The small West Australian mining community of Newman has secured a victory against the world's largest resources giant, BHP Billiton, with the company revealing it will close down its controversial workers' camp near the town.

Key points: BHP will relocate about 500 workers into the town of Newman

BHP will relocate about 500 workers into the town of Newman The community has campaigned for the workers' camp to be shut down

The community has campaigned for the workers' camp to be shut down Nationals leader Terry Redman says he will keep pushing for residential accommodation to be the first choice for mining companies

The Kurra camp houses about 500 workers from BHP's Whaleback iron ore mine on the outskirts of Newman.

Premier Colin Barnett granted the company permission to extend the lease over the village for an extra 20 years, which angered locals and caused a rift between the Government and its alliance partner, the WA Nationals Party.

Both locals and Nationals' leader Terry Redman refused to support the lease extension, arguing the camp should be scaled back or closed down, with the workers moved to the 300 houses lying vacant in town.

East Pilbara shire president Lynne Craige said housing the workers in town would add vibrancy to the community and help keep alive local businesses, which had been struggling to stay afloat.

"Absolutely ecstatic, couldn't be happier, I'm so glad they've come to the realisation that there is a win-win here for the town and that works commercially for them," she said.

"We've had empty flats everywhere, obviously having people in them, even if they're FIFO adds to the security, it adds a vibrancy to town as it adds people and even if people aren't shopping, they're walking around and being part of our community and that's what we want."

The workers and contractors will now be moved into town and housed in BHP-owned accommodation and other third-party facilities.

Local businesses have welcome the closure, which they hope will result in more jobs for the Newman community.

"The people that they used to get FIFO for — the gardening, the cleaning, the security — now can be hired from the community so we have a diverse type of population living here now," businesswoman Anita Grace said.

"The camp is an archaic way of life ... the mental [health] problems, the suicide, being away from families ... it doesn't work."

Newman grandfather Paul Foster runs the local ice cream van and said he hoped more workers would be encouraged to move their families into town.

"It'll be a joyous thing for Newman, to have more families in town ... even if half of those people bring their families, it's going to be a big thing for Newman," Mr Foster said.

"I commend BHP for finally realising how important family and town are."

Long-term Newman resident, Paul Foster, has welcomed the camp shut down. ( ABC News: Claire Moodie )

'Commercial' consideration prompts move

In a statement, the company said its decision was made following a review that considered shutting the camp a good commercial move, while also providing the best outcome for employees.

Mr Redman has labelled the move a win.

"This is a fantastic outcome for the people of Newman and the businesses of Newman and all those who had chosen to invest in Newman," he said.

"Allowing people who have got investment in town to actually be a part of decisions, the accommodation contracts, the contracts for services that are provided to those facilities is just a fantastic outcome.

"Rather than accommodate in a camp next to town, surrounded by a barbed wire fence, actually put them in the community where they can engage with the community, go down to the local pub, go down the local rec centre and the like."

Mr Redman said situations like this should not arise again and he would continue to push Mr Barnett to create a policy that forced mining companies to first consider the town's facilities before building a camp.

"We should have a state-wide government policy to give certainty to businesses and operators in the Pilbara as it applies to work camps, so they know what the State Government position and parameters are before they start to build and set up mining camps," he said.

"That's something I haven't been able to land, the Premier is not prepared to go to that level and nor are groups like the CME and others.

"So, you have to tackle these on a case by case basis."

Under the move by BHP, local businesses will provide employees with meal and recreational facilities.