MELBOURNE, Feb 26 (Reuters) - Australian miner New Century Resources NCZ.AX has agreed to supply zinc concentrate from its project in the country's far north to Belgium's Nyrstar NYR.BR , the two firms said on Monday.
As part of the deal, Nyrstar is set to suspend arbitration proceedings that it launched this month related to a historical supply agreement over concentrate from the site, the companies said. That step is pending a formal offtake agreement.
Under the deal, New Century will supply 600,000 tonnes of zinc concentrate to Nyrstar over 5-1/2 years for processing into refined metal, the companies said in a joint statement.
The firms said the terms of the deal were confidential, but that New Century remained on track for its first zinc concentrate production in the third quarter of this year.
"New Century is pleased to establish this offtake with Nyrstar, which is the world's second largest direct end user of zinc concentrate with smelters located around the world," New Century Executive Chairman Evan Cranston said in the statement.
The global market for mined zinc is facing a supply deficit due to years of underinvestment during the commodities downturn and after several giant mines dried up, heating up demand for zinc mine supply.
New Century is set to produce zinc concentrate from the tailings of the giant Century Mine in Australia's Queensland state, which was closed in 2015 by previous owners China's MMG.
New Century earlier awarded Swiss-based Mercuria Energy Trading and Transamine Trading a tender for about 750,000 tonnes of zinc concentrate, which triggered Nyrstar to file a request for arbitration based on its historical supply agreement. has traditionally been a significant long term user of Century zinc concentrate," said Nyrstar Chief Executive Officer Hilmar Rode.
"We are very pleased to have secured a new long-term supply agreement and are looking forward to continue our long standing successful relationship with the Century Zinc Mine and its new owners New Century Resources."
For the first 3-1/2 years, the offtake includes a variable tonnage allocation to Nyrstar of 250,000 tonnes of zinc concentrate, rising to 350,000 tonnes for the final two years of the agreement, which represents approximately 15 percent and 35 percent respectively of the scheduled production.