Western Areas NL
TSX : WSA
ASX : WSA

Western Areas NL

July 08, 2009 08:00 ET

Western Areas Signs Two Year Offtake Contract With Jinchuan Group in China

PERTH, AUSTRALIA--(Marketwire - July 8, 2009) -

THIS NEWS RELEASE IS NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE U.S.

The Board of Western Areas (TSX:WSA)(ASX:WSA) is pleased to announce that the Company has executed an agreement with Jinchuan Group Ltd for a contract to sell up to 25,000 tonnes of nickel in concentrate over a two year period from the Forrestania Nickel Project. The contract commences in early 2010 and is expected to terminate in December 2011.

Western Areas Managing Director, Mr Julian Hanna said, "The two year contract with Jinchuan is consistent with Western Areas' plan to sell concentrate to major smelters within and outside Australia. We expect the agreement with China's largest nickel company will also provide Western Areas with exposure to one of the world's fastest growing markets."

The first 10,000 tpa of nickel in concentrate from Forrestania up to a limit of 75,000 tonnes nickel is currently being sold to BHP Billiton under an existing offtake agreement announced on 12 March 2009. High grade nickel concentrate from Flying Fox mine is processed at BHP Billiton's smelter at Kalgoorlie, 300km from Forrestania.

Western Areas expects to double production from an estimated 10,000 tpa nickel in 2009 to reach a target of 20,000 tpa nickel in 2010 and 25,000 tpa nickel from 2011. The balance of nickel not sold to BHP Billiton during 2010 and 2011 will be sold to Jinchuan under the new contract. Concentrate is planned to be exported to Jinchuan from Esperance port.

Western Areas is on track to reach the target 10,000 tpa of nickel in CY 2009 at an estimated average cash cost of between US$2.00 to US$2.50/lb nickel. The Flying Fox mine and Cosmic Boy concentrate plant are meeting all expectations in terms of tonnes and grade mined, concentrate specifications and metallurgical recoveries. In addition to concentrate sold to BHP Billiton since May 2009, current stockpiles of ore and concentrate at Forrestania contain approximately 3,430 tonnes of nickel with an in situ nickel value of around US$55M.

Final permitting is also underway for the high grade Spotted Quoll open pit mine. First production from Spotted Quoll should overlap production from the high grade Lewinsky Lode at the top of the Flying Fox T5 orebody, starting in early 2010. Recently announced drill hole intersections in this area of the mine include 13.2m @ 10.0% nickel and 12.4m @ 8.3% nickel.

Mr Hanna added, "Western Areas remains very positive about the medium term nickel price. The Board has a clear strategy to build on the success at Forrestania and become a globally recognised company to explore, acquire and develop low cost, long life nickel mines. As part of this strategy, Western Areas has already established a growing, supportive institutional shareholder base, not only in Australia but also in Asia and North America."

COMPETENT PERSONS STATEMENT: The information within this report is based on information compiled by Mr Julian Hanna of Western Areas NL. Mr Hanna is a member of AusIMM and is a full time employee of the Company. Mr Hanna has sufficient experience which is relevant to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.' Mr Hanna consents to the inclusion in the report of the matters based on the information in the form and context in which it appears.

FORWARD LOOKING STATEMENT: This release contains certain forward-looking statements. These include: "Western Areas expects to double production from an estimated 10,000 tpa nickel in 2009 to reach a target of 20,000 tpa nickel in 2010 and 25,000 tpa nickel from 2011", and "Western Areas is on track to reach the target 10,000 tpa of nickel in CY 2009 at an estimated average cash cost of between US$2.00 to US$2.50/lb nickel", and, "First production from Spotted Quoll should overlap production from the high grade Lewinsky Lode at the top of the Flying Fox T5 orebody, starting in early 2010", and, "Western Areas remains very positive about the medium term nickel price. The Board has a clear strategy to build on the success at Forrestania and become a globally recognised company to explore, acquire and develop low cost, long life nickel mines." Forward-looking statements are subject to a variety of risks and uncertainties beyond the Company's ability to control or predict which could cause actual events or results to differ materially from those anticipated in such forward-looking statements.

This announcement does not include reference to all available information on the Company or Forrestania Nickel Project and should not be used in isolation as a basis to invest in Western Areas. Any potential investors should refer to Western Area's other public releases and statutory reports and consult their professional advisers before considering investing in the Company.

About Western Areas NL

Western Areas is mining and developing two of the world's highest grade and lowest cost nickel mines (Flying Fox and Spotted Quoll) and has completed initial surface development for two additional planned underground mines (Cosmic Boy and Diggers South) at the 100% owned Forrestania Nickel Project. Potential also exists to develop the high grade New Morning underground mine which is dependent on improved nickel prices.

The Company has completed construction of Stage One of the Forrestania nickel concentrator which is now fully commissioned. Western Areas expects to upgrade the nickel concentrator (with current capacity of approximately 300,000tpa ore) to a target of 600,000tpa ore. The Stage Two upgrade is due for completion in the March Q 2010 to treat ore from Spotted Quoll mine. All other major infrastructure including a high quality village for 460 people, grid power, roads, water, tailings disposal, an airstrip etc is complete.

The site operations are managed by an experienced technical and management team. In August 2008, Western Areas was awarded the prestigious 'Digger of the Year Award' at the Diggers and Dealers conference for the successful development of the Flying Fox mine. In May 2009 Western Areas' exploration consultants Newexco were also awarded the prestigious 'Prospector Award' for the discovery of the Spotted Quoll deposit.

Western Areas is one of Australia's most active nickel explorers. Previously announced high quality mineral resources at Forrestania (including Kagara's Lounge Lizard deposit) contain approximately 400,000t nickel. Drilling is underway to increase mineral resources and ore reserves at Flying Fox and Spotted Quoll and to discover a new deposit of this type along the 25km long Western Belt at Forrestania.

In addition to the Forrestania Nickel Project, the Company has interests in six other nickel projects within the 500km long Central Yilgarn Nickel Province in Western Australia.

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