BHP Billiton may be among potential buyers for Kagara Ltd’s non-core Lounge Lizard nickel mine in Western Australia, which is expected to be sold by the end of the year.

Western Areas’ flagship nickel mining operations in WA’s Forrestania region surround the Lounge Lizard asset, so that the company is seen as its natural buyer.

Western Areas is also mining the asset on Kagara’s behalf.

However, Kagara executive director Joe Treacy says there are “other natural buyers out there”.

“But obviously, Western Areas would be the one that you would think should be the owner of it,” Mr Treacy told AAP.

He said BHP Billiton, which buys Western Areas’ concentrate, could be interested in Lounge Lizard.

Kagara last month revealed the plan to sell the asset to help pay for expansions at the company’s core copper, lead and zinc mines in Queensland.

While reports suggest Lounge Lizard could fetch up to $180 million, Mr Treacy indicated that it could attract a higher price, given the project has considerable exploration upside.

Kagara bought Lounge Lizard for $25 million, which Mr Treacy said should be shown to be a good acquisition.

Kagara chairman Kim Robinson had been familiar with the asset since the 1970s when Western Areas’ Flying Fox deposit was discovered and couldn’t resist snapping up Lounge Lizard in 2006 when former owner Lion Ore put it on the market.

Geoff Day, Kagara’s chief executive, told a teleconference on Tuesday that the sale was expected to be completed before Christmas.

Kagara also on Tuesday reported a rise in lead and zinc production in the September quarter.

It said it had made a solid start to the financial year with a three per cent drop in cash operating costs for zinc and copper, while the cash operating margin for zinc was up 12 per cent.

Shares in Kagara closed up half a cent, or 1.15 per cent, at 44 cents on Tuesday.