Poseidon study delivers economic case for Lake Johnston nickel plant refurbishment
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An engineering scoping study just completed on Poseidon’s Lake Johnston project in WA shows the processing plant can be refurbished at a fraction of the time and cost it would take to build a new 1.5-million-tonne-per-annum plant and associated infrastructure.
Poseidon Nickel (ASX:POS) shares gained almost 13% on Thursday morning after the emerging nickel producer revealed the details of the just completed Lake Johnston engineering scoping study.
The study estimated that the Lake Johnston processing circuit and associated infrastructure could be refurbished for a modest $31m and take just seven months to complete.
This pushed shares up to an intraday peak of 10.5c.
“The refurbishment capex estimate of $31m is very modest when you consider that a new 1.5Mtpa plant and associate infrastructure would probably cost +$200m,” Managing Director Peter Harold said.
“We see Lake Johnston as our next nickel sulphide mining and processing operation which could come on stream sometime after we recommence operations at Black Swan.
“If we can get both Black Swan and Lake Johnston back into production, we could achieve one of our stated corporate objectives of producing at least 15,000 tonnes per annum of nickel in concentrate.”
The operating cost for the process facility is estimated at just $36 per tonne based on a throughput rate of 900,000 tonnes per annum.
But the big question is, just how does the operating cost and time to completion stack up against the industry average?
“The opex estimate of $36/tonne ore is an attractive number not dissimilar to other plant opex numbers I have seen for remote sites relying on a diesel fired power station,” Harold said.
“The seven-month estimate for the refurbishment is very attractive compared to the time it would take to get approval and then build a plant like this.
“Based on previous experience I would expect the timetable for project approval could be 12-24 months and the construction time could be another 12-24 months, pushing the timetable out to 2-4 years verses 7 months.
“We are incredibly lucky to have both the Back Swan and Lake Johnston processing plants sitting on top of large nickel sulphide resources in a booming nickel market.”
The Lake Johnston plant started operating in 1998 with the original concentrator treating ore from the Emily Ann underground nickel mine.
All up 1.5 million tonnes of ore was mined and processed at an average grade of 3.8% nickel, which resulted in the production of 57,000 tonnes of contained nickel between 1998 and 2007.
There have been several expansions since then, with the most recent being a major hike in throughput capacity to 1.5 million tonnes per annum in 2006 to treat ore from the Maggie Hays underground mine.
The Maggie Hays deposit was brought online in 2007 with a resource of 12.3 million tonnes at 1.5% nickel for 182,000 tonnes of contained nickel and operated between 2008 and 2013.
The plant was refurbished in 2011 before being placed on care and maintenance in 2013.
Right now Poseidon is laser focused on restarting the Black Swan project, where its ‘Fill the Mill’ strategy has the company in pole position for a bigger mining inventory to support the restart of the processing plant.
But Lake Johnston could be restarted once Black Swan is in operation. Poseidon’s plan is to first grow Lake Johnston’s resource and reserve to support a potential restart.
By developing a second processing hub, the company can expand its nickel production and meet its strategic target of at least 15,000 tonnes per annum of nickel in concentrate production.
Poseidon will now review the previous studies on mining the remaining Maggie Hays resource and begin an aggressive exploration program aimed at increasing the resource base at Lake Johnston.
The company has appointed a senior exploration geologist and lodged a program of work with the WA government to undertake a 15,000m, 250-hole drilling campaign.
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.