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Edited Transcript of WSA.AX earnings conference call or presentation 19-Aug-19 11:30pm GMT

Full Year 2019 Western Areas Ltd Earnings Call

WEST PERTH Aug 26, 2019 (Thomson StreetEvents) -- Edited Transcript of Western Areas Ltd earnings conference call or presentation Monday, August 19, 2019 at 11:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Daniel Richard Lougher

Western Areas Limited - MD, CEO & Director

* Joseph Belladonna

Western Areas Limited - CFO & Company Secretary

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Conference Call Participants

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* Daniel Morgan

UBS Investment Bank, Research Division - Director and Analyst

* Ian Warden

Global Mining Research Pty Limited - Mining Analyst

* Ian Davies;I.C.T. Family Trust;Owner

* Jon Bishop

Euroz Securities Limited, Research Division - Executive Director and Resources Analyst

* Larry Hill

Canaccord Genuity Corp., Research Division - Analyst

* Matthew Frydman

Goldman Sachs Group Inc., Research Division - Research Analyst

* Michael Slifirski

Crédit Suisse AG, Research Division - MD

* Paul Hissey

RBC Capital Markets, LLC, Research Division - Analyst

* Peter O'Connor

Shaw and Partners Limited, Research Division - Senior Analyst of Metals and Mining

* Sophie Spartalis

BofA Merrill Lynch, Research Division - VP and Senior Resources Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Western Areas' full year results. (Operator Instructions) Please be advised that today's conference call is being recorded.

I'd now like to hand the conference over to your speaker today, Mr. Dan Lougher. Thank you. Please go ahead.

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [2]

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Good morning, everybody, and thank you for joining us today to discuss the full year results. I'm Dan, and with me today is our CFO, Joe Belladonna. I'll start today with some commentary on the high-level points from our results, before handing over to Joe for a few comments and to talk through the financial results.

Our Forrestania Operations have again delivered a year of reliable production, in line with guidance and a pleasing year-on-year increase in nickel -- in concentrates sold. This increase in production, together with the increase in nickel price in Australian dollars terms, which has been extremely good, and tight control over rising cost pressures, have combined to deliver a 20% increase in net profit over the year. The second half, in particular, was very strong, and we hope to continue that momentum into FY '20 with the nickel price in recent weeks being -- rallying very strongly.

We are confident that the fundamental outlook in both the medium and longer term for nickel remains very robust. With good underlying growth in stainless steel demand and potentially quite aggressive growth in demand from the new electric vehicle battery sector, particularly as we see more rich battery chemist -- nickel-rich battery chemistries gaining market share and especially what is happening up in China.

We recognize that predicting the short-term nickel price is a challenge, given the potential to pulling through -- influenced by global geopolitical factors of government decisions from time to time. However, short-term volatility does not undermine our confidence in the fundamental outlook for nickel.

With that confidence in the outlook this year, we took the significant step of sanctioning a decision to mine at what will be our next major nickel mining operation, the Odysseus project at our Cosmos operations. This is a long-life, low-cost operation, with a 10-year base case production profile scheduled to commence concentrate production in late 2022.

We are very pleased with progress to-date with the completion of the early capital works, and we've secured key long-lead items in the form of a shaft headgear and all handling infrastructure from South Africa. We are all very excited about the potential of Odysseus and look forward to progressing the project through to production.

As you'd also be aware, we have significant upside present at the project in the first instance through the AM5 and AM6 deposits, which were not included in the definitive feasibility study. Our balance sheet continues to be robust, with $144 million cash on hand at year-end, providing ample basis to fund investment growth and Odysseus development.

Notably, on our cash position, the Kidman transaction with Wesfarmers is due to conclude in September, which will lift our cash by approximately $33 million.

The Board has moved to declare a $0.02 per share dividend, in line with our commitment to maintain reasonable returns to shareholders

(technical difficulty)

and fund organic growth projects

(technical difficulty) all production as FY '19, with strong investment in growth and development activities.

In the first half of FY '20, we will also be back in the market for refreshed offtake contracts for Forrestania, which we're extremely excited about. And we are very encouraged that initial indications in this respect are very positive, with the demand for high-quality concentrate evident. And in addition, we are seeing OEMs also now wanting to have a conversation around the table regarding nickel sulfide concentrates.

I will now hand over to Joe Belladonna, who will cover the metrics for the revenue.

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [3]

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Thanks, everybody, for joining us today. Look, I'm just going to refer to the presentation that was released earlier this morning. Look, I'm not going to cover it in significant detail. Happy to take questions later on as time permits throughout the day if anyone's got really detailed questions. We'll also have the chance for Q&A at the end of the presentation here.

So just moving through some of the key takeaways from FY '19. We're really pleased to once again meet all of our guidance metrics. We had year-on-year increase in sales with 21,675 tonnes delivered to customers. The higher nickel price prepay-ability, AUD 7.84, in Aussie dollar terms. There's a few moving parts there. Part of it is an increased U.S. dollar rate, but the depreciating Australian dollar obviously had a significant impact on our revenue line, given that we're an Australian dollar functional currency. So AUD 7.84, and obviously, that price has continued to strengthen into the early parts of FY '20.

Net profit after tax was $14.2 million. That does include some of the repricing of creditors based on July's nickel price. Cash at bank, $144.3 million. And no debt on the balance sheet, which is very important as we head forward maintaining the strength and flexibility with the capital projects that we have on hand.

Fully franked dividend of $0.02 per share, which is a return of 38% of net PAT approximately, which we think is a reasonable return based on the results for the year and the strengthening nickel price that we've seen, while also not, I guess, being too much of a drain on our cash at bank as we continue to fund that growth.

The Odysseus project has obviously been one of the key areas that we've been focused on over the financial year. Following the decision to mine in October, we did commit to purchasing the haulage shaft, and that was part of the $299 million preproduction capital that we had planned for that project had started to be spent through this financial year. And the early works was finished on time and on budget, which was very important. That had commenced in the prior year and was completed at 30 June.

And as Dan said, we're looking forward to completing both offtake contracts for Forrestania. And we're also really happy to have announced the new offtake agreement with SMM over in Japan to take our high-grade MREP products, which is a new key product line for us this year.

Just across these financial snapshots, we had a really good increase in revenue this year based on the high nickel price. We also had managed to control our costs coming in just shy of the midpoint of guidance, but on the right side of that, which is really pleasing.

Organic growth projects investment into Odysseus across feasibility, early works plus the commencement of the construction following the decision to mine totaled $35 million, which was a significant investment into our long-term future.

Look, the year was a bit of a year of 2 halves. We had flat earnings in the first half. Second half, based on a lower-cost profile coming out of the mines, plus with moderation in the capital expenditure, we did $10 million worth of free cash flow in the second half of FY '19, which we think is a great outcome given the investments that we continue to make.

Just moving on to the income statement, very similar story to what I've just covered off there. The main thing that I've wanted to highlight there is, obviously, a good solid net profit after tax. There's no underlying influences on that result this year, which is good, and the $0.02 dividend. Just, I guess, pointing out as well that the Aussie dollar nickel price as at today is sitting above $10 a pound. And that obviously, if it's maintained, will definitely have some influence on the earnings and cash flows going forward.

EBITDA margin, first half, second half. The second half, obviously, had a good increase in EBITDA margin and EBITDA. And once again, driven a lot by -- significantly driven by that nickel price.

On the cash flow statement, obviously, the earnings and revenue flows through. We had really solid operating cash flows and offset by investments across the group. Most notably, if we look at the cash flow -- if we reverse out the Cosmos early works program and early capital, we would have had a solid free cash flow result for the group for the year. But obviously, when we're investing in new growth areas, it did push it into a slight negative cash flow result for the year of $7.4 million. But like I said, if we reverse out the significant capital into Odysseus, that would have been a positive free cash flow.

The balance sheet remained strong with 0 debt and plenty of cash there. And just heading on to the guidance, look, it's relatively self-explanatory. It's very similar to last year on a lot of levels. Just pointing out a couple of key points there.

Around the Odysseus development expenditure, there has been a change in the timing of the expenditure, but the overall expenditure has not changed. On the press release that was released today and deeper into the corporate presentation, we have recast the development expenditure going forward. So just confirming, there's no increase in the overall expenditure, just a change in the timing of that.

Just on the unit cash costs, the main -- it's what we consider to be a modest increase in that guidance range. We did come in around the center of that guidance range last year. Grade has a significant impact on that. The mines have the ability to surprise us on the upside with grade, which helps us control unit costs. But as we do mine deeper out of Spotted Quoll, grant support and haulage from the lower areas of the mine do increase, and we've also factored in just some trends around rise and fall, labor rates and mining consumables. But we do think it's still a very modest increase in that guidance range provided, and we always work very hard to make sure we're doing the best we can around that.

And just on the nickel in concentrate production, we are forecasting to have 500 to 700 tonnes of MREP material reporting into that overall production. And exploration investments are remaining relatively stable year-on-year across all of the groups, and it does include continued exploration drilling into that Stage 3 lower panel of Spotted Quoll as well.

From there, I think we might move on to Q&A. Operator, please.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we have a question from Michael from Credit Suisse.

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Michael Slifirski, Crédit Suisse AG, Research Division - MD [2]

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I've got 3 or 4 or maybe 5 questions. First of all, the Kidman cash, you talked about -- [root -- leadings] were an increase of $33 million in your cash balance. Aren't you going to pay the tax on that on the way through?

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [3]

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Yes. That's great, Michael. The timing of that is probably going to be outside of the 12-month period. So we'll report the cash immediately, and obviously, tax returns don't go in until later after the financial year has ended. But there will be some tax impacts on that for sure.

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Michael Slifirski, Crédit Suisse AG, Research Division - MD [4]

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Yes. Great. Can you give us some guidance as to what you might receive after tax?

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [5]

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Look, it should be north of $25 million.

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Michael Slifirski, Crédit Suisse AG, Research Division - MD [6]

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Great. Secondly, the MREP tonnes guidance, is all that material within the MREP concentrate? Or some of that -- the cyclone-recovered material that goes in the other con, something about the payability? Is that you're getting enhanced payability on all that tonnage? Or just a portion of it?

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [7]

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Just a portion of it. The leaching circuit -- it's hard to demarcate how much will go through each product stream, but we know which -- what will be the average recovery that we'll receive out of that MREP unit. We're probably been -- err-ed on the side of caution, with regard to the type of tonnage there as well.

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Michael Slifirski, Crédit Suisse AG, Research Division - MD [8]

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Okay. The Odysseus development, when I look at that helpful section that you presented a few times, you go right past AM5, AM6. What's the opportunity to grab a few tonnes at AM5, AM6 and truck-hoist them, truck-haul them, before the main game is accessed? Before Odysseus is accessed and before the shaft is completed?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [9]

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Yes. Good question, Mike. Look, the first thing is that we've got the engineers doing work on the reserves right now. So I guess I'll be reporting that probably in the December quarter, that what type of reserves position for those 2 orebodies is more likely to be biased towards AM6 because AM5 was partially mined.

Look, we will be in a position March next year to actually have a look at that area and then work out what's the best way forward. Remember, our mill sort of upgrade is happening afterwards. So we are having a, I guess, conversation with our neighbors regarding some toll treatment, just to have that covered off in terms of an available concentrator to deal with the ore.

And then it will be up to us, Mike, as to how we want to deal with that reserve, whether we pop in -- look, truck haulage is not a problem. And remember, we've also got an intermediate shaft position as well before we finalize the full depth of the shaft haulage system. So there will be, actually, a point where we can actually do a mid-shaft loading on the way down.

So there's many options that we can look at. And to be honest with you, until I see the actual reserve and the quantum of the nickel tonnes, then, obviously, I can then play with that in terms of how we want to bring it into the schedule.

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Michael Slifirski, Crédit Suisse AG, Research Division - MD [10]

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Yes. But sort of indicatively, between the development waste that you'll have to haul up that decline before the shaft is in, and is there sort of a feeling as to what the decline could support without compromising getting waste out of the mine?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [11]

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Yes. I don't think there'd be any compromise whatsoever. It will all be with regard to our internal ventilation system, which by that stage should be up and running.

But look, the mid-shaft loading point is the obvious position. And as you've seen with the headgear CapEx, the schedule being brought forward, we obviously will be in a stronger position to start the shaft works than we had in the original DFS schedules.

So I'm not seeing any real conflict between waste hoisting and some more hoisting, if we choose to go down that path. But as I've said, until I get that reserve in my hands, I can't really make a judgment as to how I want to play that particular addition into the bigger Odysseus plan.

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Michael Slifirski, Crédit Suisse AG, Research Division - MD [12]

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Great. I've got a couple more, quickly. The CapEx guidance, the preproduction capital, how do you get to that number? And that if we add the $35 million that you spent in -- that you just completed to the remaining CapEx, it exceeds that number. So what's in the predevelopment capital number that we're sort of including to get a higher number?

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [13]

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Yes. So the early works was always treated separately because we were going to do that regardless to return the mine to care and maintenance. And so then we've already spent the best part of $10 million this year securing the shaft, completing the design for the shaft, and commencing some of the work underground on pump stations and et cetera.

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Michael Slifirski, Crédit Suisse AG, Research Division - MD [14]

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Okay. A couple last ones. The sort of increased capital intensity this year, how should we think about that in the context of what the outlook is? Is that sort of recognizing changed tenor of the orebodies that you're mining? And is that sort of higher capital base something that we should be sustaining until development completes?

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [15]

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Look, there's a couple of moving parts in the sustaining capital guidance. Flying Fox is accessing -- still accessing new areas, specifically down at T6, down at the bottom of the mine, which is some of those tonnes we may not have bought into the schedule in prior years. So we did do the ore reserve upgrade late in the financial year. So there's a little bit of extra capital going into Fox to access some new areas.

And at Spotted Quoll, it's just a continuation of the normal decline development. It's probably -- it will start to moderate at Spotted Quoll as we head forward from this financial year onward as we start to be more fully developed down at depth there, pending what happens with Stage 3.

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Michael Slifirski, Crédit Suisse AG, Research Division - MD [16]

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Okay. And then, the final one, with that sort of higher capital number depreciation going forward, does it reflect what you've done in prior years? Or would that increase?

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [17]

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Look, it would be representative because we're adding new tonnes as well as extra cost down at Fox. So it won't be -- it won't overly blow out, but obviously, every tonne of nickel will carry some form of amortization, which is a relatively consistent sort of number, given that we run life-of-mine amortization rates on them.

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Operator [18]

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(Operator Instructions) Our next question here is from Daniel Morgan from UBS.

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Daniel Morgan, UBS Investment Bank, Research Division - Director and Analyst [19]

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Just wondering about the existing operations. So Flying Fox at the moment on reserve has a 3-year life, Spotted Quoll has 7. How does this look in 3 years time when Flying Fox, well, ostensibly, runs out of reserves? Are you looking to extend that? Or would you lift production from Spotted Quoll? Just trying to get in concept what the business looks like in 3 years time and potentially beyond.

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [20]

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Yes. Thanks, Dan. Look, the current work being carried out at Flying Fox on the lower grade, what we've discussed before with the lower grade material, is really to look at the mine ability of any other material for heap leaching. As we've discussed previously, the MREP precipitation circuit can actually do 4,000 nickel tonnes. Obviously, currently being underutilized.

So the plans currently are that we would look at lower grade materials from both operations, Fox and Spotted Quoll. Look, we won't be able to extend the mine life of Fox as we've done in previous years where we've added 3 or 4 years of reserves. It will be more incremental tonnage across maybe a year or 2 years. But that work is now coming to close, so we should be -- have that, again, available to report.

Spotted Quoll, Joe mentioned -- it was really down now into the sort of Zone 3, which is where the decline is sort of heading into. Early days yet. We've got another round of drilling to do there before we can start getting -- but there's certainly going to be incremental increase in life there.

Look, the other projects that we've got organically at Forrestania is we're having a very hard look at Digger South, with where we see the nickel price moving. And of course, we've always talked about the open pit potential, and that work is now currently on foot at the new mining project.

So whilst we might see, obviously, the historical duo of Spotted Quoll and Flying Fox filling the mill, we are really a company that's producing nickel. And if I can produce nickel at the cheapest flotation at con, then through the heap leaching and sulphide sort of back-end -- so precipitation plants, sorry, then that's something we're currently now working harder on.

So 3 years from now, I would be expecting some incremental life extensions on both mines, and then, of course, we will bring in some of those organic projects before then. For example, scats project, which is currently on foot. And then, obviously, we will be pushing to get Odysseus, as Michael asked regarding some of those other lateral deposits there. So we've got a lot of flexibility, but we've got a lot of work to do. I guess that's what I'm trying to tell you.

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Daniel Morgan, UBS Investment Bank, Research Division - Director and Analyst [21]

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Yes. And just a quick follow-up on that with -- so once Flying Fox shuts, will you keep the mill full with Spotted Quoll? Is there any constraints there?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [22]

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Look, we probably won't be able to keep it absolutely full. As I said, there will be potential at that stage to have some material coming up from Digger South, which has already gone through a very strong, robust study back in '09, '10. So we know there's potential cutback there as well that the guys currently have on the table.

So Spotted Quoll as a stand-alone operation, like 600,000 or 550,000 tonnes, it will be very difficult, probably not really healthy, to ramp-up that particular operation by itself. But I can guarantee you that we are working very hard on all of the organic projects to make sure that we don't have any dip in -- and preferably, a production ramp-up over that time period. But certainly not looking to having a dip.

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Daniel Morgan, UBS Investment Bank, Research Division - Director and Analyst [23]

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And just 2 more quick questions. So the -- possibly one more for Joe. The Odysseus Project, can you just make it clear what CapEx is to come post 30 June, 2019? Is it about $260 million or can you just make that...

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [24]

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So this -- it's $289 million, is what we've got left to spend there. If you have a look at the press release today and also deeper into the corporate presentation that was released today, we do spell it out by financial year, similar to how we had explained it before. And there's just been some movement in the timing of those expenditures. And it mainly relates to the timing of the installation of the haulage shaft.

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Daniel Morgan, UBS Investment Bank, Research Division - Director and Analyst [25]

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So if -- I'll look in that. And the last question is just -- what -- when you're looking at doing your offtake agreements, what is the form that, that's going to take? So is it your offering, also Odysseus, or is it just your existing operations? Or -- also the timing, how far out are you offering offtake?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [26]

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Okay. All right. That's very good, Dan. So we're in a market right now. So we've actually sent our tenders out to about 19 parties, and that covers a whole range of, obviously, traders, smelter owners, existing partners and also now inclusive of that list there are precursor -- factory precursor manufacturers such as CATL, et cetera. So it's a bit of a broader approach.

We've had conversations recently in Shanghai with some other parties who are interested. We just got to work through the process flow sheet for those. And we are hoping to have a -- basically we've given them 5 weeks to look at the tender documents. It does not include Odysseus. However, we have been in the market for the study -- the DFS study for Odysseus. So they all have the actual technical spec sheets for Odysseus. So -- but we are in those conversations.

And as we short list those towards sort of mid-late September, we will be -- obviously if somebody wants to talk about Odysseus, it's been fast forward, and we would be foolish to put that into a contract right now where -- we believe where the EV market is going. But certainly, it's a conversation point that quite people -- few people have brought to the table.

And the conclusion of the conversations or -- will be probably around the LME week in October. So we're not rushing. We've got a few additional -- as I said, additional queries to deal with at the moment from OEMs. So it's getting quite exciting. And we've got to make sure that we don't rush too fast and go down the old smelter route again and again. Remember, the last time we did this we went into -- halfway into a roaster. So we've also got that aspect as well. So far we're very, very encouraged, and as I said, we've got a few parties joining into the tender. So.

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Daniel Morgan, UBS Investment Bank, Research Division - Director and Analyst [27]

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And just a small follow-up. The time of those contracts, how long are you offering? Or is that...

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [28]

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The terms are optional. We won't go longer than 3 years. We will probably look at it shorter term, because of -- again, where we think the market is heading. But we leave things quite open because if somebody wants to come in and we think this may be something that will start occurring. Somebody comes in and says, look, Dan, I want a 5-year contract for x number of nickel tonnes over that 10 years -- 5 years. We're willing to pay a good value for it. Then you've got to give it a consideration.

So we don't close off any avenues if we can get higher payabilities. But -- I guess, I'm telling you that it's going to be more shorter than longer range of contracts.

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Operator [29]

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Our next question in queue is from Matthew Frydman from Goldman Sachs.

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Matthew Frydman, Goldman Sachs Group Inc., Research Division - Research Analyst [30]

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Wondering if you can provide us with a little bit more detail on the capital and growth projects for FY '20. Just wondering, I guess, specifically what work is being done at the concentrator? How long that next tailings dam lift is expected to last here? And then I guess, what other capital works are you expecting at least over the life of the existing reserves? That's the first question.

And then secondly, remind us specifically, in that growth projects number which feasibility studies you're looking at conducting this year? I suspect that you alluded to some of them already in answering Dan's question. And what your plans are for the mill scats trial this year, in terms of what the price for that project is?

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [31]

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Sure. So the tails dam lift is the -- is I guess the biggest one-off project that sits inside the -- that sits with the Cosmic Boy concentrator. Look, the concentrator is 10-years old now. And there is some just structural sort of repair work that goes on there just to make sure that the plant stays in good condition. And it's sort of simple things like replacing webforge with fiberglass rather than steel and things like that. So nothing overly complicated or difficult there. Tails dam lifting, the biggest one, that's occurring now, that'll last for the next 2 years going forward.

Feasibilities, that does cover -- obviously there's -- with test works specifically, there's always a bit of a trial that occurs there. So the feasibility does go across -- it goes across new mining, the test work that's ongoing for scat leaching. The -- some money has been allocated for diggers to redo the mining study there. And that's just refreshing what we know about it and to see what can possibly be done. AM5, AM6 goes into that, some of that work there.

So it's really across the board. Every project sort of is ongoing concurrently, because a lot of them are -- have got column test work over the life that occurs. And that takes a relative amount of time.

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [32]

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For these scats projects specifically, other than laboratory work. We -- if we drop the green flag that will be a site, like a trial site heap. And that would start around about January -- December, January. So we're just concluding some other work in the lab, and we've commissioned some 8-meter columns just to see what the percolation and the acid reaction times are for leaching. But the next phase for that project would be a site trial of around about 20,000 tonnes of scats from the 280,000 that I think some of you've seen. Yes, and that would be a December, January start.

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Matthew Frydman, Goldman Sachs Group Inc., Research Division - Research Analyst [33]

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I'm sorry, Dan, what's the total contained nickel in that 280,000 tonnes?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [34]

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About 4,000.

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Matthew Frydman, Goldman Sachs Group Inc., Research Division - Research Analyst [35]

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Excellent. And then just finally from me, maybe one for Joe, be it more of a philosophical one. But given, as you noted, the Aussie dollar nickel price is above $10 a pound. Does that tempt you guys to work -- to lock in some longer-dated hedging, maybe to cover the ramp-up of Odysseus? Or is that something that you think you'll assess a little bit closer to the day -- to the date, given maybe you'll have more knowledge around the specifics of the offtake, et cetera?

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [36]

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Yes. Sure. Look, needless to say, as most of you that have followed us will know we include a hedging table in the quarterly reports every 90 days. And I would have to -- if you hazard a guess, you could probably expect that we've probably filled those up back to the levels -- to the maximum levels that we may have seen in the past. But that's not going any longer at the moment than maybe December. But with the price where it is, you would have to be considering looking at some of that longer-term exposure and at the very least considering it. So that's not saying that we're -- that we will definitely do it. But I can assure you that we talk about it.

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Operator [37]

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Our next question in queue is from Peter O'Connor from Shaw.

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Peter O'Connor, Shaw and Partners Limited, Research Division - Senior Analyst of Metals and Mining [38]

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A couple from me. Just a quick one, Joe. The tailings dam lift, you said it's over 2 years. Is that the spend is over 2 years or the lift is over the last 2 years?

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [39]

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That's the life there.

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Peter O'Connor, Shaw and Partners Limited, Research Division - Senior Analyst of Metals and Mining [40]

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The life of the lift is 2 years. Okay. Got it. On offtake, Dan, any industry trends? I know you can't...

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [41]

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[Well, I] -- sorry, you go ahead.

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Peter O'Connor, Shaw and Partners Limited, Research Division - Senior Analyst of Metals and Mining [42]

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No, you go ahead.

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [43]

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The tails dam lift is occurring right now. So some -- that expenditure is happening as we speak. And this is 3 months sort of the time.

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Peter O'Connor, Shaw and Partners Limited, Research Division - Senior Analyst of Metals and Mining [44]

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Got it. Yes, just onto the marketing side and the offtake that you're looking at now and just industry trends. I understand that you won't go and comment necessarily about what you are doing with your tender that's active. What are you seeing in the market in terms of realizational payability? Again, just broadly speaking, what sort of uplift or what sort of benefits have you seen or can we see out there?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [45]

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Well, look -- Pete, good question. Look, we can only surmise from whether the guy across [Tim] is excited or not or if he's not happy. So if I'm smiling, and you can't see if I'm smiling right now. But the bottom line is that it's early days here because we actually haven't had anything coming across our table in terms of actual bids. We're in the, I guess, clarification position at the moment in terms of, like, one smelter yesterday asked us, could we take certain size parcels and just to say yes or no.

What is exciting though that we've got 2 partners who are actually interested in another way to do the business rather than smelting. So the question that we have to answer in a timing perspective is that we still need new contracts on the tables by, I guess, December. So we've got a bit of time. But if we keep on getting these, I guess, precursor and OEMs asking questions, we got to make sure that they're real, and we've got to realize how the timing of material for them, how critical it is to then see whether the payables will reflect good value or not.

I -- look, I'm hearing quite a few things in the market from other people regarding [8Ds]. Look, we've said it very openly that the MREP product with SMM is probably the best payable of any product, including mat currently being sold. Concentrates are flotation sulphides. Look, it moves already -- it has already moved about several points because of the nickel price. So you've always got that sliding scale or escalating scale in terms of the current nickel price. So that's always adding value.

And then look, we will be looking way probably up into, if I was to go back to this -- well, if I look at today's nickel price I'd say $16,000 a tonne, you got to be way up into the 70s -- high 70s. But I'm not convinced that smelters are going to just open up their wallets and start. I think we need to have another, as I said, precursor guys getting involved with a need, and conversations with a couple of guys who are currently quite significantly in the battery market, a Korean company and a Chinese company. If you find what volume of nickel they need, Peter, over the next 5 years, it's actually quite [to mention wise] because we asked them, where do you think you're going to get this nickel from? And there lies their dilemma. It might be a bit premature right this moment to start hitting them too hard. But certainly, by the end of October, we will know a lot more. And I think we will be happily surprised on the upside.

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Peter O'Connor, Shaw and Partners Limited, Research Division - Senior Analyst of Metals and Mining [46]

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So Dan, I sense your excitement. And just with regards to what the buying is at the moment. My next question was just that, so these Chinese and Koreans, how much are they buying now? And how much are they buying with a view that is 3 years out or 5 years out? It's really like right here and now?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [47]

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Okay. Let me give you some idea of how things are going. We are over here in Melbourne and Sydney tomorrow, and a guy wants to fly in from Beijing on Friday to see us in Perth, okay? We're only flying back if Qantas does fly us back on Thursday night. So that's really exciting. When guys want to fly down from China to see you on Friday afternoon. Joe is talking to guys in Korea. They're currently doing -- Joe, how many?

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [48]

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They're taking roughly 40,000 tonnes of nickel into sulphide for battery manufacturing, directly at the moment.

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [49]

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So that's nickel units going into sulphide and that's mainly briquettes.

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [50]

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And over the next 3 years, their prediction is that they'll need to triple that.

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [51]

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So they're going to go up to circa 150,000 tonnes of nickel metal. And that's only one precursor group.

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [52]

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That was one manufacturer.

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [53]

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So...

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Peter O'Connor, Shaw and Partners Limited, Research Division - Senior Analyst of Metals and Mining [54]

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So that's between 40,000 to 150,000 over 3 years?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [55]

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Yes.

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [56]

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Yes.

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [57]

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So if I was just not mining nickel myself and I was buying nickel for my precursor factory, I'd start to lock in some mines or some miners who've got long-term projects, and just -- because you're going to be facing, either your company won't be able to grow with the demand because you don't have the raw material, or you can be sensible and start talking to miners today, which I think is where the trend will come.

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [58]

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To give you an indication there, the actual manufacturer had implemented a team sourcing strategic materials for them, and that covered nickel, cobalt and lithium. They said that basically they had lithium relatively sorted, that we're still working on nickel. And the best way to get that through the manufacturing chain through to that sulphide products that they require for the precursor manufacturing.

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Peter O'Connor, Shaw and Partners Limited, Research Division - Senior Analyst of Metals and Mining [59]

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So is there any of the counter-cyclical move in nickel price this year, which has been the outperformer versus the -- almost the whole commodity complex, how much of that is reflecting what you're seeing now? And how much of that is just done by argy-bargy stuff with options and traders that's not related to OEM buying? So are we starting to see that -- the inflection in this whole OEM precursor trade?

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [60]

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Yes, it's really difficult, obviously, for anybody to really answer that question definitively. We don't think that the nickel market from a trader point of view was very short, especially the Asian-based traders. We do think that the market was very short there. And the tightening of the curve, going forward, has obviously squeezed them. So they've had to step into the market and buy material to deliver into their short positions.

But as far as consumer demand goes of the product, the material has been going somewhere. So we do think it's probably representative of increased buying, especially of briquettes to be dissolved into the sulphide manufacturing process. So it does seem to be a combination of the 2 playing out.

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Peter O'Connor, Shaw and Partners Limited, Research Division - Senior Analyst of Metals and Mining [61]

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Just as a segue from this, but BHP, is that a good thing them extending their life in Kalgoorlie? Do they go head-to-head with you? Will that drive this pricing paradigm? Or is it actually negative, because they're going to be more material out there?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [62]

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Look, Peter, the benefit of Nickel West going into sulphide market down in Kwinana is quite straightforward. They've got acid and they've got nickel powder, before it goes into briquette. So they've got every ingredient that all the rest of us would have to buy, and -- producing nickel, of course.

But the view of the western areas is quite straightforward. I think that there's a window of opportunity to make money out of sulphide production -- nickel sulphide production in Australia, but that window is closing quickly. And only people like Nickel West -- and we know who they've got contracts with already in Korea and China. We all talk to the same people. So we know that they're in the market already putting contracts in place.

The problem is though as China ramps up and as Joe said, the current logic is dissolving briquettes or using cathode. When that reaches 811 battery, which they're not quite there yet. And we've got this from 2 of the biggest ones. They're not -- technically not quite on the 811, 622 they've got bedded in. But they -- I'm not quite on the 811 battery, which is 8 nickel, 1 copper, 1 manganese. So my or the company's view is that we've got a limited time in Australia to do sulphides at a premium. Thereafter, the bets are off and you will find that there'll be factories in Japan, Korea and China producing nickel sulphide with no premium. And it will be a -- yes, you'll get paid good payability if your raw product goes into that stream. And that's the missing link that we now have to work on as a company to get that relationship going.

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Peter O'Connor, Shaw and Partners Limited, Research Division - Senior Analyst of Metals and Mining [63]

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Just back to your customer list, the 19 people you've sent tenders to. So how many of those have come back and said, hey, Dan, I really like this, and by the way, this [8D] product looks pretty good. I'd like to talk about the stake in that.

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [64]

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Sorry, I missed this -- I missed the part...

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Peter O'Connor, Shaw and Partners Limited, Research Division - Senior Analyst of Metals and Mining [65]

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Can you give any inbound -- strategic inbounds on buying equity as opposed to just buying product?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [66]

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Is that related to Odysseus?

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Peter O'Connor, Shaw and Partners Limited, Research Division - Senior Analyst of Metals and Mining [67]

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Well, anything I guess. But that's your -- obviously your key priority...

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [68]

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Yes, that's okay. Well, look, we're not telling you everything that I've been talking to over the last month, because it seems like you're trying to get into my brain, Pete. The -- yes, look, we have had more -- I could tell you we've had significant number of strategic conversations with factories wanting to be built with investment in projects downstream in Australia on an equity level. So there's no -- I -- what can I say, there's no boundary. We are fielding and initiating strategic conversations across the board. The problem will be timing, Pete.

It's the timing of how -- you can't build a sulphide process line overnight. It's -- even if you -- even in China. It's a 2-year process. So even if we were starting a strategic conversation today, Odysseus would be the ideal product to go into that conversation because of the timing of Odysseus.

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [69]

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10 years.

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [70]

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And the 10-year mine life, because that's what they want. They want sustainability of production.

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Peter O'Connor, Shaw and Partners Limited, Research Division - Senior Analyst of Metals and Mining [71]

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Okay. And just my last one. It's a segue into costs. Your cost control sounds fantastic compared to what I hear in the industry, in gold and base metals and coal and iron ore generally over the last couple of weeks. 3% creep year-on-year to the midpoint of your cost guidance and knowing what you said about grade and [the cost of the deep] in Spotted Quoll, that's a pretty good outcome. You're not experiencing industry pressures that others are or you're just doing a better job or how should I think about your cost, please?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [72]

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I'd like to say we're doing a better job. Industry pressures in terms of -- look, whilst we talk about engineers and et cetera, rising salary, it's just not the largest number on the books. Rise and fall is more significant. That's several percentage points. So that's a nuisance. Mining deeper is incrementally adding cost because of ventilation, et cetera.

Dilution is a big part of -- I mean you'll hear gold miners going on about dilution. That is actually, probably, where you can maximize your margins because if you can protect the grade, the cost of producing a tonne of ore is pretty much constant. It's actually what's in the ore. So dilution, for us, is a key driver in the management group, and costs obviously are a way up the ladder. And I sit through every cost meeting. We have -- now I've got a lot of guys do that, I assume they do, but make -- if I was having over AUD 2,000 an ounce [for zinc], I might get a little bit lazy, but hey...

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Operator [73]

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Our next question is from Ian Warden from Global Mining Research.

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Ian Warden, Global Mining Research Pty Limited - Mining Analyst [74]

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Look, I think my question largely has been answered. I was going to ask you about payabilities. But the other thing part is a very quick one, was just when you say Odysseus will be like 2022, you're talking calendar year there. Aren't you?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [75]

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Yes.

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [76]

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Yes.

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Operator [77]

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Our next questioner is from Paul Hissey from RBC.

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Paul Hissey, RBC Capital Markets, LLC, Research Division - Analyst [78]

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Just with respect to the dividend, sort of bit dull. But you had this kind of fixed $0.02 payout. I don't think you have a specific payout ratio. Obviously, if prices are likely to stay where they are, and indeed, I think most people are reasonably positive, how are you thinking about dividend going forward given your obvious capital expectations over the next 3 or 4 years ramp-up significantly? I think it costs you about $5 million a year. It's a fairly modest sum. Any thoughts on the dividend going forward?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [79]

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Yes. Look, we always talk about dividends quite robustly at a Board level. Look, ultimately, we've always said that if the nickel price performs, Western Areas performs, and we would always like to pay a stronger dividend. But it always needs to be tempered by the need for investment and the capital and treasury requirements of the group. So yes, outside of -- and I apologize if this is a motherhood statement. Outside of that, Western Areas does like to pay dividends and does like to reward the shareholders. We do always have to manage the overall treasury requirements of the group.

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Paul Hissey, RBC Capital Markets, LLC, Research Division - Analyst [80]

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Yes. There's no formal policy right? Or is the policy fixed $0.02 at the moment?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [81]

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Yes. No, we don't have a fixed payout ratio policy at this time.

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Operator [82]

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Our next question is from Larry Hill from Canaccord.

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Larry Hill, Canaccord Genuity Corp., Research Division - Analyst [83]

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Just a quick one on FY '20 guidance. Just the splits between Flying Fox and Spotted Quoll. Obviously, probably 60% of material from Spotted Quoll. Just wanted to get a feel, though, with the MREP being a bit slower to ramp up, how does that come into with blending the arsenic? Yes. So just the key question being the split between Flying Fox and Spotted Quoll mined tonnes.

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [84]

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Yes. So it's about 60% Spotted Quoll going into the mill. The MREP as far as stripping arsenic works quite well now that the cyclones are recovering any unleashed sulphides. So yes, there's no -- I guess there's no limitation based on the MREP and the amount of Spotted Quoll that can be fed.

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [85]

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And the ore ratio will be pretty much what we did last year. So we're not changing any major circuit in the mill. It will be 60-40. It's been 60-40, sometimes it's like 58-42, so depending on month-by-month. But we've been doing that now the whole of last year.

Look, we are working hard on getting that leaching circuit recovery up -- moving upwards. And we think we've got a few ideas right there. But as Joe said, the cyclone is not putting the rest of that nickel out. We've got some interesting logic behind potentially how we're going to deal and sell that product as well including, obviously, the material we send to SMM. So that's going to come through, and we're working on that quite hard. But look, there's no major change in ore ratios as what we did last year.

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Operator [86]

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Our next question in queue is from Sophie Spartalis from Merrill Lynch.

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Sophie Spartalis, BofA Merrill Lynch, Research Division - VP and Senior Resources Analyst [87]

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Just 2 questions from me. Firstly, just in terms of how does the risk management framework overlay the offtake agreement discussion? Is it whoever is willing to pay the highest for the con? Or do you overlay that with geographic diversification and, obviously, end market diversification?

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [88]

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Yes. Good question, Sophie. We definitely look at the overall creditworthiness of the offtake parties. There's always some interesting company names that come through offering expressions of interest to be involved in offtake. And some of them, we probably don't know well enough or -- to properly engage with. So yes, there's definitely always a level of, a, does the party have a physical requirement for the product, which is always one of the key things we look for, plus then overall creditworthiness.

All of our export customers are required to provide guarantee -- irrevocable letters of credit before any product leaves Australia. So there's always a level of risk assigned to who that offtake party is to ensure that we're not putting our revenue at risk, I guess.

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [89]

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Again, just to follow up off of what Joe just [just disclosed out] there, I mean our strategic view is, a, have more than 1 party so that we can obviously not have 1 egg in 1 basket -- all eggs in one basket; b, we like to see a line of sight of where that product actually goes to, whether it would be the roads into stainless steel or whether it be now more into the sulphide market. So we can see the end user there as well. So -- and then really the strategic need, preferably if the 2 companies are aligned with their views of nickel going forward.

So there are other drivers, and it's not -- I can tell you now, it's not the top dollar that always wins the day. It helps though, but strategic alliances, potential future business participation, as we discussed with Peter, all of them come into the play. But we certainly don't deal with anybody that can -- we're just doing some background checks on their credit ratings, and we find that they fall off the bus.

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Sophie Spartalis, BofA Merrill Lynch, Research Division - VP and Senior Resources Analyst [90]

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Okay. That's great. And then just a quick one, just following up on hedging. I know, Joe, you talked to it in some previous question. But just in terms of these new projects like New Morning project or the Deep South, would you look at hedging to bring that in a little bit earlier if possible just to lock in those margins?

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [91]

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Yes. Look, it always comes down to what the study results look for, but there's no reason why we wouldn't look to guarantee some form of payback on some of those projects. There's no reason why we wouldn't do it. But obviously, it always comes down to, I guess, how robust any of those projects are. If they're dependent on a high nickel price that we're seeing today, well, then there's no reason why we wouldn't potentially hedge those longer term.

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Sophie Spartalis, BofA Merrill Lynch, Research Division - VP and Senior Resources Analyst [92]

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But given that they're not new projects, I guess you'd have quite a clear understanding of what's needed. I guess where's the hesitation? Is it on nickel price? Or is it just purely internal capacity to bring these projects online? If you could just run through that for me, please.

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Joseph Belladonna, Western Areas Limited - CFO & Company Secretary [93]

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It's probably more around the timing of when they're required to be brought online because, at the moment, we've got a clear line of sight on 3 years, really. So hedging out past 3 years don't -- would become a little bit problematic for, I guess, liquidity and volume of being out of place hedging out 3 to 5 years. Not impossible, but there would be some limitations there.

But at the moment, it's more around completing -- well, New Morning is a new project at the moment that we're -- that they're looking at. But then Diggers has obviously had a feasibility study, but we're looking at, I guess, a trimmed down mining study there. So once that's done, we'll have a fair idea of what sort of, I guess -- credit enhancement isn't the word to use, but what form of protection, hedging we might be able to provide for that project. But I mean I can't second-guess the results at this time.

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Operator [94]

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Our next question in queue is from Ian Davies from, I.C.T. Family Trust.

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Ian Davies;I.C.T. Family Trust;Owner, [95]

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I've got 2 questions. The first one is, at Flying Fox, have you thought about doing any really deep drill holes there? Because when I look at other companies that have, and that's for retail investors, it's quite often that's a stimulus for the share price if they see a good result from deep down.

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [96]

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Yes. Look, we have done some deeper drilling, basically finished off that program that last year. We didn't get very encouraging results. We did that on [the hole] and follow up on that as well. One of the problems with Flying Fox is it's got these easterly throwing faults. So if you look at it on a sort of cross-section, we find that T1, T4, T5 and then T7 and T8, we thought we'd have a better sort of orebody. We've got -- we certainly got nickel down there, but it's very, very narrow. And whilst the nickel price is looking encouraging today, we do look at it every, I guess, every time we do a reserve upgrade, but it just can't make it into reserve. So we do have nickel down there, which we've drilled.

The deeper ores that we drilled, we didn't get any encouragement. That's why most of the work we're doing now is more up on the flanks, shallower, going back into underneath the old Flying Fox, which we're currently mining very, very well. And then north of the dike as well, we're exploring as well. So we're not giving up. We're just saying that deeper down, we're not very encouraged by the holes we drilled. But we do have nickel down there, but it's just -- looks a bit thin at the moment.

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Ian Davies;I.C.T. Family Trust;Owner, [97]

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And the other question is, was your sale of your -- with your payables going up, have you thought about at all selling like a green nickel product? Because at the moment from the new mine that you're putting in, you're saying that you're getting 85% less CO2 emissions from the -- using the headframe and other, possibly -- I'm guessing that you're using solar power. Have you thought about advertising as a product for batteries that is green?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [98]

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It's a good question. I think -- yes, obviously, nickel is -- part of my role is to cover corporate governance and environmental and social reporting for the group, and nickel is seen as being one of the greener metals. We are running a gas-fired power plant out at Cosmos. It's the current plan for the longer-term period. And we're also looking at how we can link that back into solar and wind to also offset some of those emissions. But in regard to selling a green nickel product, we haven't probably considered that specifically. But nickel is definitely seen in the market as being one of the newer metals that's feeding into that greener economy. So we definitely will have a think about that.

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Operator [99]

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And our next question is from Jon Bishop from Euroz.

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Jon Bishop, Euroz Securities Limited, Research Division - Executive Director and Resources Analyst [100]

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Just a couple of questions around payabilities. Just with your current offtake discussions on Flying Fox and Spotted Quoll, is it sort of an open process where you're looking to put away the entire remaining reserve life?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [101]

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No. Look, it's going to be shorter than longer. As I said earlier on, it would be probably on the max 3. We have -- we could bring it down to 2 years. So we've got a few options in the package that we've offered.

The best way to deal with these tenders, Jon, is not to have too much rigidity because each smelter is different, different volumes, et cetera, different desire in terms of blending. Offering life-of-mine contracts today, I think, would be foolish because unless somebody walks in the door and offers you way into the 80s percent payables, you really are probably giving away too much at the moment.

Value-adding going forward, I think, is going to become a real thing, whether it happens around -- with the contracts currently in the market, might be a bit young, but certainly, we are seeing a change in the participants. And also, as I also mentioned previously to Peter, was that we're certainly seeing some strategic conversations starting to occur with precursor people because, currently, smelters are doing money -- making money through their briquettes. So if you've got a smelter and a refinery making briquettes, you are currently supplying the sulphide market. Now we would like to break that chain and actually deal directly with the precursor ourselves and not allow the guys with the smelter big money.

But it is early days, and -- but it is exhilarating. We've got to at least keep our powder dry, I think, and look at how we can best get value out of our product because we do know it is going and is starting to become a needed commodity once the nickel [be going], I guess, dilemma and laterites start consolidating into stainless steel. So we're certainly seeing a shift in the sand. I'm sure other guys who are currently in the market with contracts as well are seeing the same thing. The best thing now for us is to be able to play that market to the best of Forrestania shareholders.

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Jon Bishop, Euroz Securities Limited, Research Division - Executive Director and Resources Analyst [102]

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Okay. And just on that then, around Odysseus, when do you feel that you'd be willing to test the market in terms of payabilities and getting offtakes put away?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [103]

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Well, we did test the market when we did the DFS last October -- or September, October last year. So we've got a fair idea who's interested in that particular spec sheet. And we have had -- and we are in conversation with strategics regarding other sort of alliances and future strategic work on Odysseus, et cetera. We haven't consolidated anything yet, but we are having inbound inquiries regarding -- and as Joe said, the driver behind that is quite simple. It's got a minimum of 10-year mine life producing 14,000, 15,000 tonnes of nickel a year. So if you were a OEM or a precursor guy who's got a 10-year factory need, you'll be talking to people like us.

It's -- the equation is going to become rather simple hopefully in the next year or so. The question for us right now, Jon, is to be able to get best value that we can get in the current market. And as I've said before, and we did the roasting contract, we are not bound by smelters or treaters. We have an open book, and we are talking to some pretty serious hitters in the precursor battery market right at this very moment.

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Jon Bishop, Euroz Securities Limited, Research Division - Executive Director and Resources Analyst [104]

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Okay. Just finally then, obviously, feeling pretty bullish about the nickel sulphide macro. Just in terms of organic and potentially new M&A opportunities out there, I mean is it fair to observe that your exploration focus at the moment is largely brownfields and existing known resources? And what is the business looking at in terms of greenfield opportunity within the portfolio or external?

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [105]

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Well, I guess Gawler is our greenfield -- sort of typical standard greenfield. It's a large portfolio. I mean 10,000 square kilometers is pretty large in anybody's books. So that's keeping us busy on the greenfield side.

Look, when we talk about brownfields, i.e., Cosmos and Forrestania, remember, those are -- I mean Forrestania is 900 square kilometers. It's not like it's got no nickel. We've got 1 million tonnes of nickel inorganic resources available. It's just a nickel price play to some degree. We know we've got the technology to be able to extract the nickel. So organically, brownfields is serving us well at the moment.

Look, we do like to look at the junior side of the fence. And if we see some juniors with good tenement holdings, with good potential for delivery of mine and it's just not nickel, maybe it's a bit of copper, a bit of zinc, we do spend -- our BD team does look at those aspects of the business as well to boost the exploration, I guess, up. But look, the classic you should have a bit of everything, and as I said, we've got probably the 2 best brownfield sites there is in terms of basically organic and then the Western Gawler as we've always said is a large block of ground. It's going to take us a while to consolidate the targets, and that's currently where we're at. And it's equivalently, geologically to the Fraser Range. So if you look at the amount of noise there is coming out of Fraser Range, neighbors of Nova, et cetera, we're about the only people over in the Western Gawler and holding 10,000 square kilometers of it. So you've got to be saying, well, that's a good strategic move. But we would always have brownfields, and we will always drill either to provide concentrated feeds.

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Operator [106]

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There's no more further questions at this time. I would like to hand the call back to the speakers for any closing remarks. Please go ahead.

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Daniel Richard Lougher, Western Areas Limited - MD, CEO & Director [107]

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Thank you, everybody, who have dialed in and listened. Thanks for great questions and really appreciate the feedback like that. And look, as I've said, Western's had a good year. We're looking forward to another strong year, FY '20. And I hope to see you all coming around the mine sites and meeting with us in Perth. And thank you very much.

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Operator [108]

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Ladies and gentlemen, that does conclude the call for today. Thank you for participating. You may all disconnect. Goodbye.