.5 per cent rise in net profit despite a small drop in revenue, with the company focusing on reducing costs in the year ahead.

Western Areas posted $35 million in net profit for the 2015 financial year, with revenue down 2.3 per cent to $312.7 million.

The company declared a final dividend of 4 cents per share, fully franked, to bring the total dividend to 7 cents.

Managing director Dan Lougher said the profit result was despite a lower realised nickel price, which was the main contributor to the revenue fall.

“Western Areas has experienced these nickel swings before, and with the nickel price base being set low for FY16, any nickel price increase from the spot price today would result in a positive impact to net profit as in previous years,” Mr Lougher said.

“Whilst analyst and consensus pricing for nickel is seen to be increasing in FY16 and beyond, shareholders should take comfort in the underlying business operating efficiently and the company remains profitable into the new financial year.”

He said the company’s operating cashflow of $148.5 million was driven by a reduction in operating and interest costs, following the repayment of convertible bond debt in July last year.

“It is this cash flow which has our balance sheet in the strongest position ever, having gone debt-free in July 2015,” he said.

Looking forward, the company expects to maintain nickel production at between 25,000 and 27,000 at a unit cash cost of $2.30 per pound to $2.50/lb.

“This allows for some subtle shifts in costs from capital to operating as we reduce the sustaining capital requirements and move to paste fill at Flying Fox,” the company said.

“Sustaining capital will reduce in FY16, mainly at Flying Fox as the mine has completed the bulk of its capital development.

“In this regard, the next five years will see sustaining capital at Flying Fox and Spotted Quoll (will) continue to fall,” it said.

The company also said it would be seeking to reduce its exploration spending.

 Shares in Western Areas were 2.2 per cent lower to $2.63 at 12pm.