WSA 0.90% $3.32 western areas limited

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    WESTERN AREAS NL A.C.N. 091 049 357 Level 1, 11 Ventnor Avenue West Perth, WESTERN AUSTRALIA, 6005 Website: www.westernareas.com.au Ph: (08) 9486 7855 Fax: (08) 9486 7866 Email: [email protected] LETTER TO SHAREHOLDERS 24 January 2005 Dear Shareholder, Please find attached a copy of Western Areas activities report for the December quarter 2004. I am pleased to be able to report that mine development at Flying Fox is progressing very well and that the mining contractors are now working 24 hours per day. The commencement of operations at Flying Fox in December was an important milestone for the company. Flying Fox is one of the highest grade nickel deposits in Australia and based on recent drilling results, we are optimistic of expanding ore reserves well beyond the current T1 deposit to support a long term mining operation. The focus of Western Areas’ mine development team has now shifted to evaluating other resources at Forrestania (Diggers South, New Morning/Daybreak and Cosmic Boy) to establish a development plan and timetable which will maximise nickel production from Forrestania. We hope to announce a clear development strategy for these deposits later in the March quarter. On the exploration front, a very active program is underway with four drill rigs on site. Drilling is in progress to define resources at the exciting T4 and T5 zones at Flying Fox as soon as possible and to test the potential for a significant extension below the large Cosmic Boy mine, previously mined by Outokumpu. The first of the 2005 drill holes should reach target depth this week. The regional exploration program at Forrestania is also being stepped up. The site team has been strengthened with three additional geologists responsible for testing the backlog of targets. The Board believes the company is now well positioned for further growth. Western Areas has an outstanding asset at Forrestania and we are committed to getting the best return from this project in a very strong nickel market. At the same time, the Board is considering a number of other strategies to expand the activities and assets of the company both in Australia and offshore. We look forward to seeing rapid development of the Flying Fox mine and being able to report to shareholders further exciting results from the exploration program during the next few months. Yours sincerely, Julian Hanna Managing Director Level 1, 11 Ventnor Avenue WEST PERTH, WESTERN AUSTRALIA, 6005
    Telephone (08) 9486 7855 Facsimile (08) 9486 7866 Email [email protected]
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    WESTERN AREAS NL A.C.N. 091 049 357 Exploring and developing Nickel Sulphide and Platinum Group Metals deposits in the Yilgarn Craton of Western Australia. ACTIVITIES REPORT - DECEMBER QUARTER 2004 FORRESTANIA NICKEL PROJECT (WSA 100%) Highlights • Mine development at Flying Fox commenced in mid December after all approvals were received. This was a significant event for the Company and followed a protracted environmental application and public review process. • The $45 million mining contract for the T1 deposit has been awarded to Barminco. Excavation of the 35m deep boxcut is progressing well and work on the underground decline to access T1 is expected to start in March. • A conceptual mine design has been completed for the deeper T4 and T5 zones. Exploration on T4 and T5 is being accelerated as both have the potential to significantly increase mine life and nickel production at Flying Fox. • Excellent drilling results continued at Flying Fox during the December quarter including an intersection of 6.9m @ 9.8% nickel at T5. The Company believes T5 has the potential to be a major high grade deposit in its own right. • Drilling has resumed with three drill rigs at Flying Fox (T1, T4 and T5) and one testing the potential for extensions below the Cosmic Boy mine. One drill rig will soon move to test below the New Morning/Daybreak deposits. • A review is underway of the various options to develop the other resources at Forrestania (Diggers South, Cosmic Boy Southend, New Morning/Daybreak) and establish a treatment plant at Cosmic Boy. The aim is to maximise nickel production from a number of different deposits at Forrestania at a time of high nickel prices. • The Cosmic Boy village with accommodation for 93 people is now complete and fully operational. The village was connected to grid power in December and regular flights to site commenced in mid January. EXCAVATING THE FLYING FOX BOXCUT – JANUARY 2005
    Level 1, 11 Ventnor Avenue WEST PERTH, WESTERN AUSTRALIA, 6005
    Telephone (08) 9486 7855 Facsimile (08) 9486 7866 Email [email protected]
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    Level 1, 11 Ventnor Avenue WEST PERTH, WESTERN AUSTRALIA, 6005
    Telephone (08) 9486 7855 Facsimile (08) 9486 7866 Email [email protected]
    3
    Mine Development Excavation of the Flying Fox boxcut commenced in mid December. Despite some early delays due to the requirement to drill and blast a shallow laterite layer, operations are progressing to plan. The contractor responsible for establishing the boxcut, Barcon, has moved to a 24 hours per day operation to ensure that production targets are met. The mine will consist of a 35m deep boxcut with twin declines to 100m depth. A single decline will then extend to the top of the T1 ore reserve at about 400m depth. Assuming ore reserves are established in the deeper T4 and T5 zones at Flying Fox, a second decline will commence at about 350m depth to access these high grade deposits. Although geotechnical studies are yet to be carried out at T4 and T5, initial review of the diamond core indicates there are few signs of discing which could indicate high stress which was encountered in other deep mines in the region (eg Bounty gold mine). Most of the decline development at Flying Fox is planned to be carried out within an 80m wide dolerite dyke on the north side of the deposit. Geotechnical studies in the upper part of the dolerite dyke have shown that it should provide good ground conditions for mine development. Assuming an average advance rate of 200m per month for the decline and no unplanned delays, ore production from T1 is expected to commence in the June quarter 2006. Exploration Flying Fox • Excellent results continued at Flying Fox with drilling focussed on building extensions above the south end of the T1 deposit and defining resources at the recently discovered high grade T4 and T5 massive sulphide zones. • Recent intersections include 4.0m @ 5.8% nickel and 3.2m @ 5.1% nickel in a previously undrilled area above T1, as well as 6.9m @ 9.8% nickel and 3.2m @ 6.2% nickel in the T5 zone. • Based on the favourable geological setting and high grade nickel intersections to date, an initial target of 500,000 tonnes @ >5% nickel has been set for T5 alone. Drilling is in progress to define a resource as soon as possible. Cosmic Boy Drilling is in progress to test the potential for extensions below the Cosmic Boy nickel mine operated by Outokumpu until 1999. Outokumpu mined 1.9 million tonnes of disseminated ore at an average grade of 2% nickel in two 700m long, near horizontal ore shoots to 450m depth. Western Areas has intended to drill at Cosmc Boy for two years. Cosmic Boy is one of the largest known nickel systems at Forrestania and a series of drill holes is planned to test a number of targets up to 700m depth. Potential exists for structural repetitions of the Outokumpu ore shoots (~1 million tonnes @ 2-3% nickel) as well as possible high grade massive sulphide shoots developed within syncline keels. New Morning/Daybreak A drilling program is planned to test below the existing resources at New Morning and Daybreak as soon as a drill rig becomes available from Flying Fox. The target here is the potential for Flying Fox type deposits developed below the granite intrusion which forms the base of the New Morning and Daybreak resources. Results from the few widely spaced drill holes in this area are very encouraging and include 2.4m @ 5.2% nickel and 1.8m @ 6.0% nickel. Forrestania Regional Exploration An extensive surface EM survey was completed over the Mt Hope disseminated nickel sulphide zone in the December quarter. A number of weak EM anomalies were detected near the interpreted basal contact of the prospective ultramafic sequence. It is not known at this stage whether these anomalies represent conductive geological units (eg shale), conductive surface features or possibly massive sulphide sources at depth. Further interpretation of the EM data with previous, relatively shallow drill hole data from the Mt Hope area is required before drilling targets can be identified. The regional exploration team has been boosted with the addition of three experienced geologists to test existing nickel occurrences and generate new drilling targets. Consultants Newexco have informally divided the Forrestania province into four areas with one regional geologist assigned to each. These are: Mt Hope belt (Marco Fiorentini), western nickel belt (Kevin Frost), Cosmic Boy belt (Scott Bishop) and Diggers South belt (Sue Thornett). The Flying Fox geological team remains unchanged with Adrian Black, Dave Sharp, John Maniw and Will Belbin on site.
    Level 1, 11 Ventnor Avenue WEST PERTH, WESTERN AUSTRALIA, 6005
    Telephone (08) 9486 7855 Facsimile (08) 9486 7866 Email [email protected]
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    Feasibility Studies and Infrastructure The feasibility study for mining the Diggers South deposit located 40km south of Flying Fox is still in progress. Mine development of Diggers South is being considered along with a review of the other higher grade resources at Forrestania (Cosmic Boy Southend and New Morning/Daybreak) and is taking into account the timing of possible construction of a nickel concentrate plant at Cosmic Boy. The Company hopes to be in a position to announce a development strategy for the wider Forrestania project later in the March quarter. Major progress was made on infrastructure at Forrestania during the December quarter. The Cosmic Boy accommodation village is now complete and fully operational. It consists of 93 ensuite rooms, dining facilities, wet mess and offices and is capable of expansion in a relatively short time. The natural bush setting of the village has been retained. Environmental Western Areas is pleased to announce the appointment of Mr Phil Knapton as Environmental Officer. His role will include developing and implementing a range of strategies for the Forrestania Project to meet the Company’s intention to maintain the highest possible environmental standards in exploration and mining which will result in minimal impact. OTHER EXPLORATION PROJECTS - SUMMARY • Plumridge Project (Ni/Cu/PGE) – 12 priority targets were identified in the Plumridge intrusive complex with 10 of these located south of the nature reserve. Flora and fauna surveys were conducted and approval to conduct the drilling was received in late December. Drilling has commenced and no results are available at this stage. Western Areas has entered a joint venture with Yilgarn Mining Limited to explore for mineral sands in the northern Plumridge tenements. Yilgarn has started site exploration and can earn a 60% interest in the mineral sands. • Copper Hills Project (Ni/Cu/PGE) – The Company has built up a large holding over the Harbut Range area to cover an area of highly anomalous PGE values intersected in shallow drilling by previous explorers. A soil sampling program over the northern part of the Copper Hills intrusive complex failed to define any significant anomalies. • Mt Alexander JV (Nickel) – WMC is conducting a second drilling program to test a number of EM anomalies along the basal contact. Western Areas is awaiting results. WMC can earn a 75% interest in this joint venture. • Windarra Joint Venture (Nickel) – Four targets have been identified from geophysical data for a drilling program which is expected to be undertaken in March. WSA is earning 60% from Image Resources in this joint venture. • Mt Jewell (Nickel) – Drilling was carried out in the December quarter to test a number of IP targets in the GSP and Ringlock areas. No significant nickel sulphide mineralisation was intersected. • Bullfinch North Joint Venture (Nickel/Gold) – In mid January, joint venture partner Polaris Metals NL announced their intention to explore for iron ore on the Bullfinch North tenements. WSA has a 25% free carried interest over the central area of the iron ore targets identified by Polaris. For additional information on these projects, please refer to ASX announcements by the various joint venture partners. Julian Hanna, Managing Director 24 January 2005 DISCLAIMER This announcement does not include reference to all available information on Western Area’s projects 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 ASX releases and statutory reports and consult their professional advisers before considering investing in the Company. The information within this report as it relates to geology and mineralisation was compiled by Mr Julian Hanna and Mr Adrian Black from Newexco. Mr Hanna is a member of the Australian Institute of Mining and Metallurgy and Mr Black is a member of the Australian Institute of Geoscientists. Both are competent in the field of activity reported on and consent to the inclusion of this information in the form and context in which it appears in this report
    Level 1, 11 Ventnor Avenue WEST PERTH, WESTERN AUSTRALIA, 6005
    Telephone (08) 9486 7855 Facsimile (08) 9486 7866 Email [email protected]
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    FLYING FOX – Longitudinal section and T1 mine design with conceptual extensions to the T2, T4 and T5 zones. COSMIC BOY ACCOMMODATION VILLAGE
 
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