Nickel miner Western Areas is seeking new offtake deals for 2010 onwards after allowing BHP Billiton to take Norilsk Nickel's share of concentrate until the end of the year.
Previously, both companies agreed for BHP to take up to 40 per cent or 10,000 tonnes annually from Cosmic Boy, up to a total of 75,000t.
Western Areas has previously said it would continue to sell the remaining concentrate to Norilsk but would look for other offtake customers.
Earlier this year, Norilsk placed its Lake Johnston nickel operations in WA on care and maintenance.
The company added that it is currently seeking new offtake deals in China and elsewhere.
"The agreement with BHP Billiton is consistent with the Board's decision to split Forrestania nickel sales into at least two contracts," managing director Julian Hanna said.
"The BHP Billiton contract is intended to lock in a long term revenue base for the Company and future offtake agreements are intended to be shorter term contracts selling nickel concentrate to third parties."
The nickel miner is targeting a production rate of 25,000t of nickel per annum from 2010.
Shares in Western Areas climbed 43 cents to $5.28 at 13:09AEST.
The announcement is below:
The Board of Western Areas is pleased to announce that formal offtake agreements have been executed with BHP Billiton for the sale of up to 10,000 tonnes of nickel in concentrate per annum for a total of 75,000 tonnes from the Forrestania Nickel Project. The terms of the Heads of Agreement for the offtake were announced on 12 March 2009.
Western Areas has commenced transporting nickel concentrate 340km from the Cosmic Boy concentrator at Forrestania to BHP Billiton's Kambalda operation. Approximately 11,000 tonnes of nickel concentrate with an average grade of 14.2% nickel containing 1,540 tonnes nickel metal are currently stockpiled at the Cosmic Boy nickel concentrator. In addition there are over 30,000 tonnes of stockpiled ore with an average grade of 4.0% nickel containing 1,200 tonnes nickel awaiting treatment at Cosmic Boy.
Western Areas has also consented to the assignment of the residual 60% interest in the existing offtake agreement with Norilsk Nickel Australia ("OTCPA") to BHP Billiton. The assignment will streamline the smelter treatment and sale process for concentrate from Forrestania.
Western Areas retains the right to terminate the OTCPA at any time from 1 January 2010. Western Areas is currently seeking new offtake contracts in China and elsewhere for the balance of concentrate above the 10,000 tonnes nickel per annum to be sold to BHP Billiton.
The Company has previously announced production targets for the Flying Fox mine and proposed Spotted Quoll mine up to 25,000 tonnes nickel per annum from 2010 (Figure 1).
Additional production is targeted from proposed mines at Cosmic Boy, Diggers South and New Morning as the nickel price improves.
Western Areas Managing Director, Mr Julian Hanna said, "We think Western Areas represents a reliable supplier of high quality nickel concentrate and we look forward to building a long term relationship with BHP Billiton. The new offtake agreement provides significant benefits to Western Areas including the ability to sell nickel concentrate within Australia".
Mr Hanna added "the agreement with BHP Billiton is consistent with the Board's decision to split the Forrestania nickel sales into at least two contracts. The BHP Billiton contract is intended to lock in a long term revenue base for the Company and future offtake agreements are intended to be shorter term contracts selling nickel concentrate to third parties".