Nickel producer Western Areas has upgraded its production guidance and lowered its forecast cash costs amid hopes of an improvement in the persistently soft nickel price.
The company upgraded its nickel in ore production forecast for the 2014 financial year to 27,000 tonnes, up from its original guidance of 25,000t to 26,000t.
Nickel in concentrate production is expected to reach 25,000t, up from 23,000t to 24,000t.
Western Areas also expects its unit cash cost of production to come in lower than $2.70 per pound, compared to original guidance of between $2.80/lb and $2.90/lb.
The company expects to report stronger first-half earnings and net profit when it releases its half-year financial results next week.
Western Areas managing director Dan Lougher said the guidance upgrades were a result of the continuing strong performance of the company's operations.
"Whilst we have been able to improve our cost profile with the cooperation of major service providers, our commitment to stringent and disciplined cost management remains core to our business ethic at Western Areas," he said.
Western Areas is one of several Western Australian nickel producers that could stand to benefit from a potential upturn in the weak nickel price, following Indonesia's recent ban on the export of nickel laterite ore.
In a research note, broker Argonaut Securities said Western Areas was in a favourable position to capitalise on renewed interest in the sector.
"Whilst the Indonesian ore ban offers some hope for higher cost producers, supply side capitulation remains inevitable," Argonaut said.
"Western Areas is the safest, best quality way to play this theme. After being irrationally sold off to ~$2 in response to the resignation of long-standing chairman Terry Streeter in late November 2013, the stock has recovered. However based on fundamentals, current levels remain an attractive entry point for all investors bar the most persistent nickel bears."
Western Areas shares were trading 3 per cent higher at $2.83 at 10:32am WST.
