Poseidon Nickel Ltd (ASX:POS, OTC:PSDNF, FRA:NYG1) has a clear pathway towards restarting operations at its Black Swan Project in Western Australia, which includes refurbishing the 1.1 million tonnes per annum processing circuit to maximise nickel concentrate production.
Following the outcomes of a scoping study completed by GR Engineering Services Ltd (ASX:GNG) (GRES) in late July, the company has determined that the new ‘fill the mill’ strategy is the most economically attractive production scenario.
GRES provided Poseidon with capital and operating cost estimates for the refurbishment and operation of the separate 150,000 tonnes per annum and 1.1 million tonnes per annum ore treatment circuits at Black Swan to a +/- 20% level of accuracy.
A final investment decision is set for May 2022 with mill commissioning earmarked for December 2022.
“Most attractive project for Poseidon”
Managing director and CEO Peter Harold said: “The results from the GRES scoping demonstrating that while both processing plants can be refurbished at a relatively low cost and in a relatively short time frame (six months) the large resource base at Black Swan, together with the positive outlook for the nickel price and improved payability of nickel in concentrates, makes the 1.1 million tonnes per annum plant fed by a combination of ore sources, including the underground high-grade, the most attractive project for Poseidon.”
GRES undertook the scoping study based on three possible plant configurations, and advised that each plant configuration refurbishment would take around six months to complete based on their current forward order book:
- 150,000 tonnes per anum (the original Silver Swan high-grade circuit) with contract crushing;
- 150,000 tonnes per annum plant with the secondary and tertiary crusher refurbished; and
- 1.1 million tonnes per annum plant (the original 2 million tonnes per annum Black Swan plant for treating low grade disseminated open pit ore) derated to process 1.1 million tonnes per annum of ore.
GRES also determined the following operating cost estimated for the various plant configurations:
Fill the mill strategy
Poseidon was initially considering a small, high-grade underground mining operation with ore sourced from Golden Swan and Silver Swan and processing this ore through the refurbished 150,000 tonnes per annum Silver Sean processing circuit.
The company was also considering the merits of refurbishing the 1.1 million tonnes per annum Black Swan circuit and processing a number of ore sources (low and high-grade) to fill that circuit.
While both production options are attractive, internal studies have confirmed that maximising nickel tonnes produced will have the best economic outcome given:
- The large resource base at Black Swan (approaching 200,000 tonnes nickel);
- The low capital and operating expenditure estimates for the 1.1 million tonnes per annum plant;
- The recent improvements in payability of nickel in concentrates globally, due to a tightening market;
- The strong spot nickel price (at US$9/lb today) and positive outlook for the nickel price; and
- The ability to have a long-life project that primarily sources feed from Black Swan orebodies but could treat ore from Windarra (100% Poseidon owned) and potentially third-party feed (subject to plant capacity availability and other factors).
Black Swan 1.1 million tonnes per annum circuit in green, Silver Swan circuit in purple and common areas in orange
Consequently, Poseidon is now focused on maximising nickel units from Black Swan, which means the focus is on refurbishing the 1.1 million tonnes per annum processing plant and feeding that plant with a combination of open pit and underground ore as well as Silver Swan tailings to improve concentrate quality.
The following workstreams are underway:
- Updating the Black Swan open pit study including determining the optimal pit shell and production rate and estimated capital and operating costs;
- Delivering a maiden resource from Golden Swan and converting that to a reserve;
- Undertake further drilling at Silver Swan to convert additional resource to reserve;
- Deliver a maiden resource on the Silver Swan tailings;
- Metallurgical test work on blending all the various ore sources to determine the optimum feed blend and typical concentrate specifications;
- Seek indicative offtake terms for the quality and quantity of nickel concentrate expected to be produced;
- Seek financing proposals for the debt component of the restart capital; and
- Complete a full bankable feasibility study (BFS).
Assuming Poseidon can deliver the above outcomes, then restarting the 1.1 million tonnes per annum concentrator will become a very attractive option based on the GRES Scoping Study results and assuming acceptable mining costs, metallurgical recoveries, concentrate payabilities, A$ nickel price and attractive overall project economics.