Mincor Resources has extended its offtake agreement with BHP Nickel West, marking a key step in Mincor’s restart of its Kambalda nickel operations.
The offtake partnership covers ore tolling and concentrate, replacing the 20-year agreement between the two companies that expired in February this year.
The contract takes effect from the date Mincor delivers its first ore and expires either on the fifth anniversary of that date, or December 31 2025, whichever comes first.
Under the deal, Nickel West will use Mincor’s Kambalda nickel concentrator to process 200,000 to 600,000 tonnes of nickel ore per year.
In a statement, Mincor said it would sell nickel-in-concentrate to BHP, dependent on the average monthly London Metal Exchange nickel price, and the terms were substantially improved compared to the previous agreement.
Mincor managing director David Southam said the company decided to pursue the offtake agreement after weighing up several alternatives, including investing in its own stand-alone nickel concentrator and toll-treating its ore via third parties.
“The term sheet we negotiated with BHP Nickel West is compelling on a number of levels – most importantly with respect to price, risk and capital intensity – which clearly meant that this was the best economic outcome for our shareholders over the contract term with the lowest risk,” he said.
“It clearly demonstrates our commitment to restart nickel operations as quickly and efficiently as possible in one of the world’s most prolific sulphide nickel provinces.”
In January 2016, Mincor suspended mining operations at Kambalda due to exceptionally low nickel prices.
But Mr Southam said he believed the nickel industry had turned a corner.
“The nickel market is on the cusp of a new era, driven by a combination of rising underlying demand from the stainless steel market supplemented by new demand from the global lithium-ion battery industry as it gears up to supply the rapidly growing electric vehicle and energy storage sectors,” he said.
Kambalda is located around 60 kilometres south of Kalgoorlie.
Shares in Mincor were up 8 per cent to trade at 40 cents each at 1.30pm AEDT.