Poseidon delivers substantial hike in nickel resources, further supporting Black Swan restart
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Poseidon Nickel (ASX:POS) is in an even better position to become Australia’s next nickel sulphide producer after delivering significantly higher resource inventory as the company approaches a final investment decision at the Black Swan project in Western Australia.
The resource has risen to 26.3Mt at 0.72 per cent for 189,000t of contained nickel following a 48 per cent jump in the higher confidence measured and indicated resources and a 14 per cent increase in the average nickel grade.
The measured and indicated resources now stand at 16Mt at 0.73 per cent nickel for 118,000t of contained nickel – an 8000t increase.
“Completion of the updated Black Swan disseminated resource and block model is an important milestone for the company, underpinning the project operating model as we move towards the final investment decision (FID),” managing director Peter Harold said.
“Black Swan has a 2.2Mtpa process plant and this resource upgrade is a key deliverable in our ‘Fill the Mill’ strategy to leverage off the existing infrastructure and large resource base at Black Swan.”
Poseidon is targeting s FID in late June/early July.
The substantial increase in measured and indicated resources means there is a lot more nickel for Poseidon to convert to reserves – the estimates of nickel in the ground ready to be mined.
“The greater nickel inventory of ‘higher confidence’ mineral resources can now be considered in future ore reserves estimations,” Harold explained.
“In addition, there is a much-improved understanding of the grade distribution within the metallurgically important serpentinite (low talc material) and talc-carbonate hosted ores below the existing Black Swan open pit.
“Understanding the distribution and metallurgical characteristics of these ore types is key to further de-risking the restart of Black Swan.”
The resource was updated following the completion of a 10,845m infill reverse circulation drilling program undertaken between December 2022 and March 2023.
Buyers lining up around the block
Poseidon is in final negotiations regarding offtake and debt financing, having whittled the shortlist down from more than 30 interested parties to two.
This solid progress prompted Morgans recently to assign a valuation of $484 million, or 10c a share – more than double the current share price – and reaffirm the strong potential it sees in the emerging producer.
Shares advanced 4.7 per cent on Wednesday on the back of the resource update.
The results of a bankable feasibility study (BFS) on a 1.1Mtpa operation released in November last year demonstrated the Black Swan project in Western Australia could produce a high-grade nickel sulphide concentrate and be a profitable operation.
It is expected to process 5 million tonnes of feed over about four years to produce 200,000 tonnes of high-grade concentrate containing 30,000 tonnes of nickel.
The 1.1Mtpa scenario is forecast to deliver free cash flows of $333 million with a pre-tax net present value (NPV) of $248 million and an internal rate of return of 103 per cent at a nickel price of around $US10 per pound, or about $US22,046 per tonne, and an exchange rate of 0.67.
The Black Swan project is highly leveraged to the improving nickel price outlook.
Black Swan can produce a high-grade nickel concentrate with about 15 per cent nickel, less than 6 per cent magnesium oxide (MgO) and an iron to magnesium oxide ratio of 5:1 – which is highly desirable for conventional nickel smelters.
Poseidon is also currently investigating an expansion to 2.2Mtpa, which would substantially increase the production profile and extend the life of mine to eight years.
Australian Newspaper today Morgan’s say 10 cents
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