Horizon Minerals and Poseidon Nickel merger aiming to fast-track WA gold production

Mid-tier miner Horizon Minerals (ASX: HRZ) aims to unlock further significant Western Australian gold potential with its move to acquire Poseidon Nickel (ASX: POS).

The acquisition will add to an extensive portfolio already boosted by Horizon’s merger with Greenstone Resources earlier this year.

Horizon managing director Grant Haywood said the merger is a logical consolidation of complementary assets in the Western Australian gold fields.

‘Cost-effective pathway’

“We believe this proposed merger represents a unique opportunity to unlock the value of our significant gold resource […] and leverage strategically located processing infrastructure,” Mr Haywood said.

“This really is a logical consolidation of complementary assets, delivering a near-term and cost-effective processing pathway and creating greater potential for both sets of shareholders to generate value from the cash flow potential of a long project pipeline and wholly owned processing infrastructure.”

“Outside gold, the merged nickel and silver assets enhance the respective asset values of both parties and retain full exposure for the combined shareholder group to crystallise value in any future sustained price upturn for these commodities.”

Scheme implementation

Horizon and Poseidon have entered into a scheme implementation deed under which Horizon will acquire 100% of the fully paid ordinary shares in Poseidon and 100% of the unlisted Poseidon options.

Poseidon shareholders will receive 0.1156 Horizon shares for every share held and all Poseidon options on issue – other than those that are incentive-based, which are to be handled separately should the deal proceed – will be similarly transferred at the same ratio.

The merged entity will hold a substantial resource base and regional tenure, with combined resources of approximately 1.8 million ounces of gold at an average grade of 1.84 grams per tonne gold and 422,700 tonnes of nickel at an average grade of 1%.

Broad portfolio

Horizon holds 100% interest in gold projects in the Kalgoorlie and Coolgardie regions, including the 428,000oz Boorara project and 1.372Moz in nearby satellite projects.

Alongside its three quality WA nickel projects, Poseidon operates the Windarra gold tailings project located 260 kilometres north-east of Kalgoorlie.

A positive definitive feasibility study on the Windarra project was released in July 2021.

‘Strong alignment’

Poseidon Nickel chief executive officer Brendan Shalders said the deal is a pivotal step towards establishing a significant gold business.

“There is strong alignment between Poseidon’s strategy and that of Horizon, which is one of the core pillars underpinning this regional consolidation,” he said.

“Together, we have greater capability to deliver on longer-term cash flow generation from cornerstone operations, fitting for an emerging mid-tier gold producer.”

A key part of the merger strategy is the use of Poseidon’s Black Swan infrastructure to fast-track gold production.

Horizon’s 465,000oz Burbanks and Boorara gold deposits form the cornerstone assets in a project pipeline aiming to deliver a five-year mine plan to fill the Black Swan processing plant.

$14m placement

Horizon has also received firm commitments from investors to raise $14 million via a two-tranche placement.

Upon implementation of the schemes, Mr Haywood will continue as managing director and chief executive officer.

Mr Shalders will remain with the combined group in a consulting capacity for at least three months through the transition post-merger.