Analyst: Poseidon Nickel worth more than double, plenty more upside to come
Poseidon’s “Fill the Mill” strategy appears to be resonating, with one analyst tipping the emerging nickel producer’s share price should be more than double the 9.1c it is currently trading at, but with plenty more upside beyond that still to come.
Poseidon Nickel (ASX:POS) has several “capital-efficient” options for restarting production next year at its Black Swan nickel project in WA, according to MST Access senior research analyst Michael Bentley.
The most economically attractive option for the company is to refurbish the 1.1-million-tonne-per-annum capacity processing circuit and “fill the mill” to maximise nickel production.
A final investment decision is slated for May 2022, with first concentrate production targeted for December the same year.
“Our valuation remains at A$0.21 and is based on the restart of Black Swan,” Bentley said in a recent research update on Poseidon.
“We are yet to incorporate the full Golden Swan resource, Silver Swan tailings or Silver Swan infill into our valuation as we await the announcement of the Golden Swan resource.
“We see further upside from these additions.”
Bentley said further exploration at the Southern Terrace could also grow nickel resources at the project.
Poseidon Nickel (ASX:POS) share price chart
The Silver Swan and Golden Swan deposits provide Poseidon with high-grade nickel that can be blended with the lower grade Black Swan ore to increase the grade and quality.
The company has completed a 60-hole resource definition drilling program at Golden Swan and is expected to release a maiden resource for the deposit in mid-October.
There is also already in place a maiden resource for the Silver Swan tailings of 6,200 tonnes, which when combined with the Black Swan ore will significantly improve the saleability of the final concentrate product.
Bentley says the measured Silver Swan tailings resource provides Poseidon with six-plus years of mining inventory for blending.
In total, the Silver Swan deposit has a resource of 16,100 tonnes of nickel and a reserve of 6,800 tonnes. Poseidon plans to undertake further drilling to convert more resources to reserves as well as extend the resource.
Bentley says Poseidon also has the option of processing ore from the Windarra deposit, where there is a significant resource but no processing plant.
Poseidon picked up the 2.2-million-tonne-per-annum Black Swan project from Norilsk Nickel at the end of 2014.
The resource inventory currently stands at 195,000 tonnes of nickel, including 16,000 tonnes grading 9.5% nickel at the Silver Swan underground and 179,000 tonnes in lower grade open pit and stockpiled material.
This article was developed in collaboration with Poseidon Nickel, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.