BHP's Nickel West cuts 3-year nickel supply deal with Sirius

SYDNEY, March 2 (Reuters) - Australian nickel explorer Sirius Resources (Other OTC: SRQUF - news) will supply BHP Billiton (NYSE: BBL - news) 's Nickel West division in Australia with much-needed nickel-in-concentrate under a three-year supply agreement, Sirius said on Monday.

The agreement calls for Sirius to ship half its forecast nickel-in-concentrate production from its Nova mine under construction to BHP's Nickel West smelting division, most likely starting in late 2016, Sirius said.

Sirius ignited interest in the Australian nickel sector three years ago when it made a major discovery, which it named Nova because it was found by a prospector looking for debris from NASA's Skylab space station.

Financial terms of the contract were confidential and discussions were under way with other buyers for the remaining 50 percent of Sirius' projected 26,000-tonnes-per-year production rate, Sirius said.

The Nickel West smelter lost out on a potential key supply source of nickel last year when rival Jinchuan Group of China signed a purchase agreement with another Australian miner, Western Areas.

That agreement narrowed the number of supply sources available to BHP as it strives to run the 43-year-old smelter at its maximum capacity of just over 100,000 tonnes per year.

BHP has been redoubling efforts to secure supplies for the smelter after trying unsuccessfully trying to sell Nickel West.

(Reporting by James Regan; Editing by Cynthia Osterman)