Western Areas Sees Rising Chinese Demand For Nickel Concentrates

Kalgoorlie, Australia, Aug. 3 -- Having recently shipped its first nickel to China, Western Areas NL (WSA.AU) said Monday that it sees further growth in demand from the country's expanding stainless steel sector.

Julian Hanna, managing director of Western Areas, told Dow Jones Newswires that his confidence is driven by recent statements from his company's new customer Jinchuan Group, China's largest nickel producer.

 "Jinchuan have announced that they are looking to construct a brand new refinery, which will produce 120,000 (metric) tons of nickel per annum," Hanna said on the sidelines of the Diggers and Dealers Conference.

"We think that is a very positive sign for China requiring more nickel products to feed into its stainless steel industry," Hanna said.

Now rated Australia's third largest nickel producer, Western Areas sells part of its production to BHP Billiton Ltd. (BHP) and last month shipped its first concentrates to Jinchuan.

Hanna described the initial shipment from Esperance on Australia's southern coast as the start of a A$200 million-a-year export business to China, with regular monthly shipments scheduled to Xingang Port.

Western Areas has a two year contract to sell a total of 25,000 tons of high grade nickel in concentrate to Jinchuan.

"By the end of December we'll have shipped 7,000 tons of that," Hanna said.

In the quarter ending June 30, Western Areas produced a record 6,810 metric tons of nickel at its Western Australian mines, following the start of its new Spotted Quoll operation.

The mine has "surprised us on the upside in both tons and grade," Hanna said. "We are now mining an average 7% nickel from a pit that has a 5% reserve grade, and we are finding more tons as well," he said.

Western Areas is targeting "sustainable" total nickel production of 25,000 tons a year from its two Australian mines, Hanna said.

The company is due to report its financial results in mid-August and hopes to be able to pay shareholders a dividend for the six months ending June 30, he said.

Western Areas is likely to post a stronger financial result in the second half ending Dec. 30, reflecting the impact of increased production, Hanna said.