Poseidon positions itself for nickel recovery, prepares to restart Silver Swan

Poseidon Nickel ASX POS Silver Black Swan processing plant
Poseidon Nickel's Black Swan processing plant.

In anticipation of the rising nickel price, Poseidon Nickel (ASX: POS) has secured all regulatory approvals to restart its high-grade Silver Swan nickel sulphide mine in Western Australia, while kicking-off an integrated restart study for the mine and its nearby Black Swan processing plant.

An earlier definitive feasibility study into resuming operations at the 9% nickel Silver Swan underground mine revealed a potentially quick restart opportunity that posed minimal risk with low operating and capital costs.

The definitive feasibility study indicated a restart capital cost of A$25 million and revenue of A$120.7 million over two years, based on a nickel price of US$6.50 per pound.

Meanwhile, a definitive feasibility study is underway into reviving the nearby Black Swan processing plant and open pit mine which Poseidon expects will add a further three years to the Silver Swan mine life.

Poseidon reported it was also in discussions with potential offtake partners for the Silver Swan ore.

Other milestones during the December quarter included Poseidon pushing its way further into the lithium space after the board approved a 4,000m drilling program at its Medusa lithium project, part of the company’s Lake Johnston operations in WA.

Additionally, Poseidon is considering expanding exploration in the area to include the Abi Rose nickel project which is 1km from the Lake Johnston processing plant and associated infrastructure.

Previous drilling at Abi Rose hit 10.48m grading 3.20% nickel which includes a 2.32m interval grading 7.62% nickel.

Across its project suite, Poseidon has almost 400,000t in contained nickel resources, with a contained cobalt credit of 7,450t, plus 183,000 ounces of gold and 670,000oz of silver.

Poseidon also progressed off-take discussions during the period for its other commodities as well as investigating co-processing options at its two plants to include lithium, cobalt and gold.

Nickel market fundamentals

During the December 2017 quarter, Poseidon actively positioned itself in readiness for the nickel price to hit commercially viable levels, with the company attracting numerous queries from domestic and international investors for an update on its plans for the coming year.

Poseidon anticipates the lithium-ion battery market will power nickel demand to about 500,000 tonnes a year by 2025.

Meanwhile, the company expects nickel will fall into a 100,000t deficit during 2018, which will shave off some of the excess supply.

“The Company believes the nickel market fundamentals will continue to improve over the mid to long term as the green energy disruptive technology is embraced by regulators and consumers,” Poseidon stated in its December report.

Nickel major Glencore told investors at a recent meeting it believed nickel market fundamentals were the best they’d seen since 2006 and 2007.

In the past week, alone, the nickel price has soared more than 8% to hit US$6.30/lb on 29 January 2018.

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.