Key points
- The Western Areas share price hit a new multi-year high today after the release of its quarterly report.
- This comes as many ASX shares suffer through a shocking week
- The All Ordinaries Index has fallen more than 5% since Friday's close
This week has been a bloodbath on the ASX. The All Ordinaries Index (ASX: XJO) has slumped around 5% since Friday's close. However, one of its constituents hit its highest point since 2019 today.
At the time of writing, the Western Areas Ltd (ASX: WSA) share price is $3.54. That's 2.61% higher than its previous close. However, earlier today, it hit a new multi-year high of $3.58 – representing a 3.7% gain.
The gain followed today's release of the nickel producer's earnings for the quarter ended 31 December.
Western Areas share price gains on strong December quarter
- Cashflow increased to $34.4 million – up from $31.1 million in the September quarter
- Total mined nickel increased 12.2% quarter-on-quarter to 4,600 tonnes
- Realised nickel price increased to $12.48 per pound – up from $11.90
- Sold 4,511 tonnes of nickel – 13% more than during the prior quarter
- Ended the quarter with $142.6 million of cash in the bank
- Entered an agreement to be acquired by rival, IGO Ltd (ASX: IGO)
Over the quarter just been, the company received a takeover bid from IGO, offering to acquire all Western Areas shares for a price of $3.36 apiece.
The all-cash offer implies a valuation of around $1.1 billion and was accepted by the Western Areas board.
Additionally, the company's mill production increased to 4,025 tonnes of nickel concentrate – up from 3,804 tonnes the prior quarter.
Finally, its unit cash cost of nickel in concentrate dropped to $4.87.
What else happened in the quarter?
Over the December quarter, this ASX All Ordinaries mining share continued to develop the Odysseus mine after announcing its first ore production in October.
The company also narrowed down the contenders for Cosmos nickel offtake for the first 2 years of Odysseus' production.
Finally, the company began diamond drilling at Mt Goode. The exploration campaign is proceeding on schedule.
Western Areas also noted it experienced some minor production losses due to COVID-19 over the quarter.
The key area impacted was the maintenance of its underground mobile equipment, as staff shortages of diesel mechanics and fitters along with long-hole production drillers made its dint.
What did management say?
Commenting on the update likely fuelling the Western Areas share price, managing director Dan Lougher said:
Development at Odysseus has ramped up considerably and we significantly de-risked the future development schedule for the project during the quarter. We also made positive progress in continuing to bolster the high-potential AM6 and Mt Goode deposits, which provide significant upside value potential at Odysseus.
In tandem with this, we have entered the final stages of the Cosmos nickel offtake tender process, for the initial two years of Odysseus' production, following substantial market interest. It was also very pleasing to see mine production from Forrestania increase by over 12% during the quarter, principally on the back of increased production at Spotted Quoll, enabling us to capitalise on the robust nickel price environment.
What's next for this All Ordinaries share?
Western Areas anticipates a scheme booklet outlining the IGO takeover, alongside details of its board's recommendation and an independent expert's report, will be sent to shareholders in March.
Following the booklet's release, the company expects to hold a scheme meeting wherein shareholders will vote on the takeover in April.
If all goes to plan, the takeover should be finalised later that month.
Additionally, the company anticipates up to 20% of its workforce may be impacted by the Omicron variant after Western Australia's borders are reopened.
Western Areas share price snapshot
Since the end of 2021, the Western Areas share price has gained 3.3% while the All Ordinaries Index has slipped almost 9%.
The company's stock is also 20% higher than it was this time last year, while the All Ordinaries is up just 0.5%.
