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Western Areas share price lower despite BHP Nickel West and Jinchuan deals

James Mickleboro
Rio Tinto share price

The Western Areas Ltd (ASX: WSA) share price is trading lower on Tuesday despite the release of a positive announcement.

In afternoon trade the nickel producer’s shares are down 0.5% to $2.84.

What did Western Areas announce?

This morning Western Areas announced the award of new offtake contracts with BHP Group Ltd (ASX: BHP) subsidiary BHP Nickel West and China’s Jinchuan Co. for its high grade Forrestania Nickel Operation concentrate product.

These new contracts follow the successful completion of a highly competitive tender process that has resulted in improved commercial terms compared to current offtake agreements.

The company’s managing director, Dan Lougher, was very pleased with the agreements.

He said: “The Company is very pleased with the execution of the new agreements that extend our long and mutually beneficial relationship with Nickel West and reintroduces Jinchuan as an offtake customer following completion of the Tsingshan contract as at 31 January 2020.”

“It is notable that both of our offtake customers are involved in the downstream operation of nickel smelters. Western Areas firmly believes that the smelting of concentrates is a key process to continue to feed both the emerging Electric Vehicle (EV) battery market, via nickel sulphate, and the traditional stainless steel market,” he added.

BHP Nickel West agreement.

The Nickel West contract is for a period of three years or until the completion of the aggregate quantity.

That quantity is 10,000 tonnes of nickel contained in concentrate per annum, with a 30,000 tonne aggregate limit.

Mr Lougher believes the agreement is “an excellent outcome, particularly given the Company’s long and mutually beneficial relationship that has existed for over ten years.”

Jinchuan Co. agreement.

The agreement with Jinchuan is for two years and is for 10,000 tonnes of nickel contained in concentrate per annum, with a 20,000 tonne aggregate limit. It can be extended for a further 12 months, by mutual agreement.

Mr Lougher was also pleased with this agreement and notes that “it reconnects the groups at a time when the nickel market is repositioning to feed the emerging nickel market from EV batteries.”

Jinchuan is the largest nickel matte and cathode producer in China. Management believes that aligning itself with a China-based producer of Jinchuan’s calibre is strategically important as the market for higher value products continues to evolve.

The post Western Areas share price lower despite BHP Nickel West and Jinchuan deals appeared first on Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020