Sirius signs nickel offtake deal with BHP

THE BOURSE WHISPERER: Sirius Resources (ASX: SIR) has inked an agreement with BHP Billiton (ASX: BHP) Nickel West.

The deal will result in Sirius supplying approximately half of the planned nickel sulphide concentrate production from the company’s Nova nickel mine for a period of three years from commencement of production.

Production of concentrate is expected to commence in late 2016.

Sirius explained it intends trucking concentrate by road from the Nova mine site to Nickel West’s processing facilities at Kambalda.

The two publicly-listed companies have chosen to keep the commercial terms of the offtake agreement confidential, possibly because shareholders aren’t smart enough to understand these types of arrangements, however in its ASX announcement Sirius assured the market the deal does reflect the anticipated high quality of the Nova nickel concentrate.

The company declared the quality of the Nova concentrate is anticipated to be smelter-friendly, making it an ideal material to blend with other, lower quality concentrates that are otherwise problematic for smelting.

Sirius said the contract is consistent with its previously stated aim of splitting its planned nickel concentrate production between two customers.

“We are pleased to have secured such an attractive offtake deal for half of our planned nickel production for the first three years of Nova’s initial ten year mine life,” Sirius Resources managing director Mark Bennett said in the company’s announcement to the Australian Securities Exchange.

“We are looking forward to a productive relationship with Nickel West.”

Sirius revealed it is currently in discussions with other parties for the remaining half of the expected nickel concentrate production from Nova and intends to conclude a second offtake contract by the middle of 2015.

It also disclosed negotiations for the sale of the copper sulphide concentrate to be produced from Nova are advancing with another party.