THE honeymoon between junior nickel explorer Niagara Mining and the Andrew "Twiggy" Forrest-run Fortescue Mining continues to blossom with Niagara promising to give up all future nickel marketing rights to Fortescue for an undisclosed sum.
Niagara signed a deal with Fortescue yesterday effectively giving Fortescue access to any nickel that Niagara produces from its Windarra project in the West Australian Goldfields.
It comes six weeks after Mr Forrest joined the minnow as chairman.
The tie-up between the two companies gave Niagara access to diamond drill rigs not previously available.
Mr Forrest took 5.5 million Niagara shares and 117.5 million post-consolidation options, which range in exercise price from 40c to $1.
Fortescue is gearing up to produce 45 million tonnes of iron ore from its Chichester Ranges project in the Pilbara, and Mr Forrest believes nickel, which is also in short supply in global markets, is a logical move for Fortescue.
Fortescue now becomes the "exclusive agent" for all marketing services for Niagara nickel.
Niagara chief executive Chris Daws said negotiations over the marketing rights had been going on for weeks, but their confidential nature meant it could not release details when questioned by the Australian Securities Exchange over a share price spike on Monday.
The share price rise was later attributed to institutional buying.
Mr Daws added that while Fortescue would get the lucrative nickel marketing rights, Niagara would receive less tangible benefits.
"Our value is in the strategic alliance with Fortescue," Mr Daws said.
"We will get access to things like human resources, to contracting and engineering services - we are paying for things like that through the marketing rights."
Niagara is trying to revive Windarra, which was the scene of one of the most infamous periods in Australian mining history - the Poseidon boom and bust.
Windarra yielded 128,000 tonnes of nickel during the 17 years WMC Resources worked the mine until its close in 1991 because of flagging nickel prices. New technology has reinvigorated both the underground and open pit workings at Windarra, and Niagara claims to have discovered five to six "high priority" anomalies.
Fortescue's access to marketing rights, while totally dependent on any nickel production, is also subject to a reorganisation of the Fortescue board.
Mr Forrest will take over as chairman from current occupant Doug Daws, while Chris Indermaur, one of the key players in the controversial and failed management buyout attempt of Alinta, has also been nominated to join.
A shareholders meeting to ratify all the changes is expected to be held in mid-June.
Niagara shares gained 12c to $1.51 while Fortescue stock added $1.20 to $33.50.
NIA
niagara mining limited
