Western Areas NL
TSX : WSA
ASX : WSA

Western Areas NL

August 12, 2009 21:49 ET

Western Areas Commits to Major Expansion at Forrestania

PERTH, AUSTRALIA--(Marketwire - Aug. 12, 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 a decision to mine the Spotted Quoll open pit and double the capacity of the Cosmic Boy nickel concentrator. This should provide the opportunity for the Company to increase production from 10,330 tonnes nickel mined in FY2009 to achieve the target 20,000 tonnes nickel in CY2010.

In addition, the Spotted Quoll open pit mine and plant expansion will establish the basis for future increases in long term nickel production at Forrestania. A feasibility study has commenced for a substantial underground mine at Spotted Quoll which will be accessed from the open pit. Development of the underground mine is expected to commence in mid 2011.

The Company intends to start work at Spotted Quoll and the plant upgrade as soon as possible, subject to final ministerial consent. Major contracts have already been awarded for Spotted Quoll and the nickel concentrator with site works due to start in September.

The expansion schedule should result in first production from Spotted Quoll overlapping first production from the high grade T5 ore body at Flying Fox in the March Q 2010. As a result, Western Areas expects to be in a strong position to benefit from any further improvements in the nickel price. Average cash costs from the Flying Fox mine for the past 12 months were around US$2.00/lb and similar cash costs are expected from the Spotted Quoll open pit mine.

The Spotted Quoll mine and Cosmic Boy plant expansion will employ over 80 people during development and construction and 85 people during sustained production. Western Areas has funds available for the estimated $62M total cost of the expansion.

Spotted Quoll Open Pit Mine

Federal and State EPA approvals have now been received. There were no objections and the project has been recommended to the Western Australian Environment Minister for consent.

The revised Ore Reserve for the open pit mine (refer to Appendix 1) is 386,000 tonnes at an average grade of 5.1% nickel containing 19,900 t nickel. This represents only 16% of the total contained nickel in the current Spotted Quoll Mineral Resource which is approximately 2.0Mt at an average grade of 6.2% nickel containing 125,460 t nickel (to 640m depth).

The Spotted Quoll open pit is expected to be a very robust project with estimated cash costs of less than US$2/lb. The total capital cost for all surface infrastructure and full development of the 150m deep open pit is estimated to be A$36.2M. The open pit will also provide access to the planned underground mine.

Pre-production development will occur over a six month period with first ore production expected in March Q 2010. Target mine production from the open pit is 11,500 tonnes nickel in FY 2011 and 6,300 tonnes nickel in FY 2012. The mine schedule is intended to result in a smooth transition from open pit to underground mine production in early 2012.

The open pit contract has been awarded to Mining and Civil Australia (MACA). MACA has considerable experience in open pit mining and has previously conducted site works for Western Areas at the Cosmic Boy and Diggers South mine sites.

Federal and State approval for the development of the Spotted Quoll open pit is subject to Western Areas complying with a number of conditions. These involve implementation of Conservation Management Plans which provide for the mitigation of impacts from mine development and for the ongoing monitoring for the Declared Rare Flora species Eucalyptus steedmanii, the Malleefowl (Leipoa ocellata) and the Chuditch (Dasyurus geoffroii).

In addition there are standard conditions to complete a comprehensive mine closure and rehabilitation plan. Western Areas is already involved in a tracking program of Chuditch (Western Quoll) at Forrestania and maintains high environmental standards in all its activities.

Expansion of Cosmic Boy nickel concentrator

Construction of the Cosmic Boy nickel concentrator was completed in February 2009 and officially opened by the Western Australian Minister for Mines on 24 March. The plant was built on time and on budget. Commissioning was very successful and the plant is producing high quality nickel concentrate from Flying Fox ore at 14% average nickel grade. Metallurgical recoveries are now achieving target levels of 92-93% nickel recovery.

The capacity of the plant will be doubled to accommodate ore from Spotted Quoll in addition to the expanded production from Flying Fox expected from March Q 2010. Plant capacity will be increased from the current 300,000 tpa ore to a nominal 550,000 tpa capacity. The expansion will include installation of secondary and tertiary crushers, conversion of the SAG mill to a ball mill and installation of additional flotation capacity.

The contract for design, construction and commissioning for the plant upgrade has been awarded to GR Engineering. GR Engineering has considerable expertise in nickel flotation plants and successfully completed construction of the first stage of the Cosmic Boy plant. Total cost of the plant expansion is estimated to be approximately A$25M.

Discussion

The decision to expand production at Forrestania comes at a time of strong growth in the nickel price and improving market conditions. Spotted Quoll (like Flying Fox) is expected to be one of the highest grade nickel mines in the Australia which should operate for many years initially as an open pit mine, followed by a potential long life underground mine.

Importantly, the expansion program over the next six months will establish a solid base for future increases in nickel production from other planned mines at Forrestania.

Flying Fox (including Lounge Lizard) and Spotted Quoll have total, combined Mineral Resources, announced previously, of approximately:

4.5Mt at an average grade of 5.8% nickel, containing 264,350 tonnes nickel

Drilling programs are underway to increase mineral resources and ore reserves at both mines.

Or visit: www.westernareas.com.au

COMPETENT PERSON STATEMENT:

The information within this report as it relates to exploration results or mineral resources or ore reserves is based on information compiled by Mr Julian Hanna, Mr John Haywood and Mr Tim Peters. Mr Hanna, Mr Haywood and Mr Peters are members of AusIMM. Mr Hanna and Mr Haywood are full time employees of the Company, Mr Peters is a consultant to the Company employed by Piran Mining Pty Ltd. Mr Hanna, Mr Haywood and Mr Peters have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.' Mr Hanna, Mr Haywood and Mr Peters consent 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. Examples of forward looking statements used in this release are: 'should provide the opportunity for the Company to increase production from 10,330 tonnes nickel mined in FY 2009 to achieve the target 20,000 tonnes nickel in CY 2010.' and, 'Spotted Quoll open pit mine and plant expansion will establish the basis for future increases in long term nickel production at Forrestania,' and, 'should result in first production from Spotted Quoll overlapping first production from the high grade T5 ore body at Flying Fox in the March Q 2010. Western Areas expects to be in a strong position to benefit from any further improvements in the nickel price. Average cash costs from the Flying Fox mine for the past 12 months were around US$2.00/lb and similar cash costs are expected from the Spotted Quoll open pit mine,' and, 'Target mine production from Spotted Quoll is 11,500 tonnes nickel in FY 2011 and 6,300 tonnes nickel in FY 2012', and, 'Plant capacity will be increased from the current 300,000 tpa ore to a nominal 550,000 tpa capacity'.

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 the 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.

For Purposes of Clause 3.4 (e) in Canadian instrument 43-101, the Company warrants that Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.

Appendix 1

The completed Feasibility Study for the Spotted Quoll Open Pit has revised the Ore Reserve based on current metallurgical domaining, associated recoveries and a detailed mining schedule. As announced previously, an area of near surface supergene ore was excluded from the Ore Reserve. The following key parameters apply:

- Average ore production rate at 195,000 tonnes per annum

- Total mine life including capital works is 21/2 years

- Estimated total cash costs are less than US$2.00/lb

- Base case assumes $US5/lb Ni price for the pit optimisation

- The ore will be treated at the Cosmic Boy Concentrator

Ore Reserve Estimate

The Spotted Quoll Feasibility Study has converted the first 150m of the mineral resource into an Ore Reserve of 386,000 tonnes at 5.1% Ni for 19,900 tonnes Ni metal, based on results of optimisations using the Lerchs-Grossman algorithm and subsequent mine design.



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Spotted Quoll Ore Reserve Statement - Open Pit Mine
11th August 2009
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Category Ore Tonnes Grade % Ni Ni Metal Tonnes
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Probable 386,000 5.1 % 19,900 t
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The Spotted Quoll resource model was evaluated using the Lerchs-Grossman algorithm to create various pit shells. The pit optimisation and mine design work was completed by Mining Solutions Consultancy. Geotechnical design parameters were supplied by Dempers & Seymour geotechnical consultants. Pre-split blasting of the hangingwall and footwall contacts was included in the final design and costing. In addition a dilution factor of 20% at zero grade Ni and ore recovery of 95% was applied. Mining is planned to be undertaken by conventional drill and blast, load and haul operations under contract mining arrangements. The mine design is based on 120t excavators and 100t trucks.

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