Poseidon Nickel Ltd (ASX:POS, OTC:PSDNF, FRA:NYG1) has released a positive scoping study on capital and operations expenditure for the Black Swan Nickel Project, revealing ore processing circuits can be refurbished at relatively low capital cost.
The company reported the outcomes from the study on the estimated capital cost for the refurbishment and operation of two processing plant configurations at Black Swan - the 150,000 tonnes per annum (tpa) Silver Swan circuit for treating high-grade sulphide ore and the 1.1 million tpa (Mtpa) Black Swan circuit for treating lower grade open pit disseminated ore and potentially ore from its Windarra project.
POS shares bounced 10.8% this morning to as much as 15.5 cents after hitting A$0.16 on Monday - their highest point in nearly seven years while the market cap pre-open was approximately A$393.3 million.
High potential at low cost
Poseidon managing director Peter Harold said the results of the scoping study accelerated the timelines for development at its Western Australian nickel projects.
“The results demonstrate that both processing plants can be refurbished at a relatively low cost and in a relatively short period of time, ie, approximately six months,” he said.
“This creates wonderful optionality for our shareholders as it allows us to consider producing concentrate from our high-grade resources like Silver Swan and potentially Golden Swan, assuming the current resource drilling results in a maiden resource which can be converted to a reserve.
“The benefit of producing our own concentrate compared to selling ore would be the ability to obtain higher payability for the contained nickel and improve overall project economics.
“In addition, with a strong nickel price environment and positive outlook, it’s definitely time to review mining and processing of the lower grade Black Swan disseminated ore and potentially combining that feed with Windarra ore from Mt Windarra and/or Cerberus.”
Scoping study details
The 150ktpa high-grade circuit is estimated to cost A$13.4 million or A$15.9 million to refurbish depending on the crushing option, while the 1.1Mtpa lower grade circuit could be refurbished for A$22.1 million. Both plants would take about six months to refurbish.
It is proposed that the existing 2Mtpa plant would be de-rated to 1.1Mtpa utilising the semi-autogenous grinding (SAG) mill grinding capacity only initially but could be re-rated later to bring into service the Ball Mill grinding capacity, subject to the quantity of ore reserves defined going forward and the prevailing nickel price.
The operating costs for the various processing circuits have been measured at A$91.60/tonne, A$79.09/tonne and A$29.39/tonne for the 150ktpa contact crushing, 150ktpa secondary crushing and 1.1Mtpa circuits respectively.
“Given the relative low capital number for the refurbishment for both circuits and the strong nickel price and buoyant price outlook, the company will maintain its focus on the high-grade ore production options available including Silver Swan and potentially Golden Swan, subject to defining a resource and a reserve,” the company said.
“The company will continue to study the sale of ore to third parties, however, given the low capital cost of the refurbishments and high payabilities for high quality (ie, high nickel grade, high iron/low MgO ratio) nickel concentrates, processing at Black Swan looks to be the most attractive option for the company for high-grade ore.”
Poseidon now needs to increase its high-grade ore inventory and is focused on delivering a maiden resource from Golden Swan and converting that to a reserve and increasing the Silver Swan reserve by infill drilling the existing resource.
“Assuming the company can deliver the above outcomes then restarting the 150ktpa concentrator would be a very attractive option based on the GRES Scoping Study results and assuming acceptable mining costs, metallurgical recoveries, concentrate payabilities, future A$ nickel price and attractive overall project economics,” it said.
- Daniel Paproth