Poseidon Nickel has released the highly anticipated results of its bankable feasibility study for a 1.1Mpta mill feed option that puts the company on track to become Australia’s next nickel sulphide concentrate producer.

Poseidon Nickel (ASX:POS) has delivered positive results in a bankable feasibility study (BFS) that demonstrate its Black Swan project in Western Australia can produce a high-grade nickel sulphide concentrate and be a profitable operation.

The study 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.

“We have received indicative offtake terms from a number of groups which confirm this is a sought-after concentrate with excellent nickel payability,” managing director Peter Harold said.

“This is a significant de-risking of the project compared to the 2018 study.”

Harold said the Black Swan project was highly leveraged to the improving nickel price outlook with the NPV increasing to $470m based on a $US15-per-pound nickel price and an Aussie to US dollar exchange rate of 65c.

“These positive economic outcomes are set against an environment where capital and operating costs have increased significantly since the 2018 feasibility study was completed,” he noted.

“The team at Poseidon together with our contractors and consultants have put in a huge effort throughout the study period undertaking resource drilling, resource model updates, mine studies, metallurgical testing, process plant refurbishment and operating cost estimates, marketing and logistics studies and economic analysis to ensure the study numbers are robust.”

All-in sustaining costs are estimated at around $US4.90 per pound. Existing infrastructure means a low pre-production capex of ~$50m, including $38m for the refurbishment of the Black Swan concentrator – much less than the +$200m that would be required to build a processing plant from scratch.

Poseidon could also utilise up to $187m in carried forward tax losses.

Meanwhile, the extensive work the emerging producer has undertaken has also boosted the reserves and resulted in a more robust mining inventory.

“Resource drilling, mineral resource estimate updates and mining studies have increased the combined project ore reserves to 3.5 million tonnes averaging 1% nickel for 35,000 tonnes nickel contained, which combined with the Silver Swan tailings and existing stockpiles has extended the project life to over four years of processing,” Harold said.

“This increased project life together with the high spot Australian dollar nickel price have led to improved project economics compared to the 2018 feasibility study and will allow us to consider more financing options for the restart.”

ESG a key focus

The BFS also highlighted a reduction in carbon emissions compared to the 2018 feasibility study by using grid power.

“During the study we have maintained an ESG focus to ensure our nickel concentrate production meets the expectations of our stakeholders,” Harold explained.

“By developing an ESG framework focused on achieving identifiable benefits to the environment, social and governance elements we aim to deliver real benefits to all Black Swan stakeholders.”

Nickel M&A hotting up

Poseidon’s advance towards a restart of the Black Swan operation is well timed, with the nickel price expected to strengthen further and kick starting a flurry of mergers and acquisitions activity as the majors scramble to get their hands on more supply to further capitalise on the massive growth anticipated in the battery metals market.

The latest in the growing line of M&A deals its BHP’s (ASX:BHP) increased $9.6 billion bid to secure OZ Minerals’ (ASX:OZL) valuable copper and nickel portfolio. If successful, it would be the largest Australian mining acquisition since 2011.

This follows IGO’s (ASX:IGO) recent takeover of Western Areas (ASX:WSA) and private equity again throwing its hat in the ring with a $45m play for Cannon Resources (ASX:CNR).

Poseidon is progressing discussions with potential offtake and financing partners to reach a final investment decision (FID).

“Concurrently we continue to work on the 2.2Mtpa ore feed feasibility study which includes the processing of the talc carbonate ore to produce a rougher concentrate, with a lower nickel grade and higher MgO when compared to typical conventional smelter concentrate specifications,” Harold said.

“This could unlock significantly more material and would result in higher annual nickel production and improved project economics, with potential customers including Pure Battery Technologies’ proposed Kalgoorlie pCAM refinery or local HPAL plants.”

The study is well advanced and slated for completion in the first half of 2023.

If the company achieves FID in the first half of 2023, whether it decides to go with the 1.1Mtpa or 2.2Mtpa option, concentrate production could begin in early 2024 to take advantage of the strong nickel price environment, Poseidon said.

Investors welcomed the news today, pushing shares up around 7% to an early trading session peak of 4.6c.

Poseidon Nickel (ASX:POS) share price chart

 

 

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.

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