I guess in a short time we will be sitting on "proven resources" ala NI43-101 style

Western Areas Seeks Takeovers as Tumbling Nickel Hurts Rivals

By Jason Scott

Sept. 11 (Bloomberg) -- Western Areas NL, an Australian nickel producer that's tripled sales, is studying acquisitions as this year's drop in the price of the metal may force competitors to look for buyers as margins get squeezed.

``There's a load of opportunities out there right now, not only in Australia but also in Canada,'' Julian Hanna, managing director of the Perth-based company, said today in an interview. ``We're targeting advanced exploration plays with proven resources and strong infrastructure.'' He declined to identify the targets.

Xstrata Plc, the world's fourth-largest nickel refiner, and Russia's Industrial Metallurgical Holding last month cut output after costs surged and prices fell, making operations unprofitable. Western Areas' shares have risen 56 percent this year.

``We're starting to see mine closures for some companies, so these prices are putting a lot of pressure on margin production,'' Hanna said. ``If we're the last man standing, that will put us in a very good position. In two or three years, we'll be one of a very small number of nickel miners still producing if prices stay at these levels.''

Western Metals fell 5.3 percent to A$8.52 at the 4:10 p.m. Sydney time close on the Australian stock exchange. The company has a market value of A$1.4 billion ($1.1 billion).

Nickel prices are poised to climb this year, Hanna said. David Singleton, chief executive officer of Australian explorer Poseidon Nickel Ltd., said yesterday prices are at ``the bottom of the curve.''

Stainless Steel

Prices of the metal used to make stainless steel have tumbled since reaching a record $51,800 a metric ton on May 9, 2007 and traded at $18,500 at 4:24 p.m. Sydney time on the London Metal Exchange.

Western Areas is targeting production of 35,000 tons of concentrate by 2011 from the Forrestania project, about 400 kilometers (250 miles) east of Perth. It bought the site in 2002 for about A$2.5 million.

Western Areas has abandoned a plan, announced in March, to diversify into copper and zinc and expand its portfolio of non- nickel projects to as much as 30 percent.

``We've stared down that barrel a few times but the zinc price has burnt off that ambition,'' Hanna said. ``The plan is now just to keep it as nickel.''

Western Areas this month more than doubled the amount of resources at its Spotted Quoll project to 75,140 metric tons of contained nickel. Production at Forestannia's Spotted Quoll site may begin in about a year, while Flying Fox is on track to produce 8,000 tons this year and 14,000 tons in 2009, he said.

To contact the reporter on this story: Jason Scott in Perth at jscott14@bloomberg.net

Last Updated: September 11, 2008 03:14 EDT