BHP Billiton Ltd. (BHP) Friday said it agreed to sell its Yabulu nickel refinery in Queensland to companies owned by Australian mining magnate Clive Palmer.

The sale follows a review of the operation, and the terms of the sale are confidential, BHP said in a statement.

Market speculation previously focused on a sale to Palmer's Gladstone Pacific Nickel Ltd. (GPN.LN), or that BHP may opt for a packaged sale of Yabulu and its failed US$2.1 billion Ravensthorpe mine in Western Australia.

"From a strategic point of view, after the Ravensthorpe closure, Yabulu no longer fit with our business because it is a downstream operation," a BHP spokesman said. BHP has long focused on low-cost, long-life upstream assets rather than processing facilities.

At Dec. 31, Yabulu's book value was US$593 million.

Palmer's Gladstone Pacific Nickel has plans for a large-scale nickel operation in the Gladstone area.

"The sale of Yabulu is a great result for BHP," said Macquarie Bank analyst Brendan Harris. "We had previously assumed closure of the facility from June 30, and with this announcement there's no impact to our expectations while the sale enables BHP to avoid closure costs. Yabulu is no longer a strategic asset for BHP following the closure of Ravensthorpe and it's never been material to the business.

"We see Yabulu as a challenged operation because of the increasing competition from Chinese nickel pig iron producers," Harris said.

BHP modified Yabulu to take ore feed from the Ravensthorpe laterite mine, which was set to produce 50,000 tons annually using a high-pressure acid leach system.

Without the ore feed from that mine, Yabulu has a capacity of about 30,000 tons of nickel as well as 1,900 tons of cobalt, using an ammonia solution to leach metal from nickel ore. The refinery currently processes ore from New Caledonia and the Philippines.

The sale will prevent the loss of 900 jobs, the spokesman said, after BHP already cut 300 jobs earlier this year as part of a global reduction in its workforce.

BHP will write down the carrying value of Yabulu by around US$500 million and a further US$175 million of unrecoverable tax benefits. Those writedowns will be reported in BHP's results for the year ending June 30.

BHP didn't give details on Yabulu's initial book value, but the company in January said it would take a pretax impairment charge of about US$1.2 billion in its first half results.

Those writedowns came as a result of the Ravensthorpe closure as well as the collapse in the nickel price affecting all of BHP's nickel operations.

At the time, BHP said a further US$400 million in writedowns was likely to be recognized in the second half.

BHP will continue with its review for Ravensthorpe, scheduled to conclude at the end of the year, and all options for the mine, including a sale, are under consideration, the spokesman said.

-By Elisabeth Behrmann, Dow Jones Newswires;

61-2-8272-4689 elisabeth.behrmann@dowjones.com