2. Disclaimer and Forward Looking Statements
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y p yp p y
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The information contained in this presentation has been prepared by Western Areas NL. No representation or warranty, express or implied, is or will be made in or in relation to,
and no responsibility or liability is or will be accepted by Western Areas NL, employees or representatives as to the accuracy or completeness of this information or any other
written or oral information made available to any interested party or its advisers and any liability therefore is hereby expressly disclaimed. No party has any obligation to notify
opinion changes or if it becomes aware of any inaccuracy in or omission from this presentation. All opinions and projections expressed in this presentation are given as of this date
and are subject to change without notice.
d bj t t h ith t ti
This document contains forward‐looking statements. These statements are subject to certain risks and uncertainties that could cause the performance or achievements of
Western Areas NL to differ materially from the information set forth herein, although such information reflects forecasts and projections prepared in good faith based upon
methods and data that are believed to be reasonable and accurate as at the dates thereof and although all reasonable care has been taken to ensure that the facts stated herein
are accurate and that the forward‐looking statements, opinions and expectations contained herein are based on fair and reasonable assumptions. Western Areas NL undertakes
no obligation to revise these forward looking statements to reflect subsequent events or circumstances. Individuals should not place undue reliance on forward looking
no obligation to revise these forward‐looking statements to reflect subsequent events or circumstances Individuals should not place undue reliance on forward‐looking
statements and are advised to make their own independent analysis and determination with respect to the forecasted periods, which reflect Western Areas NL’s view only as of
the date hereof.
The information within this PowerPoint presentation was compiled by Mr. David Southam, but the information as it relates to mineral resources and reserves was prepared by Mr.
Dan Lougher and Mr. John Haywood. Mr. Southam, Mr. Lougher and Mr. Haywood are full time employees of Western Areas. Mr. Lougher and Mr. Haywood are members of
AusIMM and have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to
p y yp p y y g
qualify as Competent Persons as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr. Southam,
Mr. Lougher and Mr. Haywood consent to the inclusion in this presentation of the matters based on the information in the form and context in which it appears.
For Purposes of Clause 3.4 (e) in Canadian instrument 43‐101, the Company warrants that Mineral Resources which are not Mineral Reserves do not have demonstrated economic
viability.
THIS PRESENTATION IS NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE U.S.
2
3. Agenda
“Western Areas has an enviable track record of
exploring, finding, developing and producing
highly profitable mines..”
Introduction
O
Operations
i
Financial Summary
E l
Exploration & Growth Outlook
i &G hO l k
Nickel Industry
Explore p
Develop
Sales Produce 3
4. Introduction – Corporate Summary
Listings: Member of S&P ASX 200 Top 15 Shareholders %
1 T Streeter 14.36
2 Colonial Group 8.58
Shares on Issue:
Shares on Issue: 179.7M
179 7M 3 M & A Greenwell
M & A Greenwell 5.45
5 45
4 Northwards Capital 3.19
5 Giovanni Santalucia 3.18
Options: 2.0M 6 Sydney Fund Manager 3.02
(varying strike prices >$7.00) 7 UBS Asset Management 2.82
8 Celeste Funds Management
g 2.56
Share Price: ~ A$4.20 (August2012) 9 State Street Corporation
10 Paradice Asset Management
2.44
2.39
11 Antares Asset Management 2.33
Market Cap: A$750 million 12 Concise Asset Management 1.92
(undiluted) 13 Independent Asset Management 1.80
14 Vanguard 1.74
15 Mount Kellet 1.70
Cash: A$165M at 30 June 2012
TOTAL 57.48
WSA 25 Month Share Price
$8.00
$6.00
$4.00
$4 00
$2.00
$0.00
Jul‐10
J l 10 Oct‐10
O 10 Jan‐11
J 11 Apr‐11
A 11 Jul‐11
J l 11 Oct‐11
O 11 Jan‐12
J 12 Apr‐12
A 12 Jul‐12
J l 12
Closing Share Price
4
5. Board of Directors
Proven Depth & Experience
Terry Streeter and Julian Hanna
Terry Streeter and Julian Hanna
founders of Western Areas
Extensive experience in nickel
exploration, mining and
p , g
processing
Global expertise in project
sourcing, exploration and mine
development
Strong banking, financial, M&A
and corporate governance
backgrounds
Involvement with other
Left to right: David Southam (Exec Director – Corporate), Dan Lougher (Managing Director),
successful nickel companies Rick Yeates (Non‐Exec Director), Terry Streeter (Non‐Exec Chairman), Ian Macliver (Non‐Exec Director) Julian
(Jubilee Mines)
(Jubilee Mines) Hanna (Non‐Exec Director), Robin Dunbar (Non‐Exec Director) & Joseph Belladonna (Company Secretary)
(Non Exec (Non Exec
Solid understanding of Chinese
markets, project financing and
offtakes
5
6. Powering through the Cycle
Western Areas is:
Australia’s lowest cash cost nickel producer
A proven explorer, developer and operator led by an experienced management team
An S&P ASX 200 index member
An S&P ASX 200 index member
Market cap ~ $740 million at current prices
Profitable, even at the current low A$ nickel price
A
A proven dividend payer, with a strong balance sheet
di id d ith t b l h t
Australia’s third largest producer of nickel at 31,000 tonnes of nickel mined and 25,000 tonnes of
nickel in concentrate produced
No 1 = BHP‐B Nickel West and No 2 = Glencore
Employer of approx 500 staff, either directly or through contractors
Into its sixth consecutive year of production, eight consecutive quarter with no downside surprises
First production 26 October 2006
Committed to stable organic growth from the current solid platform
6
7. Strong Asset Base
Production Exploration
Assets & Growth
Flying Fox
• 1st nickel mine Forrestania &
• 15,000 Ni tonnes WA Regional
per annum
per annum
Spotted Quoll
• 2nd nickel mine Canadian Assets
• 10,000 Ni tonnes
per annum
Cosmic Boy
• Nickel concentrator Finland
– treats ore from
both mines
7
10. Flying Fox Mine
Summary
Continuous high grade Nickel to 1300m. Open at
depth
depth
Resource ore grades increase at depth from 3.9% to
5.8% Nickel
Announced intersection T7: 34.7m @ 8.9% Nickel
Announced intersection T7: 34.7m @ 8.9% Nickel
Production
FY2012 – 373,726t @ 5.0% nickel for 18.5kt nickel
Low cash cost operation <US$3/lb
Low cash cost operation <US$3/lb
Purchase of Kagara Nickel Assets
Combined Total High Grade Resource now stands at
around 115,000t of Nickel
around 115,000t of Nickel
Major drilling program commenced at Lounge Lizard
for next 6 months
T5/ T6 & T7 down dip extensions cross into Lounge
Lizard and remain open at depth
Flying Fox now approaching a 10 year mine life
Purchase includes 300sqkm of tenements adjacent
to Forrestania operations
t F t i ti
10
11. Spotted Quoll Mine
Summary
Ore reserve was upgraded in June 2012 by 94%
with an exceptional 88% conversion ratio:
3.095mt @ 4.20% containing 131,360t nickel
R
Remains open at depth
i t d th
Drilling is ongoing which will result in further
conversion of inferred resource to indicated to
reserve
Already well over a 10 year mine life
Production
Stage 1 underground first ore delivered ahead of
schedule – (Nov 2011)
Ramp up to 10,000tpa nickel in FY13
Mine optimisation study well advanced for
potential increase in production up to 15,000tpa
nickel
11
12. Forestannia Nickel Concentrator
Concentrator Summary
Current capacity of 550,000tpa of ore
f f
Nickel concentrate output >25,000tpa Ni
Concentrate grades of around 14.0% Ni
Premium blending product (Fe/Mg ratio >15)
14,000t of concentrate storage capacity
Export Infrastructure and Logistics
Access to >1400 sealed shipping containers
No Environmental issues
Using 25 trucks for concentrate transportation
Shipping contract in place, FOB Esperance Port
Concentrator Expansion
Preliminary high grade expansion study (750ktpa) completed
Expansion configured for upgrade to 1mtpa of ore
Expansion configured for upgrade to 1mtpa of ore
Some items of infrastructure (crusher) already capable of 1mtpa
12
13. Concentrate Supply and Offtake Contracts
Concentrate Supply 1000
Global Smelter Demand vs Global Concentrate Supply
950
Tightness in smelter supply to be experienced from 2013 900
850
Global nickel sulphide grades in decline
Nickel in Conc/ Kt
800
Reliable nickel sulphide concentrate supply dwindling
750
700
Laterites and Nickel Pig Iron do not fill the void 650
600
550
Offtake Contracts 500
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Long term offtake to BHP – 12ktpa nickel in conc Nickel in Concentrate Supply Smelter Demand
New Jinchuan contract signed:
o 12 month contract extension
o Improved commercial terms
o Significant uncommitted offtake beyond 2013
Tender process to commence Sept/Oct 2012
WSA in a unique position being an independent producer
Ability to complete spot/ opportunistic sales
NOTE: The graph FORRESTANIA – OFFTAKE CONTRACTS is based on Western Areas’ 10 Year
Production Targets. These Targets include estimates and assumptions on production rates of
existing ore reserves, conversion of existing mineral resources to ore resources and assumptions
on potential extensions to existing mineral resources, based on current information. These
Production Targets may vary due to future drilling results, nickel prices, costs and market
conditions. Refer to Disclaimer and Forward Looking Statement in Presentation
13
15. Report Card FY2012
Delivering on Objectives
Objectives What's Been Delivered
Pay Dividends 5c interim and 6c final dividend
Cashflow from Operations A$159m cashflow, debt reduction and dividends
Profitable through the cycle Weak nickel price, EBITDA A$185m, NPAT $40m
Cash costs below A$2.50/lb A$2.43/lb
Increase resources at Spotted Quoll 130kt nickel reserve
Increase resources at Flying Fox Purchased KZL nickel assets ‐ Lounge Lizard +40kt Ni
New discovery at Forrestania Sunrise ‐ early encouragement
Mill expansion
Mill expansion Study complete awaiting board decision
Study complete ‐ awaiting board decision
Tidy up backyard Outokumpu royalty retired
15
16. Financial Highlights
Full Year Highlights ($ 000)
Full Year Highlights ($'000) FY 2011
FY 2011 FY 2012
FY 2012
Mine Production (tonnes Ni) 32,222 31,102
Mill Production (tonnes Ni) 25,663 25,641
Recovery 91% 92%
Sales Volume (tonnes Ni) 27,498 26,637
Cash Costs (US$/lb) 2.11 2.50
Cash Costs (A$/lb)
h ( $/lb) 2.12 2.43
Exchange Rate USD/ AUD 0.99 1.03
Nickel Price (U$/tn)
25,089
17,791
EBITDA ('000) 312,018 186,583
EBIT ('000) 231,991 94,902
NPAT ('000) 134,973 40,181
Cashflow from Operations ('000) 276,235 159,253
Net Cashflow ('000) 143,580 (43,446)
Cash at Bank 208,948 165,502
Dividend (cents) 25.0 11.0
16
17. Income Statement
WSA NPAT ‐ Actual FY2011 vs Actual FY2012
WSA NPAT ‐ Actual FY2011 vs Actual FY2012
250
$10.0 ‐$1.3 ‐$11.7
200 $13.1 ‐$16.5
$43.0
$
‐$131.4
150
$135.0
100
ns
Million
50 $40.2
0
Tax
alties
mort
FY11
ther
ther)
FY12
(Vol)
Revenue (Price)
Depn & Am
Actual F
Actual F
Ot
Revenue (
Roya
Revenue (Ot
‐50
‐100
‐150
150
FY12 NPAT would have matched FY11 if not for the nickel price.
17
21. Canada – Mustang Minerals
WSA owns 19.9% of Mustang Minerals ‐ a Canadian listed nickel and PGM company
WSA has two of 5 board seats, plus provides technical assistance
Makwa Nickel/PGE mine in Manitoba – feasibility in progress targeting 5ktpa Ni in concentrate
Mak a Nickel/PGE mine in Manitoba feasibilit in progress targeting 5ktpa Ni in concentrate
Mayville Copper/Nickel deposit in Manitoba – drilling in progress for open pit resource
Potentially significant Palladium & Platinum discovery adjacent to Mayville
WSA is earning a 65% interest with Mustang at East Bull Lake
is earning a 65% interest with Mustang at East Bull Lake
80km west of Sudbury
Highly anomalous Nickel/Copper and Platinum/Palladium in Gabbro intrusion
Drill program commenced in 2012
East Bull Lake VTEM targeting Mayville drill core: 74.7m @ 0.75% Cu & 0.24% Ni
21
22. Finland – FinnAust Mining PLC Projects
81% WSA, planning to list on AIM ‐ dependent on
market conditions
300km long base metal province in Finland
Numerous nickel/copper/zinc mines & occurrences
12
12 major project areas, many drilling targets
j j d illi
Geophysics proving very effective in defining targets
ZTEM survey completed
ZTEM survey completed
Significant results from historic and FinnAust drilling
Major ramp up of drilling has commenced at Tormala &
j p p g
Hammaslahti
22
23. Growth Outlook
Short Term Medium Term Long Term
< 12 Months
< 12 Months 2‐5 years
2‐5 years >5 years
>5 years
Flying Fox > 10 years – drilling in Spotted Quoll & Flying Fox Base Case production 40‐
progress – 30ktpa 50ktpa , plus new mines
Sunrise drilling results Sunrise reserve & Large disseminated
production – 5‐10ktpa resource potential
Mill expansion decision
4th mine from Forrestania FinnAust producing
Cash costs <US$3.00/lb (New Morning)
Base Metals exposure
Strong cashflow Mill expanded 750ktpa
Dividends
Dividends First quartile cash costs
Continued exploration
New offtake contract – process FinnAust in feasibility upside
begin Sept/ Oct
Dividends Independent producer
List FinnAust Mining
Mustang prod – 5ktpa
23
24. The Portfolio
Kawana JV
JV
80% Sandstone
JV 70% East Bull
Lake JV
65%
Cosmic Bullfinch Makwa &
North JV
N h JV Mayville
M ill Spotted
Boy
70% Canada Quoll
Resource New
Morning
Mt Flying
Koolyanobbing
y g Diggers
Alexander
Alexander Fox
South
JV 25%
Sunrise
Spotted
Mt Gibb JV Quoll Bioheap
Lake King
70%
70% Southern
JV 70%
JV 70% Underground
Underground
Cross
Upgrade
Goldfields ‐
Other Cosmic
Finland – Cosmic Boy Mill
Hatters
Hill Copper Boy Mill
Jkjjljljlkj
jj j j j Expansion
Finland –
Nickel
Mt Jewel 25%
= International = WA Regional = Forrestania
24
26. When will the Cycle Turn?
Market bottom likely reached – current price
uneconomic for many, insufficient to bring on
uneconomic for many insufficient to bring on
“The current nickel market appears to
supply
be ignoring the impending impact of
Limited sources of good quality future supply for Indonesian legislation…
smelters
“We therefore favour bullish positions
Nickel Pig Iron constrained due to margin in nickel on a 3‐6 month forward basis
compression and in a quarter‐four context.”
Huge Laterite projects serial underperformers
Huge Laterite projects serial underperformers
Citigroup Analysts, 31 May 2012
Capex blowouts
Not meeting production targets “We are raising our long‐term nickel
price from $7.27/lb to $9.5/lb. …. We
I d
Indonesian ore export ban and tax increase still to
i b d i ill believe that capex inflation remains a
bite significant issue for the nickel
industry.”
Fortunately, not in the business of making
predictions BofA Merrill Lynch, 27 July 2012
Many analysts tipping next 3 – 6 months for pickup,
in conjunction with seasonal demand pickup
26
29. Energy Intensity
1. Conventional Nickel Sulphide
Mature nickel camps contribute ~45%
global production
global production
NO MAJOR NEW DISCOVERIES
2. Low Grade disseminated sulphide
2 L G d di i t d l hid
Increasing reliance on low grade and
low quality nickel sulphide production.
HIGH CAPEX, MODERATE ENERGY
,
3. Nickel Laterite
Laterite & Ferro Nickel contribute >40%
global production
HIGH CAPEX, HIGH ENERGY COST
4. Chi
Chinese Nickel Pig Iron
i k l i
Chinese nickel pig iron, 15% global
production. Announced cut backs
ENERGY INTENSIVE, HIGH COST
, Increasing energy intensity
and production cost
Increasing energy intensity
and production cost 29
32. Income Statement
Commentary (FY 2012)
Earnings Data ($'000)
g ( ) 1H FY 2012 2H FY 2012 FY 2011 FY 2012 Ni price down 29% year on year (QP ‐
Exchange Rate USD/ AUD 1.03 1.03 0.99 1.03 A$26.4m FY2012) reducing revenue by
Nickel Price (U$/tn avg)
18,761
18,276
24,000
17,791 A$131.4m.
Revenue 149,106 181,592 468,659 330,698 Despite nickel price, EBITDA margins
remained strong >50%
>50%.
EBITDA 96,633 89,950 312,018 186,583
Depreciation & Amortisation 43,819 47,862 80,027 91,681 Switch to two underground mines in Feb
2012 – SQ Open Pit was A$1.60/lb
EBIT ('000) 52,814 42,088 231,991 94,902
Cost management remained in focus with
Interest Expense ( 000)
Interest Expense ('000) 18,086
18 086 19,355
19 355 36,721
36 721 37,441
37 441 unit cash costs at $A2.43/lb.
Tax ('000) 10,626 6,654 60,297 17,280
D&A increases in line with higher
NPAT ('000) 24,102 16,079 134,973 40,181 investment mine development/ capex &
( )
Dividend (cents) 5.0 6.0 25.0 11.0 KZL nickel purchase.
Earnings per share (cents) 13.4 9.0 75.1 22.4 D&A should stabilise/reduce in FY2013
with increased reserves.
Final dividend declaration of 6c (partially
franked) reflects 49% of NPAT returned to
shareholders for FY2012.
32
33. Cashflow Statement
Commentary (FY 2012)
Cashflow Statement ($'000) 1H FY 2012 2H FY 2012 FY 2011 FY 2012
Cashflow from Operations of A$159 3m
A$159.3m
Operating Cashflow 64,412 94,841
276,235
159,253
2nd half FY12 produced A$4.6m free cashflow
Less: despite a weaker 2nd half nickel price
Exploration (17,860) (15,940) (18,110) (33,800)
A$ Ni price down 29% on FY11 ‐A$131.4m
FinnAust Investment
FinnAust Investment (4,058)
(4 058) (3,307)
(3 307) (1,964)
(1 964) (7,365) impact.
impact
Acquisition of Mining Interests (1,512) ‐ ‐ (1,512) US$15m for Outokumpu Royalty payout.
Mine Development (38,506) (28,911) (70,664) (67,417)
Exploration spend of A$33.8m delivers Sunrise
Capital Expenditure (8,087) (5,625) (13,417) (13,712) and significant resource/ reserve extensions
Investment activities
i ii (274)
( ) (811)
( ) (1,999)
( ) (1,085)
( 08 ) KZL nickel purchase costs of A$71.1m includes
Outokumpu Royalty Payout (14,926) ‐ ‐ (14,926) the A$3.1m for ore stockpiles.
Payment for subsidiary ‐ (71,100) ‐ (71,100) Proceeds from financing ‐ draw down of
Proceeds from Share Issues ‐ ‐ 380 ‐ A$45m from ANZ for KZL nickel purchase
Proceeds/(Costs) from Financing (319) 44,486 (3,517) 44,167 Dividend payments reflect 15c final dividend
Dividends Paid (26,962) (8,987) (23,364) (35,949) from FY11 and 5c interim dividend for FY12.
Net Cashflow (48,092) 4,646
143,580 (43,446)
Cash at Bank
Cash at Bank 160 856
160,856 165 502
165,502 208 948
208,948 165 502
165,502
33
34. Free Cashflow Waterfall
WSA Cashflow ‐ Actual FY11 vs Actual FY12
250
$8.0 $3.2 ‐$4.8 ‐$5.4
200 $47.7 $10.0 ‐$12.6 ‐$14.9
‐$15.7
‐$71.1
150 $143.6
$143 6
100 ‐$131.4
Millions
50
M
‐$43.4
0
Other
Dividends
Mine Dev
Financing
Exploration
KZL Nickel
Op Costs
Actual FY11
yalty Buyout
Sales (Price)
Actual FY12
Sales (Vol)
national Inv
‐50
100
‐100
A
A
Intern
S
Roy
‐150
Nickel price has driven the changes from FY11 to FY12
Nickel price has driven the changes from FY11 to FY12 – A$131.4m
KZL nickel purchase is a one‐off item – A$71.1m
34
35. Balance Sheet
Commentary (FY 2012)
Balance Sheet ($'000) FY 2011 FY 2012 Flexible balance sheet with good cash generation
Cash at Bank
C h tB k 208,948
208 948 165,502
165 502 Total Assets continue to grow with mine
Receivables 27,719 25,360 development and acquisitions
Stockpiles & Inventory 30,942 42,121 Repaid A$105.5m bond on 2 July 2012 – well
PP&E 111,683
111 683 107,111
107 111 flagged to market and strong positioning
gg gp g
Exploration & Evaluation 91,875 133,282 Capital Management has plenty of headroom:
Mine Development 209,454 295,634 ANZ Facility of A$125m – drawn down $45m
for KZL nickel purchase
Other 11,705
, 5,958
,
Convertible bond July 2014 – A$110.2m
TOTAL ASSETS 692,326 774,968
Convertible bond July 2015 – A$125.0m
Trade & Other Payables 59,791 66,444
FY13 capex/mine development likely to be <A$70m
Short Term Borrowings 61 162,656
Long Term Borrowings 344,016 256,003 FY13 exploration around A$20m, with a reduction
l d $ h d
in regional projects, but full ramp‐up around
TOTAL LIABILITES 403,868 485,103 Forrestania
SHAREHOLDERS EQUITY 288,458 289,865
35
