The path to production is now gathering pace. Rooster Talk Episode 70 is packed with updates and insights and we have not one but three thought leaders share their knowledge in this episode. We begin our trilogy with Peter Harold, Managing Director and CEO of Poseidon Nickel Limited (ASX: POS).
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Introduction
The Poseidon story is fascinating, with a journey stretching all the way back to the 1960s and the legendary nickel boom that spiked the stock from a few cents up to over $280 before plummeting back to earth again by early 1970.
The resurrected Poseidon has experienced quite a few bumps along the road to production, gearing up towards a restart at a time of strong nickel price outlook due to the EV revolution.
This is all set to change dramatically as the company reaches a key inflection point - making a Final Investment Decision and signing Project Funding and Offtake Agreements.
About Poseidon Nickel Limited
Poseidon Nickel Limited (ASX Code: POS) is a nickel sulphide exploration and development company with three projects located within a radius of 300km from Kalgoorlie in the Goldfields region of Western Australia and a resource base of around 400,000 tonnes of nickel and 180,000 ounces of gold.
Poseidon owns the Windarra, Black Swan and the Lake Johnston Nickel Projects. In addition to the mines and infrastructure including concentrators at Black Swan and Lake Johnston, these projects have significant exploration opportunities demonstrated by the discovery of the Abi Rose deposit at Lake Johnston and the Golden Swan high-grade resource discovered at Black Swan in 2020.
Company Mission
Poseidon is committed to becoming a sustainable nickel producer, delivering value through performance and growth. The commencement of mining and processing at Black Swan is viewed as a first step in the Company's "Fill the Mill" strategy which the stated goal of growing the business to a 15ktpa plus nickel producer over the next 5-10 years.
Poseidon owns three significant nickel assets with a combined resource of over 400kt of nickel and processing capacity of up to 3.7Mtpa of ore to produce nickel concentrate. The Company’s business strategy remains focused on leveraging its existing asset base to grow Poseidon into a significant nickel producer over a period of expected significant growth in nickel demand, largely driven by growth in the electric vehicle market.
Check out the conversation in this Rooster Talk and, as I always encourage, DYOR.
Poseidon’s strategic pillars are:
developing a pathway to production
targeted exploration across its nickel asset portfolio
considering proximal business development opportunities.
Poseidon's Projects
Here are Poseidon's projects at a glance.
BLACK SWAN NICKEL PROJECT
• Open pit and underground mineral resources
• Significant established mining and processing infrastructure
• Bankable Feasibility Study completed in Nov 2022
• Planning to make FID mid 2023 and production by mid 2024
LAKE JOHNSTON NICKEL PROJECT
• Strong exploration potential, exploration drilling about to commence
• Significant established mining and processing infrastructure
• Previous mining studies being reviewed
WINDARRA NICKEL/GOLD PROJECTS
• Significant nickel mineral resource
• Potential to mine nickel ore and process at Black Swan
• Gold tailings resource with BFS, partner found, due diligence underway
All about Black Swan
Features
• 2.2Mtpa processing plant
• Silver Swan underground 12.9kt Ni (grade - 9.5%)
• Golden Swan underground 6.3kt Ni (grade - 3.9%)
• Silver Swan Tailings - 6.2kt Ni (grade - 0.92%)
• Black Swan Disseminated 181kt Ni (grade - 0.63%)
• Southern Terrace remains prospective for additional high grade discoveries
History
The Black Swan Project is located approximately 600km east of Perth and 50km northeast of Kalgoorlie, Western Australia and 300kms south of Poseidon’s Windarra Nickel Project.
The project commenced operations in 1997 and operated continuously until 2008. The following production was achieved:
• Black Swan Open Pit - 5.9Mt @ 0.7% Ni for 41kt Ni in concentrate
• Silver Swan Underground - 2.7Mt @ 5.1% Ni for 138kt Ni in concentrate
• Total production 179kt Ni concentrate
Poseidon Business Strategy
The Company’s pathway to production was significantly progressed during FY22 with two metallurgical breakthroughs which has significantly improved the economics of the Black Swan project.
The first involves incorporating a rougher concentrate regrind into its process flowsheet to significantly improve the quality of the smelter grade concentrate, which has resulted in improved nickel payability. The second was testwork on a combined serpentinite and talc carbonate ore blend to produce a rougher concentrate which is amenable to both pressure oxidation and high-pressure acid leach to produce a mixed hydroxide precipitate.
This culminated with the delivery of the Feasibility Study on the 1.1Mtpa project to produce high grade nickel concentrate suitable for conventional nickel smelters. Refer to ASX Release dated 21 November 2022 "Positive Black Swan Feasibility Study". The Company is now working with a short list of potential offtakers and project financiers with the aim of reaching a Financial Investment Decision during the second quarter of 2023.
With the assistance of Poseidon’s geological consultants, Newexco, the Company completed an exploration targeting report for Black Swan with three high priority targets identified. Newexco is now preparing a drilling program and budget to test these targets.
Nickel Market Comments
As Poseidon moves towards the proposed restart of Black Swan to become a nickel producer – the nickel price fundamentals outlook, with the backdrop of the new world of energy storage and EVs, is arguably the strongest we have ever seen.
The strong performance of the nickel price and the positive price outlook, based on robust demand growth of nickel in electric vehicle batteries is critical to the “Fill the Mill” Strategy. Primary nickel demand is forecast to grow from 3Mtpa in 2022 to around 5Mtpa by 2030 and a staggering 10Mtpa by 2050.
In our view this should result in the nickel price staying well above US$20,000 per tonne for the foreseeable future.
The primary focus for Poseidon has been advancing the Black Swan Feasibility Study and during this process a major breakthrough on the metallurgy was achieved. The addition of a regrind mill which will utilise the existing Silver Swan mill, increases the nickel grade and reduces the MgO content of the final concentrate. This will make the smelter grade concentrate more attractive to traditional nickel smelters and should lead to optimal nickel payabilities being achieved.
It was also recognised that a lower grade nickel concentrate (5-7% nickel) could be produced with a higher MgO content that should be attractive feed to both high pressure acid leach and pressure oxidation plants. Consequently, the scope of the Fill the Mill Strategy has been widened to include a full feasibility study on the “rougher concentrate option”, which would mean recommissioning both the SAG and ball mills at Black Swan and operating at 2.2Mtpa throughput.
This will also allow processing of the talc carbonate ore which is not included in the 1.1Mtpa throughput smelter grade concentrate study and has potential to increase the project life. This study will be completed in the June 2023 quarter and should coincide with the completion of Pure Battery Technologies feasibility study on the 50ktpa pCAM refinery proposed for Kalgoorlie.
Poseidon is working closely with Pure Battery Technologies since signing the MoU with them in July 2021, as the Black Swan rougher concentrate would be an ideal base feed for their proposed refinery. The rougher concentrate could also be suitable feed for a pressure oxidation and/or high pressure acid leach plants and a dialogue has been opened with a select group in relation to this opportunity.
Assuming a decision to proceed is made during 2023 (whether based on a 1.1Mtpa or 2.2Mtpa throughput operation), production of concentrate could commence by around mid-2024 to take advantage of the strong nickel price environment. The decision on the larger tonnage, rougher concentrate project, will be dependent on the outcome of the feasibility study and discussion with potential customers for that product.
Other Projects
There is significant infrastructure at Lake Johnston, including a 1.5Mtpa concentrator and the Maggie Hays orebody which contains 52,000 tonnes of nickel.
A comprehensive geological review of the Lake Johnston tenements has confirmed there are numerous targets that could generate more komatiite style orebodies and there is even the possibility of finding an intrusive orebody like Nova-Bollinger. A 15,000 metre RC drilling program is due to commence in April to test the Western Ultramatic unit.
At Windarra, 25 kilometres west of Laverton, there is a significant resource base of approximately 150,000 tonnes of nickel. The economics of mining ore from Mt Windarra and trucking it to Black Swan is being studied. In addition, Windarra is highly rated in terms of exploration potential and it is intended to do more exploration there in the future. Newexco are preparing an exploration target report for the Company.
Poseidon’s ultimate goal is to be mining ore from Black Swan, Lake Johnston and Windarra and processing these ores through mills at Black Swan and Lake Johnston to produce nickel in concentrate. The Black Swan BFS confirmed the economic viability of achieving that goal -:
The highlights from the BFS include -:
NPV of $248M, free cashflow of $333M and an IRR of 103% at spot Ni and FX.
Low pre-production capital – inc ~ $38M for the refurbishment (46 weeks construction).
High grade nickel concentrate (15%) – good Fe Mg ratio – highly desirable smelter feed.
Poseidon Nickel Limited: 3 Year Share Price
It can be a rough ride for the share price as a company transitions from explorer, having resources defined to ultimately becoming a developer. This graph charts that course but we strongly believe better times are ahead for shareholders and all associated with this attractive nickel development company.
Poseidon - Points of Difference
Samso’s Conclusions (Tony’s Take)
We believe POS is about to embark on that final, exciting phase of a mining company’s journey – commencing production. The long term outlook for nickel is excellent and Poseidon is virtually unique, globally, amongst all those prospective and near term producers. It has multiple existing nickel assets from average to high to super high grade ores and strong drilling exploration targets - and it has infrastructure valued conservatively at over $600 million replacement value.
The share price on the other hand, has waxed and waned at a relatively low level for more than a decade of trading, suffering from historical nickel price setbacks and this has induced a level of scepticism that, frankly, is unwarranted. Mr. Market values their shares at a paltry 3.6 cents, with a market cap of circa $120 million.
The experienced management team in place led by Peter Harold has been diligently working through all the necessary precursors to production and during that process they have unlocked enormous economic potential. It is our firm belief that Poseidon will be substantially re-rated this year and, therefore, there is a great opportunity to get in early ahead of key announcements regarding the FID and Project Funding and Offtake Agreements.
Chapters:
00:00 Introduction
01:17 Recap of March 6 Announcement; Black Swan Project progress leading to Final Invest Decision (FID) and Project Funding/Offtake Agreement.
05:12 Market perception and assay results implications.
07:50 The Expansion Project: investigating and modelling increasing the existing plant throughput from 1.1 mt/pa to 2.2 mt/pa. The production of two different grades and forms of nickel concentrate.
14:48 Cost implications of production expansion (per unit and capex).
16:03 Life of Mine comments.
19:05 Holistic mining scenarios, incorporating Lake Johnston with Black Swan and Windarra assets (all geographically separated sites).
25:23 Cascading effect of multiple assets becoming mined over time.
26:39 Refurbishment of Black Swan processing plant – time to complete and get into production.
27:26 Confidence in achieving the milestone of FID and Project Funding/Offtake Agreement.
32:15 Concluding comments from Tony.
PODCAST
About Peter Harold
Managing Director and CEO
Peter Harold (B.AppSc (Chem) AFAICD) is a process engineer with over 30 years corporate experience in the minerals industry, specialising in financing, marketing, business development and general corporate activities.
He was the Managing Director of Panoramic Resources from 2001-2019, a company he co-founded as a $3 million IPO in 2001. Peter steered Panoramic through the financing and development of the Savannah Nickel Project in the East Kimberley and the acquisition and re-start of the Lanfranchi Nickel Project near Kambalda with the company reaching a market capitalisation of $1.2 billion in 2007. He was more recently involved in bringing the Savannah Project out of care and maintenance and back into production.
Peter has extensive experience in base metal mining project feasibility studies, financings, developments, operations and marketing.
About Poseidon Nickel Limited (ASX: POS)
Poseidon owns three significant nickel assets with a combined resource of over 400kt of nickel and processing capacity of up to 3.7Mtpa of ore to produce nickel concentrate. The Company’s business strategy is focussed on leveraging its existing asset base to grow Poseidon into a significant nickel producer over a period of expected significant growth in nickel demand largely driven by growth in the electric vehicle market.
Poseidon’s strategic pillars are developing a pathway to production, targeted exploration across its nickel asset portfolio and considering proximal business development opportunities. The key enablers for the Company’s strategy to be successfully executed are ensuring key capabilities are resourced and the business is sufficiently funded for growth underpinned by a strong ESG framework.
Poseidon Business Strategy
The Company’s pathway to production was significantly progressed during FY22 with two metallurgical breakthroughs which could significantly improve the economics of the Black Swan project. The first involves incorporating a rougher concentrate regrind into its process flowsheet to significantly improve the quality of the smelter grade concentrate, which is expected to result in improved nickel payability. The second was testwork on a combined serpentinite and talc carbonate ore blend to produce a rougher concentrate which is amenable to both pressure oxidation and high-pressure acid leach to produce a mixed hydroxide precipitate.
With the assistance of Poseidon’s geological consultants, Newexco, the Company completed an exploration targeting report for Lake Johnston during FY22, with follow up reports for Black Swan and Windarra to be delivered in FY23.
The Lake Johnston report identified the Western Ultramafic Unit as a priority, with a program of works approved to undertake 15,000 metres of RC drilling which is planned for FY23.
The Company’s business development efforts over FY22 focused on delivering value from the Windarra/Lancefield gold tailings project. Partnering with Green Gold and determining whether their proprietary gold recovery technology is suitable for Windarra/Lancefield is considered the optimal path to unlocking value from this project.
Disclaimer
The information or opinions provided herein do not constitute investment advice, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not take into consideration, nor have any regard to your specific investment objectives, financial situation, risk profile, tax position and particular, or unique needs and constraints. Read full Disclaimer.
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