Western Areas NL (WSA) said it had formally completed the previously announced heads of agreement with BHP Billiton Limited (BHP) for the sale of up to 10,000 tonnes of nickel concentrate per year. The company said the deal would be for around 75,000 tonnes from the Forrestania Nickel Project.

Western Areas also said it had started sending nickel concentrate 340km from the Cosmic Boy concentrator at Forrestania to BHP Billiton's Kambalda operation.

Western Areas managing director, Mr Julian Hanna said the arrangement improved the company’s ability to sell nickel concentrate in Australia.

“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,” Mr Hanna said.

Mr Hanna also said the agreement with BHP Billiton was 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.”

Additional production is targeted from proposed mines at Cosmic Boy, Diggers South and New Morning as the nickel price improves.

Looking at the company’s nickel reserves, Western Areas said around 11,000 tonnes of nickel concentrate with an average grade of 14.2% nickel containing 1,540 tonnes nickel metal were currently stockpiled at the Cosmic Boy nickel concentrator.

Western Areas also said that there were over 30,000 tonnes of stockpiled ore with an average grade of 4% nickel containing 1,200 tonnes nickel awaiting treatment at Cosmic Boy.

At 1035 Western Areas were up 46c at $5.31, while BHP was up $1.25 to $35.15.