Coffee with Samso Episode 182 is with Peter Harold, Managing Director of Poseidon Nickel Limited.
Since taking the reins of Poseidon Nickel, Peter Harold has been steadily working towards restarting mining production. Today, Peter will address recent setbacks to restarting, as outlined in the company announcement of July 17.
About Poseidon Nickel Limited
Poseidon Nickel Limited (ASX Code: POS) is a nickel sulphide exploration and development company with three projects located within a radius of 300km from Kalgoorlie in the Goldfields region of Western Australia and a resource base of around 400,000 tonnes of nickel and 180,000 ounces of gold (Figure 1).
Poseidon owns the Windarra, Black Swan and the Lake Johnston Nickel Projects. In addition to the mines and infrastructure including concentrators at Black Swan and Lake Johnston, these projects have significant exploration opportunities demonstrated by the discovery of the Golden Swan high-grade resource discovered at Black Swan in 2020, Abi Rose deposit at Lake Johnston and the recent nickel intersections along the Western Ultramafic at Lake Johnston.
Black Swan Restart
Despite the solid progress made since the November 2022 Black Swan BFS was delivered, the decision to restart Black Swan has been delayed due a combination of factors including:
The later availability of grid power;
The need to complete additional metallurgical testwork;
The continuing tightness of the WA labour market;
Ability to secure accommodation in Kalgoorlie for FIFO workers; and
The volatility in global commodity and equity markets.
The Company is optimistic about the project development environment in 2024. The main goal is to restart Black Swan once all the issues mentioned above have been resolved and there is a more positive outlook on nickel prices and equity markets.
Company Mission
The commencement of mining and processing at Black Swan is viewed as a first step in the Company's "Fill the Mill" strategy and growing the business to a 15ktpa plus nickel producer over the next 5-10 years.
Poseidon owns three significant nickel assets with a combined resource of close to 400kt of nickel and processing capacity of up to 3.7Mtpa of ore to produce nickel concentrate. The Company’s business strategy remains focused on leveraging its existing asset base to grow Poseidon into a significant nickel producer over a period of expected significant growth in nickel demand, largely driven by growth in the electric vehicle market.
BLACK SWAN NICKEL PROJECT
• Open pit and underground mineral resources
• Significant established mining and processing infrastructure
• Bankable Feasibility Study completed
LAKE JOHNSTON NICKEL PROJECT
• Strong exploration potential
• Significant established mining and processing infrastructure
• Previous mining studies being reviewed
WINDARRA NICKEL/GOLD PROJECTS
• Significant nickel mineral resource
• Potential to mine nickel ore and process at Black Swan
• Gold tailings resource with BFS
Black Swan
2.2Mtpa processing plant
Silver Swan underground 12.9kt Ni (grade - 9.5%)
Golden Swan underground 6.3kt Ni (grade - 3.9%)
Silver Swan Tailings - 6.2kt Ni (grade - 0.92%)
Black Swan Disseminated 181kt Ni (grade - 0.63%)
Southern Terrace remains prospective for additional high grade discoveries
History
The Black Swan Project is located approximately 600km east of Perth and 50km northeast of Kalgoorlie, Western Australia and 300kms South of Poseidon’s Windarra Nickel Project.
The project commenced operations in 1997 and operated continuously until 2008. The following production was achieved:
Black Swan Open Pit - 5.9Mt @ 0.7% Ni for 41kt Ni
Silver Swan Underground - 2.7Mt @ 5.1% Ni for 138kt Ni
Total production - 179kt Ni concentrate
Poseidon Business Strategy
During FY22, the Company made significant progress in advancing its pathway to production. Two metallurgical breakthroughs were achieved, which are expected to greatly enhance the economics of the Black Swan project.
The first involves incorporating a rougher concentrate regrind into its process flowsheet to significantly improve the quality of the smelter grade concentrate, which is expected to result in improved nickel payability. The second was testwork on a combined serpentinite and talc carbonate ore blend to produce a rougher concentrate which is amenable to both pressure oxidation and high-pressure acid leach to produce a mixed hydroxide precipitate.
As a result of these achievements, the Feasibility Study for the 1.1Mtpa project to produce high-grade nickel concentrate suitable for conventional nickel smelters was delivered. You can refer to the ASX Release dated 21 November 2022 titled "Positive Black Swan Feasibility Study" for more details. The Company is now actively working with a shortlist of potential offtakers and project financiers with the goal of reaching a Financial Investment Decision.
In addition, with the assistance of Poseidon's geological consultants, Newexco, the Company completed an exploration targeting report for Lake Johnston during FY22. Follow-up reports for Black Swan and Windarra are planned to be delivered in FY23. The Lake Johnston report identified the Western Ultramafic Unit as a priority, and a program of works has been approved to undertake 15,000 meters of RC drilling.
The primary focus for Poseidon has been advancing the Black Swan Feasibility Study, and a major breakthrough in metallurgy was achieved during this process. The addition of a regrind mill, which will utilise the existing Silver Swan mill, will increase the nickel grade and reduce the MgO content of the final concentrate. This will make the smelter grade concentrate more appealing to traditional nickel smelters and is expected to result in optimal nickel payabilities.
Furthermore, it was discovered that a lower-grade nickel concentrate (5-7% nickel) with a higher MgO content could be produced. This concentrate would be suitable for both high-pressure acid leach and pressure oxidation plants. As a result, the scope of the Fill the Mill Strategy has been expanded to include a full feasibility study on the "rougher concentrate option." This would involve recommissioning both the SAG and ball mills at Black Swan and operating at a throughput of 2.2Mtpa. This expansion would also allow for the processing of talc carbonate ore, which is not included in the initial 1.1Mtpa smelter grade concentrate study and has the potential to increase the project's lifespan.
Assuming a decision to proceed is made by early 2024, production of concentrate could commence by the end of 2024. The decision on the larger tonnage, rougher concentrate project will depend on the outcome of the feasibility study and discussions with potential customers for that product.
Samso’s Conclusions (Tony’s Take)
The journey of POS has been quite a rollercoaster ride, with its fair share of ups and downs. While there have been setbacks and unfulfilled promises, it's important to take a clear-eyed look at the company's potential to become a nickel producer before passing judgment on the project. Despite recent challenges, POS is actively addressing the identified issues, and we believe it's only a matter of time before they transition from an explorer to a miner.
Looking at the long-term outlook for nickel, it remains excellent, and POS stands out globally among prospective and near-term producers. They have multiple existing nickel assets with varying grades, from average to high to super high-grade ores, and strong exploration targets. Additionally, their infrastructure is conservatively valued at over $600 million replacement value.
Currently, the share price is undeniably low due to the project delay announcement. However, in our opinion, there is a significant disparity between the market cap of around $90 million and a more reasonable valuation based on the continued progress towards production, which could potentially reach a market cap of $300 million or more. Given the dynamic nature of the battery minerals space, it wouldn't be surprising if the low price makes POS an attractive takeover target.
Nevertheless, the delay doesn't change our overall expectations, as POS is actively working with two shortlisted partners for offtake and funding. They are also diligently addressing the metallurgical and other issues outlined in their recent announcement. Once these are successfully resolved, the company will be in a position to announce a Final Investment Decision, as well as Project Funding and Offtake Agreements.
As a result, we anticipate that POS will experience a substantial re-rating in due course, presenting trading opportunities for savvy investors.
Chapters:
00:00 Start
00:20 Introduction
00:34 Updates from Poseidon
01:13 Metallurgy - Black Swan Restart
06:58 The global nickel market
10:23 Nickel from an ESG perspective
11:53 The cost effective advantage
17:42 The nickel market
21:44 Grid power not available to late 2024
24:43 Discussion about microgrids
26:12 Extending the mine life
28:26 Discussion about the finances
29:46 Share price performance
32:20 Concluding comments from Tony
33:49 Conclusion
PODCAST
About Peter Harold
Managing Director and CEO
Peter Harold (B.AppSc (Chem) AFAICD) is a process engineer with over 30 years corporate experience in the minerals industry, specialising in financing, marketing, business development and general corporate activities.
He was until recently the Managing Director of Panoramic Resources, a company he co-founded as a $3 million IPO in 2001. Peter steered Panoramic through the financing and development of the Savannah Nickel Project in the East Kimberley and the acquisition and re-start of the Lanfranchi Nickel Project near Kambalda with the company reaching a market capitalisation of $1.2 billion in 2007. He was more recently involved in bringing the Savannah Project out of care and maintenance and back into production.
Peter has extensive experience in base metal mining project feasibility studies, financings, developments, operations and marketing.
Disclaimer
The information or opinions provided herein do not constitute investment advice, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not take into consideration, nor have any regard to your specific investment objectives, financial situation, risk profile, tax position and particular, or unique needs and constraints. Read full Disclaimer.
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