Western Areas : Quarterly Activities Report

• ZERO lost time injuries (LTI's) for the quarter - now 912 days without an LTI;
• Mine and mill production at 6,357 and 5,763 nickel tonnes respectively tracking at the top end of guidance;
• Unit cash cost of production of nickel in concentrate of A$2.53/lb, towards lower end of guidance;
• Realised nickel price of A$6.54/lb which represents a 20% increase over the previous quarter;
• Positive free cash flow generated for the quarter after all capital and exploration expenditure;
• Consolidated cash at bank and receivables of A$103.0m (up by A$10.9m) and debt free;
• Commencement of formal tender process for offtake contracts, targeted for completion by end of December;
• Mineral resource upgrade at New Morning resulting in a 165% increase in nickel tonnes;
• Pre-feasibility study for Odysseus Project on schedule for completion late in the December quarter; and
• Drilling approvals for Neptune (Cosmos) progressing well, with drilling expected to start in December.

Managing Director & CEO, Mr Dan Lougher, said the Company has commenced the year delivering a very strong first quarter

"It's been pleasing to start the year with all our metrics being well met, and successfully generating positive cashflow," Mr Lougher said.

"With a robust balance sheet, we are well positioned to fund the progression of our selected growth projects, including the Odysseus PFS at Cosmos which is on track for completion late in the December quarter.

Western Areas ("WSA" or the "Company") (ASX: WSA) is pleased to report strong cost control and safety results, together with delivering positively on all other operational metrics during the September 2016 quarter. Full production statistics overleaf demonstrate that unit cash costs of production for the quarter remain well controlled at A$2.53/lb, coming in towards the lower end of the FY17 guidance range of A$2.40/lb to A$2.75/lb.

Mine physicals were ahead of expectations at 153,192 ore tonnes. Mill throughput was excellent with one of the highest quarters on record at 159,616 tonnes, despite a planned 30 hour maintenance shutdown. Nickel production was lower than prior quarters with grade trending to reserve, being consistent with the released FY17 guidance.

Importantly, there were no lost time injuries for the quarter and the Company is proud to continue to report a LTI frequency rate (LTIFR) of ZERO.

The Company has advanced a range of organic growth initiatives at Cosmos with the advancement of the Odysseus pre- feasibility study and approvals for drilling at Neptune progressing well.

Western Areas remains highly leveraged to fluctuations in the nickel price, with the improved nickel price for the quarter having a positive impact on cashflow generation. Consequently, after all capital expenditure, exploration and corporate costs, free cashflow was A$5.4m.

In the nickel market, the actions of the Filipino Government in applying stronger environmental controls on open cut mining (which are mainly nickel laterite mines) have contributed to an improved price outlook. The continued steady drawdown of nickel stockpiles on the LME, together with robust growth in the high nickel content bearing 300 series stainless steel demand, provides reason for optimism with regard to the nickel outlook. Many market analysts are forecasting CY16 to be the first significant deficit in the nickel supply versus demand balance, before factoring in the potential impact of mine closures in the Philippines.

Note 1: Refer page 9 for composition of unit cash costs.

Western Areas (ASX:WSA) is Australia's highest grade, lowest cash cost nickel producer and its main asset, the 100% owned Forrestania Nickel Project, is located 400km east of Perth in Western Australia. Western Areas is also Australia's second largest sulphide nickel miner producing approximately 22,000 to 25,000 nickel tonnes per annum from its Flying Fox and Spotted Quoll mines - two of the lowest cost and highest grade nickel operations in the world.

An active nickel explorer at Cosmos and Western Gawler in Australia, the Company also holds significant exploration interests in Canada, Finland and Greenland through shareholdings in Mustang Minerals and FinnAust Mining Plc.

The Board remains focused on the core business of low cost, long life nickel production, new nickel discoveries and generating returns to shareholders. It has put in place the cost structure and capabilities to prosper throughout the cycle by adopting prudent capital management and an opportunistic approach. Its latest presentation can be found at http://www.westernareas.com.au/investor-centre/corporate-presentations.html.

Cashflow

Cash at bank was A$81.1m at the end of the quarter (June quarter A$75.7m). Cash plus nickel sales receivables increased by A$10.9m to A$103.0m (June quarter A$92.1m). The increased receivable position reflects the 20 day cash receipt timing difference for nickel concentrate sales sold into the BHP Billiton Nickel-West (BHPNW) compared to the Jinchuan contract. BHPNW received 100% of sales for the September quarter as part of a temporary sales arrangement outlined in the June quarter report.

Free cashflow generation of A$5.4m was a solid result that displays the resilience of the Forrestania operations with a multi-year low, albeit improved nickel price. The realised price increased to A$6.54/lb from A$5.44/lb with the inclusion of positive quotational price adjustments. However some of the cashflow benefits of the price increase were offset by the timing of cash receipts difference as explained above.

The deferred mine development expenditure and measured approach to discretionary exploration expenditure was sustained during the quarter and will continue through to the end of December. A total of A$5.6m was invested into capital and exploration expenditure activities in the quarter.

Bank Facility

The ANZ corporate loan facility remains undrawn at the end the quarter, leaving the Company debt free. As disclosed in prior periods, the bank facility is due to expire in March 2017, and discussions are well advanced with regard to improving the facility to provide the Company with a flexible, committed and at call funding solution for the future.

Hedging

When pricing is supportive, the Company manages nickel price and foreign exchange risk with a combination of short term quotation period (QP) hedging and a set limit of medium term hedging. The policy allows the use of forward sales, bought options and collar style options:

• QP hedging is used to manage the risk of price fluctuations for nickel already shipped to offtake partners that is yet to have its nickel price finalised.

• Medium term hedging is used to manage the risk of nickel price fluctuations with a maximum 25% of expected nickel sales per month hedged out for a maximum of 12 months.

At quarter's end, the hedge book consisted of zero cost nickel collar QP hedges. No USD foreign exchange contracts were in place at the end of the quarter. Details of hedging in place at quarter end are as follows:

Corporate

WSA continues to hold 37% of FinnAust Mining Plc (AIM:FAM.L), with WSA's investment having a value at 30 September 2016 of £11.3m. Western Areas monitors the exploration progress and activities at FinnAust's Greenland and Finland projects. Further details can be viewed on the FinnAust website at: www.finnaust.com.

Safety

A continued excellent safety performance resulted in no LTIs with the LTIFR remaining at ZERO. Western Areas has now operated 912 days without an LTI and also reduced the rate of total recordable injury frequency rate (TRIFR) to 9.9 by the end of the quarter.

Ongoing health and safety training has continued with 189 people completing fire extinguisher training and 53 people being trained to use the site's automatic external defibrillators. A new monthly health promotion initiative commenced in July with the first three topics being Sleep Health & Apnoea, "R-U-OK" suicide prevention and Prostate Cancer, which included on-site sessions by an external expert during September.

August Mine Rescue Hazmat training exercise

Environment

No environmental incidents were recorded during the quarter.

A three yearly update of the Rehabilitation and Mine Closure Plan was completed in September which included extensive engagement with key stakeholders including the Department of Mines and Petroleum (DMP), Shire of Kondinin, Environmental Protection Authority (EPA) and the Department of Environment Regulation (DER).

Western Areas expanded the seepage recovery system around the Mossco Farm evaporation pond which has improved groundwater management in the area.

Compliance and Approval

A number of key environmental reports were completed including the Annual Environmental Report, the Triennial Groundwater Aquifer Review and the annual Mineral Resources Fund (MRF) submission.

A number of Programme of Work and Clearing Permits for exploration were granted during the quarter including South Ironcap, South Quest and Cross Roads.

Community - Cosmos

The DER completed a compliance audit which found that Cosmos was fully compliant with all regulatory requirements.

Western Areas continued to foster its relationship at Cosmos with members of the Tjiwarl native title claimant group through engagement regarding a Section 18 application for the future Neptune drilling programme near Lake Miranda. Western Areas also employed Tjiwarl group members to clear drill pads and as Heritage Monitors to oversee an exploration drilling programme just south of the Cosmos mine site.

During August, Company representatives presented four sewing machines, one overlocker and an assortment of indigenous style fabrics to the Leonora Women's Group called "nyunnga gu" in the local Kuwarra language, which means "women belong to". The "nyunnga gu" women's group aims to empower local women by providing a safe