Western Areas seeks new nickel offtake terms for Diggers South and commits to full feasibility study



    /THIS NEWS RELEASE IS NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR
    FOR DISSEMINATION IN THE U.S./

    ASX & TSX: WSA

    WEST PERTH, Western Australia, Nov. 29 /CNW/ - Western Areas today
announced that the Company will be seeking new offtake terms for nickel
concentrate to be produced from the proposed Diggers South nickel mine
("Diggers South"). Current open pit and underground Mineral Resources at
Diggers South contain a total of approximately 94,200 tonnes of nickel (refer
to Table 1). This release follows:

    
    1.  Notification from Norilsk Nickel Australia Pty Ltd ("Norilsk") that
        it will exclude Diggers South from the existing Ore Tolling and
        Concentrate Purchase Agreement ("Offtake Agreement") executed in June
        2004. Importantly, this enables Western Areas to negotiate improved
        commercial terms for Diggers South concentrate. Norilsk retains a
        pre-emptive right to match terms offered by a third party for Diggers
        South.

    2.  Western Areas' Board decision to proceed with a full feasibility
        study (FFS) for all three stages of the proposed mine development at
        Diggers South. These are:

        -  Stage 1: open pit mining as cutback to existing Digger Rocks pit
        -  Stage 2: underground mining at existing Digger Rocks mine
        -  Stage 3: underground mining at Diggers South deposit

    3.  Successful completion of all technical aspects of the pre-feasibility
        study (PFS) for underground mining at Digger Rocks and the Core Zone
        of the Diggers South deposit ("Stages 2 and 3" of the proposed mine
        development). Based on current ore reserves, Stages 2 and 3 have a
        potential 8 year mine life. Stage l was not included in the PFS.

    4.  Until commercial terms for the offtake have been finalised, the
        financial analysis of the PFS for Stages 2 and 3 is incomplete and
        will not be released in full. If reasonable terms are assumed for the
        offtake, the following outcomes are expected:

        -  Base case model: assuming US$8/lb nickel, conservative mining
           costs and production levels, the project produces a 27% IRR over a
           total eight year mine life.

        -  Upside model: assuming US$10/lb nickel, conservative mining costs
           and production levels, the project produces a robust return of 64%
           IRR.

        -  Pre production Capex of $47M including $33M for mine development
           and infrastructure and $16M to upgrade the Cosmic Boy nickel
           concentrator to 650,000 tonnes per annum ore capacity. (This
           allows an average contingency of 15%).

        -  Estimated C1 cash cost for life of mine is US$3.45/lb of nickel in
           concentrate.
    

    The Diggers South pre-feasibility study has been carried out to a high
level of confidence. This will reduce the time required to complete the full
feasibility study which should result in Western Areas reaching a decision to
mine in the June Q 2008. Stage 1 mine development is targeted to commence in
the September Q 2008 with first production in mid 2009.
    A clearing permit for the mine site has already been approved and the
full mining proposal is ready to be submitted. The capacity of the Cosmic Boy
village is being expanded to 300 ensuite rooms to accommodate the increased
work force expected at Diggers South.

    
    Table 1: Current Mineral Resources at Diggers South

    -------------------------------------------------------------------------
                                                                   Contained
    Stage  Mineral Resources    Category          Tonnes   Nickel      Ni
                                 (JORC)                      %      (tonnes)
    -------------------------------------------------------------------------
    1     Digger Rocks        Inferred Mineral   1,613,000  0.74%    11,900
          Openpit             Resource
    -------------------------------------------------------------------------
    2     Digger Rocks        Indicated Mineral     54,900   3.7%     2,000
          Underground         Resource
    -------------------------------------------------------------------------
    3     Diggers South Core  Indicated Mineral  3,000,000   1.5%    44,700
          Zone Underground    Resource
    -------------------------------------------------------------------------
    3     Diggers South Halo  Indicated Mineral  4,800,000   0.7%    35,600
          Zone Underground    Resource
    -------------------------------------------------------------------------

    Diggers South Ore Reserve Statement

    The following Ore Reserve statement includes two Mineral Resources, Digger
Rocks and the Core Zone at Diggers South. The Total Ore Reserve is referred to
as the Diggers South Ore Reserve.

    -------------------------------------------------------------------------
       Deposit           Category            Tonnes     Grade %  Ni Metal (t)
    -------------------------------------------------------------------------
    Digger Rocks    Probable Ore Reserve       93,000    1.98        1,850
    Underground
    -------------------------------------------------------------------------
    Diggers South   Probable Ore Reserve    2,016,000    1.43       28,950
    Underground
    -------------------------------------------------------------------------
                    Total Ore Reserve       2,109,000    1.46       30,800
    -------------------------------------------------------------------------
    Notes:
    ------
           1.  The tonnes and grade figures have been rounded to reflect the
               precision of the calculations and this rounding will affect
               the tonnes of contained nickel metal.

    Diggers South Ore Reserve Parameters

    ----------------------------------
        Parameter          Details
    ----------------------------------
    Minimum Mining       Width 3.3m
    ----------------------------------
    Design Break-Even  Grade 1.2 % Ni
    ----------------------------------
    

    The Ore Reserves incorporate all mining dilution and recovery factors
relevant to the mining method and expected ground conditions as defined in the
Pre Feasibility Study.
    Approximately 69% of the Indicated Mineral Resources at Digger Rocks and
in the Core Zone of the Diggers South deposit has been converted into a
Probable Ore Reserve.
    The potential for the lower grade Halo Zone mineral resource at Diggers
South (which contains 35,600 tonnes nickel) to be converted into ore reserves
will be reviewed as part of the FFS. The Halo Zone surrounds the Core Zone and
could be accessed from the same mine development at nominal additional capital
cost.
    Drilling is in progress to define an open pit ore reserve at Digger Rocks
to include in the FFS.

    Metallurgy

    Recent testwork has resulted in significantly improved metallurgical
recoveries from previously announced results for the Core Zone of the Diggers
South deposit. Key results are:

    
    -   Average 79% nickel recovery from disseminated ore
    -   11% nickel concentrate product
    -   Fe/MgO ratio of (greater than) 5 (which is acceptable to most nickel
        smelters)
    -   65ppm arsenic
    

    Operating Costs

    Operating costs in the PFS are based on current rates experienced at
Flying Fox and an estimate of ore treatment costs through the proposed Cosmic
Boy concentrate plant.
    The total mine operating cost to deliver to the concentrator is
A$95/tonne ore. This includes contract hire costs for all underground mobile
equipment and manning levels based on a four panel FIFO roster from Perth.
Total operating cost including ore treatment are estimated to be $US3.45/lb of
nickel in concentrate.

    Mine Plan

    The average production rate estimated will be approximately 1,000 to
1,100 tonnes of ore per day once mine development reaches 300m below surface.
Total mine life based on the current ore reserves in Stages 2 and 3 (including
capital development) is 8 years.
    The development of the project requires prior dewatering of the existing
Digger Rocks pit and rehabilitation of the decline previously mined by
Outokumpu. This will allow early access to previously delineated resources
below the Digger Rocks open pit. Simultaneously it is proposed a main decline
will be developed off this point to the south accessing the Diggers South lode
at a level where the resource indicates the greatest thickness and grade
occurs.

    
    Full Feasibility Study (FFS)

    The FFS will focus on three key areas:
        1. permitting and approvals
        2. hydro-geology and dewatering of the Diggers Rocks open pit
        3. optimisation of the mine plan and schedule
    

    Geotechnical drilling of the mine area has already commenced. Additional
metallurgical testwork will focus on optimisation of nickel recovery and
quality of concentrate.
    A National Instrument 43-101 compliant technical report will be filed on
SEDAR. Until commercial terms for the Diggers South offtake have been
finalised, any financial analysis will include an estimate of the expected
terms for an offtake agreement which is based on comparison with other company
offtake agreements.
    Western Areas expects to make two additional releases within the next few
days. These are:

    
        1. Drilling results from the new Spotted Quoll nickel discovery
        2. November production results from the Flying Fox T1 ore body
    

    COMPETANT PERSONS STATEMENT:

    The information within this report as it relates to exploration results
and the offtake agreement is based on information compiled by Mr Julian Hanna.
The information within this report as it relates to mineral resources, ore
reserves and financial models is based on information compiled by Mr Tim
Peters. Mr Hanna and Mr Peters are members of AusIMM. Mr Hanna is a full time
employee of the Company and Mr Peters is an independent mining consultant. Mr
Hanna and Mr Peters have sufficient experience which is relevant to the style
of mineralisation and type of deposit under consideration and to the activity
which they are undertaking to qualify as Competent Persons as defined in the
2004 Edition of the 'Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves.' Mr Hanna and Mr Peters consent to the
inclusion in the report of the matters based on the information in the form
and context in which it appears.

    FORWARD LOOKING STATEMENT:

    This release contains certain forward-looking statements. An example of a
forward looking statement in this release is 'If reasonable terms are assumed
for the offtake, the following outcomes are expected' Forward-looking
statements are subject to a variety of risks and uncertainties beyond the
Company's ability to control or predict which could cause actual events or
results to differ materially from those anticipated in such forward-looking
statements.

    DISCLAIMER:

    This announcement does not include reference to all available information
on the Company, the Diggers South deposits or the Forrestania Nickel Project
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 public releases and
statutory reports and consult their professional advisers before considering
investing in the Company.
    For Purposes of Clause 3.4 (e) in Canadian instrument 43-101, the Company
warrants that Mineral Resources which are not Ore Reserves do not have
demonstrated economic viability.





For further information:

For further information: Julian Hanna, Managing Director - Western Areas
NL, Telephone +61 8 9334 7777, Email: jhanna@westernareas.com.au; Ann
Nahajski, Investor Relations - Porter Novelli, Telephone +61 8 9386 1233,
Email: anahajski@wa.porternovelli.com.au; Craig Oliver, Finance Director -
Western Areas NL, Telephone +61 8 9334 7777, Email:
coliver@westernareas.com.au; Or visit: www.westernareas.com.au

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