European Nickel PLC (ENK.LN), an emerging mid-tier nickel laterite producer, said Wednesday it has signed a termination agreement with BHP Billiton, pursuant to which BHP Billiton has agreed to release the company from all of its obligations under the off-take agreement in relation to the company's Caldag project, in Turkey.

MAIN FACTS:

-As previously announced and in accordance with the heads of agreement signed with Jiangxi Rare Earth and Rare Metals Tungsten Group Company Limited (JXTC) in December 2008, following signature of the Termination Agreement European Nickel intends to enter into a new off-take agreement with JXTC.

-The company has also signed a $4 million Facility Agreement with Endeavour Financial Corporation to provide bridge loan finance pending completion of the proposed $20 million equity investment by JXTC in Caldag.

-The successful conclusion of negotiations with BHP Billiton is an important step towards finalising the acquisition by JXTC of a 20% equity interest in Caldag and the progression of the debt finance facility being arranged by China Tianchen Engineering Company. European Nickel is confident of completing this by the end of the year.

-Originally, only 50% of Çaldag's off-take was going to be sold to JXTC but this has been increased to 100% by mutual agreement to facilitate the 100% debt financing of the project from a Chinese bank.

-The terms of the termination of the BHP Off-take are a payment of $10 million on first drawdown of the project finance facility and a further 24 monthly payments of $1 million, starting once nickel output has reached 50% of the Caldag plant's design specification of 20,400 tonnes per annum of contained nickel.

-The maximum funding cost of the Caldag project has not increased as a result of the payments due pursuant to the Termination Agreement.

-The initial payment of $10 million to BHP Billiton is more than offset by the reduced current market prices of consumables at the Caldag project, particularly sulphuric acid where the price has dropped very significantly since the estimate used in the last announced project evaluation.

-The monthly payments start after maximum drawdown and are treated as operating costs.

 
-By London Bureau, Dow Jones Newswires; +44 (0)20 7842 9296; ian.walker@dowjones.com