As the nickel market tightens and the battery market continues surging, Black Mountain Metals has made an informal play for Western Australia-based Poseidon Nickel (ASX: POS) that values the company at A$0.06 a share, with negotiations between the parties still ongoing and Poseidon’s board remaining quiet on a recommendation.
Poseidon’s board stated it will refrain on making a recommendation until it has received a formal bid and that “there is no certainty that any takeover will result from the continuing discussions”.
US-incorporated battery metals company Black Mountain proposes to secure 100% of Poseidon for a cash consideration of A$0.06 per share, which is a 53.8% premium to the company’s last closing price of A$0.039 per share.
However, the bid is significantly lower than Poseidon’s July 2007 pre-GFC price of A$1.46 per share.
If Black Mountain is granted access to undertake due diligence, it has agreed to provide Poseidon with an immediate A$2 million loan that will attract a 7.5% interest and 12-month repayment term.
At this stage of the process, Poseidon’s board will grant Black Mountain due diligence access and seek further information while continuing negotiations.
Meanwhile, Poseidon’s board told shareholders there was currently “no need to take any action”.
Investors reacted positively to the news, with Poseidon’s share price rocketing more than 28% to hit A$0.05.
Poseidon’s nickel operations
In late July, Poseidon reported it had appointed Robert Dennis as chief executive officer and managing director with his role becoming official from 1 August.
Mr Dennis’ appointment was to drive the company’s nickel restart strategy, with a recent feasibly study indicating Poseidon could resume mining and processing at its Black Swan and Silver Swan operations for an initial capital expenditure of A$56.7 million.
As part of its strategy to fast-track the restart, Poseidon has been in discussions with various parties regarding funding options, including an equity raising.
According to Poseidon, because it is in advanced stages of planning a “significant equity raising”, it felt obligated to notify the market of Black Mountain’s takeover proposal.