[ferro-alloys.com]Western Areas remains bullish on the nickel price saying market fundamentals appear strong despite volatile conditions in the first half caused by geopolitical factors.

Releasing its December-quarter operating results today, the nickel miner noted global stockpiles of the steel-hardening commodity had fallen towards 200,000 tonnes during January, their lowest levels in more than five years, which it said demonstrated that demand was continuing to outstrip supply.

“Encouragingly, the nickel price has started the new calendar year on a positive trend, with stainless steel consumption remaining healthy and the outlook for nickel-intensive electric vehicle battery demand remaining promising,” the company said.

Prices have risen from below $US10,500/t late last year to $11,615/t today.

Western Areas produced 5415t of nickel in the quarter at costs of $3.15/lb, both within previously stated guidance.

Managing director Dan Lougher said the company continued to deliver consistent operational performance in line with expectations for the first half.

“Pleasingly the quarter saw an increase in both nickel production into concentrate and nickel tonnes delivered into the company’s offtake contracts,” he said.

Western Areas said its Mill Recovery Enhancement Project was continuing to ramp up and was consistently producing product in line with design specifications with several bulk container shipments of product delivered to multiple customers via spot market contracts.

The company officially sanctioned its $300 million Odysseus underground project in October, reviving the historic Cosmos nickel complex near Leinster with early works already under way.

RBC Capital Markets analyst Paul Hissey said he believed Western Areas could fund the project using cash reserves ($134.3 million at December 31) based on the bank’s rising nickel price assumptions.

He rated the stock as “sector perform” with a price target of $3 given a lack of identifiable catalysts, outside of the nickel price, that would drive a re-rating.

“In addition, persistence of (prevailing) spot prices would likely weigh on sentiment towards Western Areas given its pure nickel exposure,” Mr Hissey said.

The MREP and Odysseus are part of the company’s bid to take advantage for the expected surge in demand for nickel in the manufacture of batteries for electric vehicles.

(The Western Australian)

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