-Solid quarterly production
-Well managed
-High quality mines
-Nickel price the stumbling block


By Eva Brocklehurst

Nickel miner Western Areas ((WSA)) hit all the right notes with the broking community after its solid December quarter production results and evidence of being well managed. However, the nickel price is out of the company's control and on that hangs the tale.

BA-Merrill Lynch notes the company is on track to beat its guidance in terms of production for FY13 but cash costs are rising and will be a concern going forward. Underground mining at Spotted Quoll will ramp up but weak prices translate to weak cash flow. This is despite WSA being in the lowest quartile on the global cost curve, BA-ML notes. The broker says WSA is fairly valued at current prices and, unless there are fundamental improvements in the nickel price, the key driver of long term value will be further exploration success. The broker keeps a Hold rating but notes, if WSA is successful in achieving its production targets, it can generate strong returns given its mines are higher grade, hence lower cost, compared with its peers.

Nickel-in-concentrate production was up 9% in the December quarter at 6,722t versus BA-ML's forecast of 6,142t and JP Morgan's forecast of