triple play for poseidon nickel vision

The Australian

Matt Chambers | June 27, 2008


THREE of the biggest names able to attract mining speculators came together yesterday when Andrew "Twiggy" Forrest persuaded US investor Philip A. Falcone to put $US50 million ($52 million) into the Poseidon Nickel venture to try to build Australia's third-biggest nickel mine.

Mr Falcone's investment in Poseidon's West Australian ground, where some of the fastest fortunes in mining history were made and lost in the 1960s, sent shares in the junior soaring and shone a light on Poseidon's ambitions to become a 20,000 tonne a year miner with a refinery.

The backing of Mr Falcone's Harbinger Capital Partners, which made huge gains on its early investment in Fortescue Metals Group, has boosted the chance Mr Forrest, who chairs Poseidon, will spur a third big minerals operation in his home state.

As well as driving the unlikely success of Fortescue, Mr Forrest was earlier behind Anaconda Nickel, which overcame some big losses to investors and big production problems and now operates Australia's biggest nickel mine, Murrin Murrin, in its new guise as Minara Resources.

BHP Billiton has plans to take that mantle with its recently opened Ravensthorpe mine.

Harbinger's investment is in the form of notes that can be converted into stock at $1 a share and comes with some fairly attractive terms for Poseidon.

The six-year notes are interest-free for three years before reverting to 5 per cent a year.

Harbinger is Fortescue's biggest shareholder after Mr Forrest, who was described by Poseidon as the key element in securing the agreement.

Harbinger "has advised Poseidon that it sees similar growth through this investment", the nickel junior said.

The US fund already holds 8 per cent of Poseidon and would become its biggest shareholder, with about a quarter stake, if the notes are converted.

Poseidon managing director David Singleton said despite the company having only identified 60,000 tonnes of nickel resources, he wants to produce a feasibility study by the end of the year to outline plans for a 20,000 tonne a year operation with a life of more than a decade.

"We're not looking that far off into the future (for first production), if you look at how quickly Fortescue got into production, that's what we're looking at doing," Mr Singleton said, but would not give a target date for start-up.

Mr Singleton said it was too early to give a cost for plans to develop the old Windarra mine, which is being dewatered, or to say how it would be mined.

Recent industry analysis indicates that new nickel operations cost about $50,000 a tonne of annual capacity to develop, indicating a potential $1 billion price tag. One analyst who knows the region welcomed the investment, but said he had concerns about the low grade of the resources at around 1.5 per cent nickel.

"They might try some innovative technologies to get it up, but sometimes those type of solutions can be disastrous," said the analyst, who declined to be named. "Still, Twiggy will attract a high-calibre team."

Yesterday, Poseidon shares rose 17c, or 23 per cent, to 91c, but were still well off the $1.99 high they hit nearly a year ago after Mr Forrest was made chairman.

Separately, it was revealed that Mr Forrest gave away 2.38 million of his Fortescue shares on Wednesday, a package valued at $28.6 million, based on that day's closing share price.

A spokesman for Mr Forrest would not reveal who the shares were given to, or whether the gift was philanthropic, saying only that it went to "worthwhile recipients".

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