Poseidon looks to fund restart of nickel operations after positive feasibility study

Poseidon Nickel ASX POS restart nickel operations Black Swan Silver Swan
Poseidon Nickel has firmed up 400,000t in contained nickel resources and is looking to restart its Silver Swan and Black Swan operations after a positive feasibility study.

Poseidon Nickel (ASX: POS) has reported positive results from a feasibility study into restarting its wholly-owned Silver Swan and Black Swan nickel operations, with revenues of A$288.6 million projected.

The company was reinstated to official quotation yesterday after a favourable Federal Court ruling.

With full reinstatement, Poseidon has hit the ground running publishing a feasibility study that forecasts capital expenditure of A$56.7 million to refurbish and restart its Silver Swan and Black Swan assets.

Initial mine life from both the Silver Swan underground operation and the Black Swan open pit is expected to push past the three-year mark, with Poseidon hoping to begin producing within 12 months of securing funding for the restart.

According to Poseidon, the Black Swan nickel plant and mine remain in “good standing” since they were placed on care and maintenance.

Once operational, Poseidon anticipates processing 1.1 million tonnes per annum through Black Swan which has capacity of 2.2Mtpa.

Poseidon expects it will initially produce around 8,000tpa of nickel from both Silver Swan and Black Swan mines.

The feasibility predicts an operating cost of US$3.18 per pound of nickel to generate A$288.6 million in revenue, with net cash flow of A$60.20 million.

In order to resume operations as soon as possible, Poseidon is advancing funding discussions with a number of parties regarding possible traditional debt and equity as well as prepayments on future production.

Commenting on its ability to secure the funding, Poseidon stated it was confident it would be able to lock-in the required finance when taking into account the success of other nickel stocks to secure funds in recent times and the rising nickel price.

Additionally, Poseidon noted it had “fielded a number of enquiries” from strategy investors and potential offtake parties.

As part of its funding quest, Poseidon has also mandated Petra Capital to lead a potential capital raising.

Investigating other revenue routes

In addition to anticipated revenue from its nickel operations, Poseidon is evaluating extracting more cash from its assets by using its excess Black Swan plant capacity to toll treat third party ore.

“Several mines within the Kalgoorlie region will come out of contract and an opportunity exists to competitively bid for the ore,” the company stated.

Pathway back to production

During the downturn, Poseidon built up more than 400,000t of contained nickel across its asset portfolio in Western Australia.

Revenue from Silver Swan and Black Swan will be diverted into exploration to extend mine life and advance other nickel assets as well as restarting the Lake Johnston plant which has an additional 1.5Mtpa in processing capacity.

Poseidon’s share price surged almost 19% to reach A$0.044 in early morning trade.

Lorna has more than 10 years' experience as a finance journalist and editor. She has written for numerous industry publications reporting on various sectors, including: resources, energy, construction, biotech, pharma, science and technology, agriculture, and chemicals. Specialising in resources, Lorna has also covered a myriad of small and large cap ASX and dual-listed stocks.