Investors support Poseidon on the back of strong Black Swan BFS outcome
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Poseidon Nickel will top up the coffers with potentially as much as $9m after receiving firm commitments for a placement and launching a share purchase plan, providing it with significant funds to continue its advance towards the restart of the Black Swan nickel operation.
Following the release of the highly anticipated bankable feasibility study (BFS) results for the Black Swan project, Poseidon Nickel (ASX:POS) has received commitments to raise $6m through a private placement being done at 3.5c per share.
The company is also offering existing shareholders additional stock at the same price as part of a share purchase plan (SPP) to raise up to $3m.
Managing director Peter Harold said the placement and SPP would support Poseidon’s strategy to grow its nickel inventory and “Fill the Mill” at Black Swan as the company moved towards a decision to proceed in Q2 2023, with first production to follow in 2024.
“The funds raised will be used to convert more resources to reserves at Black Swan to expand the mine life, continue with pre-production works, order long lead items, complete the rougher concentrate feasibility study and undertake an extensive drilling program at Lake Johnston targeting Emily Ann style (+3% Ni) mineralisation,” he said.
Poseidon is on the fast track to become Australia’s next nickel sulphide producer after recently delivering strong BFS results that demonstrate its Black Swan project in Western Australia can produce a high-grade nickel sulphide concentrate and be a profitable operation.
The study was for a 1.1Mpta mill feed option, but studies are also underway on a larger 2.2Mtpa operation.
The BFS envisages the operation will process 5 million tonnes of feed over four years to produce 200,000 tonnes of high-grade concentrate containing about 30,000 tonnes of nickel.
This scenario is forecast to deliver free cash flows of $333m with a pre-tax net present value of $248m and an internal rate of return of 103% at the current Australian dollar nickel price.
Black Swan can produce a high-grade nickel concentrate with ~15% nickel, less than 6% magnesium oxide (MgO) and an iron to magnesium oxide ratio of 5:1 – which is highly desirable for conventional nickel smelters.
This high-quality concentrate has brought several end users to Poseidon’s door, with Harold confirming last week the company had “received indicative offtake terms from a number of groups which confirm this is a sought-after concentrate that will command excellent nickel payabilities”.
The placement will boost Poseidon’s cash reserves to $10.5m. This will increase further with additional funds raised from the SPP.
If a positive final investment decision is made for the Black Swan project in the first half of 2023, concentrate production would start in early 2024 taking advantage of the strong nickel price environment.
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.