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Poseidon Nickel delivers positive Black Swan BFS; free cash flows of A$333 million

Last updated: 19:50 20 Nov 2022 EST, First published: 19:40 20 Nov 2022 EST

Poseidon Nickel Ltd -
The company is in the midst of completing a feasibility study on a 2.2 million tonnes per annum ore feed to produce rougher nickel concentrates.

Poseidon Nickel Ltd (ASX:POS, OTC:PSDNF) has completed a positive bankable feasibility study (BFS) for the Black Swan Project in Western Australia, which the company says puts it on track to becoming Australia’s next nickel sulphide concentrate producer.

The BFS shows that the mining and processing of 1.1 million tonnes per annum of feed from Black Swan could deliver free cash flows of A$333 million, with a pre-tax net present value (NPV) of A$248 million and an internal rate of return (IRR) of 103% at the current nickel price.

As the project is highly leveraged to the improving nickel price outlook, the company has projected the NPV increasing to $470 million based on an input assumption of US$15.00 per pound nickel price and a foreign exchange rate of $0.65 to the US dollar.

The combined project ore reserves stand at 3.5 million tonnes, averaging 1.0% nickel for 35,000 tonnes of contained nickel and when combined with the Silver Swan tailings and existing stockpiles, has extended the Black Swan project life to more than four years of processing.

The BFS estimates Black Swan milling 5 million tonnes of feed to produce 200,000 tonnes of concentrate containing about 30,000 tonnes of nickel over its four-year life.

Other highlights of the BFS include:

  • Black Swan can produce high-grade nickel concentrate with about 15% nickel, less than 6% magnesium oxide and a iron:magnesium oxide ratio of 5:1, which is highly desirable for conventional nickel smelters.
  • Existing infrastructure means a low pre-production capex of about $50 million compared to a greenfields operation, which includes $38 million for refurbishment of the Black Swan concentrator.
  • Significant carried forward tax losses of up to $187 million could be utilised.
  • ESG focus embedded into the feasibility study process, with carbon emissions reduced compared to the 2018 feasibility study by using grid power.

2022 Black Swan Project ore reserve estimate.

Significant undertaking

“Poseidon has achieved a significant milestone for our ‘Fill the Mill’ strategy by completing the Black Swan 1.1 million tonnes per annum mill feed bankable feasibility study,” Poseidon managing director and chief executive officer Peter Harold said.

“The team at Poseidon together with our contractors and consultants have put in a huge effort throughout the study period undertaking resource drilling, resource model updates, mine studies, metallurgical testing, process plant refurbishment and operating cost estimates, marketing and logistics studies and economic analysis to ensure the study numbers are robust.

“When we commenced the study the main areas that required further work were the large amount of higher risk mining inventory tonnages included in the 2018 study based on the conversion of 'low confidence' inferred mineral resources, the talc distribution within the disseminated mineral resource and the suitability of the concentrate for a traditional nickel smelter.

“We have undertaken several resource definition drilling programs on each proposed ore source resulting in a far more robust mining inventory. We have also undertaken numerous QXRD readings to construct a detailed talc distribution model for the Black Swan disseminated mineral resource estimate that will allow us to optimise the ore blends.

“This increased project life together with the high spot Australian dollar nickel price have led to improved project economics compared to the 2018 feasibility study and will allow us to consider more financing options for the restart.”

Moving forward

Poseidon will now work towards securing agreements with potential offtake and financing partners to support a final investment decision (FID) on the project.

Assuming FID is made during the first half of next year, the company intends to commence nickel concentrate production in early 2024 to take advantage of the strong nickel price environment.

Concurrently, the feasibility study on the 2.2 million tonnes per annum ore feed to produce rougher nickel concentrates is well advanced and due for completion in the first half of 2023.

This could unlock significantly more material and result in higher annual nickel production to improve the project’s economics.

Read the full BFS here.

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