Here’s why the Western Areas (ASX: WSA) share price crashed 16% today

The Western Areas share price took a 16% hit today following release of the company’s quarterly results. Here are some updates from the activities report.

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The Western Areas Ltd (ASX:WSA) share price closed over 16% lower today at $2.46, making the company one of the biggest losers on the ASX for the day. The S&P/ASX 200 Index (ASX: XJO) finished off 2.7% lower.

Western Areas is one of Australia’s top nickel producers with a current market capitalisation of approximately $811 million. Its shares came under pressure today after the company released its most recent quarterly report. Here’s a closer look at its performance for the quarter ending 31 December 2020.

Mining activity updates

Within Western Areas’ Forrestania operation there are four separate mine sites — Flying Fox, Spotted Quoll, Cosmos and Odysseus. The Flying Fox site is Western Areas first producing underground mine. According to Western Areas, it’s one of the highest grade nickel mines in the world. The mine has been operating since 2006.

At the end of the December 2020 quarter, Western Areas advised that its Flying Fox operation produced 38,255 tonnes of ore at an average grade of 2.5% nickel for 939 nickel tonnes.

The Spotted Quoll mine was discovered by Western Areas in 2007. The company estimates it currently has a mine life exceeding six years, based on reserves. Spotted Quoll produced 86,204 tonnes of ore at an average grade of 3.0% nickel for 2,579 nickel tonnes during the period.

The other two sites, Cosmos and Odysseus, both received capital injections during the period as the company continues to expand and develop its programmes. In total, $35.6 million was invested in the Forrestania operation during the December quarter.

Financial position

Western Areas finished off the December quarter with a cash total plus nickel sales receivables and liquid assets totalling $168.6 million. This is around $12 million less than the preceding quarter.

‘Cash at bank’ was $98 million at the December quarter end. This compares to $120.3 million in the quarter prior.

The company attributed the spending increase to a few different events across the quarter, including the $18 million spend on the Odysseus Mine development and shaft haulage infrastructure construction.

Additionally, the company paid $13.4 million toward mine development and capital expenditure at its Forrestania site. It spent $4.3 million on exploration and feasibility expenditures, and $2.1 million went to FY20 final dividends.

Today’s steep plummet puts the Western Areas share price at $2.46, down more than 7% on this time last year.

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Motley Fool contributor Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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