The conditional offtake agreement covers two years but is renewable for a further two years.

The agreement is in the form of an ore tolling and concentrate purchase deal, with ore to be mined at Poseidon's Windarra project to be trucked to Nickel West's Leinster concentrator for toll treatment.

Nickel West will buy 100% of the concentrate produced.

An extensive test work program has been completed to ensure the Windarra ore is up to scratch for processing at Leinster.

Poseidon will pay a treatment charge for every tonne processed, which will be offset against Nickel West's concentrate purchases.

First ore deliveries are due no later than February 2015 and the contract is for a minimum 350,000 tonnes of ore per annum up to 500,000tpa, with an option to boost ore deliveries to 700,000tpa.

Poseidon said it was well advanced on obtaining funding to meet the first delivery and processing at Leinster would further reduce capital costs of the Windarra restart to $A11 million.

Before the acquisition of its new Black Swan project from Norilsk Nickel, Poseidon had envisaged start-up costs of as much as $290 million for Windarra.

The company plans to truck some of the Windarra ore to Black Swan project for processing but said there was sufficient production capacity to supply both facilities.

Poseidon followed up its Black Swan buy with the acquisition of Lake Johnston, also from Norilsk, for just $1 million.

Poseidon CEO David Singleton said the offtake deal with Nickel West continued a series of strategic steps completed over the last year.

"We have removed the capital funding risk for the company through the Black Swan acquisition, developed depth to the company with the acquisition of Lake Johnston and provided a clear route to market through the offtake arrangement with Nickel West," he said.

"We thoroughly believe, like most analysts, in the future of the nickel market, given renewed strength in demand for nickel and limited new supply, and believe that Poseidon is now well-structured to grow into that market."

Windarra has an ore reserve of 1.7 million tonnes at 1.44% nickel for 25,000t nickel and a resource of 157,000t.

Shares in Poseidon dropped nearly 12% over the last 12 sessions as the nickel price fell to a six-month low.

Poseidon shares closed at 18.5c yesterday.