Western Areas (WSA) released September Q results with 5.4kt Ni in concentrate and C1 cash costs of A$2.99/lb (before payability), broadly in line with Argonaut’s forecast of 5.4kt @ A$2.80/lb. Cash and receivables declined $7.7m to $164.3m after a ~$13m increase in capital works and exploration, including $4.4m on the Odysseus project. WSA recently released a DFS on Odysseus and formalised its decision to mine. Argonaut derives an uncompelling post-tax IRR of 12% applying a long-term nickel price of US$6.50/lb and 0.72 AUD/USD FX. At current milling rates Forrestania has ~4.5 years remaining mine life based on reserves. We believe the share price will come under increasing pressure if reserves are not replenished at Forrestania. Maintain BUY recommendation with a revised target price of $2.75 (from $3.40).
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