Poseidon strikes lucrative deal to monetise Windarra gold tailings project

Poseidon Nickel has formalised a deal with an experienced developer and operator of tailings projects keen to help the emerging nickel producer monetise its Windarra gold tailings projects.

Poseidon Nickel (ASX:POS) has signed a binding heads of agreement with Green Gold Projects Pte Ltd for the processing of the gold tailings at the Windarra project after receiving significant interest in the project from several parties.

The deal will be very beneficial for Poseidon if Green Gold Projects proceeds with the development because it will boost the company’s coffers by $1.25m and earn it an 8% free carried profit interest.

Poseidon managing director Peter Harold said the proposed partnership was an ideal outcome for Poseidon given the company’s focus on the development of its nickel projects.

“This agreement is a significant milestone in the company’s strategy to monetise the Windarra gold tailings project,” he said.

“Green Gold Projects is an experienced developer and operator and is currently active in 30 projects globally.”

The deal is subject to the outcome of metallurgical testwork and a bankable feasibility study, which will be funded by Green Gold Projects.

Once these have been completed, Green Gold Projects will earn a farm-in stake in the Windarra gold tailings project.

“In return, Poseidon will receive consideration in the form of cash payments – upfront and upon project financing and a free carried profit interest of 8%,” Harold said.

“The funding, development and operation of the project will be the responsibility of Green Gold.”

The gold tailings project hosts the Windarra and Lancefield tailings with a combined resource of 5.96 million tonnes at 0.84 grams per tonne (g/t) gold and 2.1g/t silver, for 161,000oz of contained gold and 399,000oz of silver.

A definitive feasibility study completed by Poseidon and released in mid-2021 investigated using two different mining methods on the Windarra tailings, amphibious dredging or hydraulic mining, and the construction of a modular 1.5Mtpa processing plant to recover up to 55,000oz of gold over a 45-month period.

The DFS estimated the project would have a net present value of around $20m and an internal rate of return of 45-50% – measure of a project’s profitability – depending on the mining method and assuming a gold price of $US1,750 ($A2,567) an ounce.

Poseidon said Green Gold Projects’ patented technology had the potential to improve the economics of the project even further, which was a key factor in Poseidon’s decision to partner with Green Gold Projects.

Securing a partner to fund and develop the Windarra gold tailings project allows Poseidon to remain focused on the restart of its Black Swan nickel project while also potentially generating some cashflow from the Windarra project.

Poseidon is advancing a bankable feasibility study on its Black Swan project and expects to release the results of the study shortly.

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.