Poseidon Nickel has signed an offtake agreement with steel producer Tsingshan to process Silver Swan ore in China.
Under the agreement, Tsingshan will take the output from the Silver Swan underground mine in Western Australia for the first 2.5 years.
Tsingshan will receive broken ore from Poseidon and process the material through its integrated nickel pig iron (NPI) and stainless steel facilities in Fujian.
The Tsingshan process route can recover 100% of the nickel in the ore.
Poseidon Nickel managing director and CEO David Singleton said: "Our studies to date indicate that Silver Swan could have one of the lowest operating and start-up capital costs in Australia.
"This novel style of contract for export ore coupled with Tsingshan's low-cost production route is a key enabler to starting production at the mine.
"Whilst nickel prices remain low, we believe that when the recovery gets underway, Silver Swan can get into production very quickly."
In May, the company has signed an agreement to sell a contractual right to mine the Silver Swan mine to Caeneus Minerals for $1.5m.
The parties also intended to enter ian agreement for the ore to be processed by Poseidon either through its Lake Johnston or Black Swan concentrator plants after they are recommissioned.
Image: Poseidon's Silver Swan mine is located on Black Swan tenements. Photo: courtesy of Poseidon Nickel Limited.