Australian television footage of coastal communities showed homes being evacuated or residents strapping down belongings in preparation for the storm, the second to occur inside Australia's so-called "Cyclone Alley" during the November-to-March storm season.
Ports in the Indian ocean, used to ship hundreds of millions of tonnes of iron ore from the companies' mines in the Pilbara region, have been closed and freighters sent to safe harbours to ride out the storm.
Nicholas was packing winds of up to 70kph and swells of up to nine metres, according the Australian Bureau of Meteorology.
The sparsely populated Pilbara region, some 1,900km north of Perth, is home to scores of iron ore, manganese, nickel and bauxite mines as well as nearby offshore oil and gas wells.
Australia's Bureau of Meteorology said on Sunday that Nicholas would be upgraded to a Category 4 cyclone.
Tony Yates, a weather bureau spokesman, said communities between Pardoo and Exmouth could experience strong winds.
"There could be gale force winds developing at any time within the next 24 hours," he said, adding that "some of the offshore islands have been experiencing gales already".
Elsewhere in Australia, flood waters around the Mackay region in north Queensland were receding on Mondau.
Mackay was declared a disaster zone after torrential rainfall on Saturday when 600 mm fell in just six hours.
But flood warnings remain in place with more heavy rain expected this afternoon along the north Queensland coast.