UPDATE: Western Areas Inks Offtake, Financing Deal With BHP
12 Mars 2009 - 5:46AM
Dow Jones News
Western Areas NL (WSA.AU) said Thursday it has struck an offtake
deal that will see BHP Billiton Ltd. (BHP) buy nickel concentrate
from its Forrestania project and provide A$45 million in
financing.
News of the offtake deal, which looks set to replace an existing
agreement with Norilsk Nickel (GMKN.RS), boosted the Perth-based
junior miner's shares, which were up 5.8% to A$3.48 at 0407 GMT, in
a broader Australian market down 0.2%.
The agreement will see BHP buy up to 10,000 metric tons of high
grade blended nickel in concentrate a year from Western Area's
Forrestania nickel concentrator, up to a total of 75,000 tons.
BHP will use the high grade nickel concentrate from Western
Areas to help feed its Kalgoorlie smelter.
As a part of the offtake deal, BHP will also provide A$45
million in financing to Western Areas, most of which will be used
for early development of the Spotted Quoll deposit and the
expansion of the processing plant.
Repayment of the loan from BHP will begin in July 2012 and is
subordinated to Western Area's senior lender, the ANZ Banking Group
Ltd.
"The new agreement provides significant benefits to Western
Areas, including terms which are an improvement over the existing
agreement with Norilsk and substantial financing which can be
directed towards increasing low cost nickel production at
Forrestania," Western Areas Managing Director Julian Hanna said in
a statement.
Western Areas' sales agreements with Norilsk were amended in
February after the Russian company announced it was shutting down
its Australian operations.
Norilsk is still buying Western Areas' concentrate, but the
Australian company has the option to cut its sales to Norilsk by
40% from April this year and by 100% from January next year.
Western Areas is aiming to produce between 20,000 and 25,000
tons of nickel a year from its mines in the Forrestania area 400
kilometers east of Perth from 2010.
The miner said it is seeking a short term sales contract for the
10,000 tons to 15,000 tons a year that will be left over after the
BHP offtake deal.
-By Alex Wilson, Dow Jones Newswires; 61-3-9671-4313;
alex.wilson@dowjones.com
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