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Western Areas to acquire 100pct of Kagara Nickel Pty Ltd
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Tuesday, 06 Mar 2012
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The board of Western Area announced that the company has reached agreement with Kagara Limited to purchase 100% of Kagara Nickel Pty Ltd including the high grade Lounge Lizard nickel deposit for AUD 68 million. The Lounge Lizard deposit is located adjacent to Western Areas' 100% owned Flying Fox nickel mine at the Forrestania Nickel Project refer figure 1.

As per KZL's mineral resource statement announced on September 20th 2011, the Lounge Lizard deposit contains a high grade Indicated Mineral Resource of 743,000 tonnes at a grade of 5.8% nickel for a total of 43,000 tonnes contained nickel. In addition there is a published lower grade disseminated Indicated Mineral Resource of 4,428,000 tonnes at a grade of 0.8% nickel for 36,000 tonnes contained nickel. Kagara Nickel's other assets include over 300 square kilometers of tenement ground in the surrounding Forrestania project region, with many holdings situated immediately adjacent to existing Western Areas' Forrestania tenements.

The purchase of Kagara Nickel is subject to the final terms of the agreement being formally documented. This process is well advanced.

Mr Dan Lougher MD of Western Areas said that "That in my view the purchase of Kagara Nickel is a win win for both KZL and Western Areas shareholders. Western Areas is the logical owner of Kagara Nickel, particularly the Lounge Lizard deposit, as we are best placed to extract maximum value from the assets. We can now see the potential mine life for Flying Fox approaching 10 years and combined with the recent resource increase at Spotted Quoll, provides longevity to the Company's core operations. The consolidation of the Forrestania resources under the control of Western Areas should provide operating cost synergies and provide greater production flexibility."

He added that "Our focus is now on completing the formal documentation expeditiously. Western Areas has the ability to fund the purchase price from either its cash reserves or established banking facilities."

Western Areas currently mines, mills and sells the Lounge Lizard nickel concentrate utilizing the existing Flying Fox infrastructure under a Project Agreement with KZL. As a result, Western Areas has a sound understanding of the Lounge Lizard operating costs, mineral resource and upside potential, and the Company believes the purchase represents exceptional value for shareholders.

Western Areas also adds the Kagara Nickel tenement package to the Company's existing 598 square kilometers of highly prospective tenements at Forrestania. This results in a combined tenement area of greater than 902 square kilometers, that the Western Areas' skilled and experienced exploration team can explore for further high grade nickel discoveries in this highly prospective area.

Source - Western Areas

(www.steelguru.com)

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