THE BOURSE WHISPERER: Poseidon Nickel (ASX: POS) has completed the acquisition of the Lake Johnston nickel project from Norilsk.
The company said it is planning to return Lake Johnston and its Mt Windarra nickel project to production within six months of final financing and completion of a Definitive Feasibility Study for the Lake Johnston.
Poseidon agreed to acquire Lake Johnston from Norilsk Nickel for $1 million in September, having struck an agreement to purchase the Black Swan nickel project for $1.5 million in July.
The Lake Johnston and Black Swan projects include mine and concentrator plant infrastructure, and proven resources.
Poseidon has estimated the cost of bringing the initial two assets into production at around $24 million plus working capital with Black Swan, planned at this time to be funded from operational cashflow.
The company explained this initial capital figure for the first production of nickel concentrate for Poseidon has been revised down from a previous estimate of $300 million to restart operations at Mt Windarra on a standalone basis.
This much lower capital hit is partly a result of a recent offtake deal,the upshot of which means Poseidon has avoided the need to build a new concentrator plant and associated facilities.
Poseidon expects its overall nickel production capacity to be twice as high as original estimates, which were just for the Mt Windarra project.
Poseidon recently completed a $30 million placement to fund the initial capital investment for the recommencement of production at Mt Windarra and Lake Johnston.
A final decision of the recommencement of operations at Lake Johnston will follow completion of a DFS currently underway on the project.
“Poseidon now has three high quality nickel assets and substantial processing infrastructure in near working order,” Poseidon Nickel chief executive officer David Singleton said in the company’s announcement to the Australian Securities Exchange.
“We have a resource base that has more than doubled with the recent acquisitions of Lake Johnston and Black Swan.
“We can bring three projects into production within a relatively short timeframe, and within a manageable funding requirement.”
Poseidon indicated the acquisition of Lake Johnston and Black Swan has more than doubled its resource base to over 380,000 tonnes of nickel.
The Lake Johnston processing plant has capacity of 1.5 million tonnes per annum and the Black Swan nickel plant, which was upgraded in 2006, has proven throughput capacity of 2.15 million tonnes per annum.
The return to production of all three projects would give Poseidon the second largest nickel sulphide processing capacity in Australia.
“The Norilsk assets we are acquiring have had a substantial amount of capital spent on them and are in good operational condition and we currently have studies underway to finalise the exact costs and schedule to production,” Singleton continued.
“We now have a realistic and clear pathway to production, with profitable projects at current average nickel prices.
“It’s a very exciting time in the life of the company.”