Poseidon Nickel (ASX:POS) has released its highly anticipated BFS results for the Black Swan project in WA which place the company on track to become Australia’s next nickel sulphide concentrate producer.
It’s very timely with the increase in activity in the nickel space like the recent IGO takeover of Western Areas, the private equity play for Cannon Resources and BHP’s increased bid for OZ Minerals’ copper and nickel portfolio.
The BFS shows that mining and processing 1.1Mtpa of feed from Black Swan could deliver free cash flows of $333 million with a pre-tax NPV of $248 million and IRR 103% at the current Australian dollar nickel price.
The study assumes milling 5.0Mt feed over four years to produce 200kt concentrate containing ~30kt nickel.
Black Swan can produce a high-grade nickel concentrate with ~15% Ni, < 6% MgO and a Fe:MgO ratio of 5:1 which is highly desirable for conventional nickel smelters.
Managing Director and CEO, Peter Harold, said the Black Swan project is highly leveraged to the improving nickel price outlook.
Poseidon is progressing discussions with potential offtake and financing partners to achieve a Final Investment Decision (FID).
Poseidon has achieved a significant milestone for our ‘Fill the Mill’ strategy by completing the Black Swan 1.1Mtpa mill feed Bankable Feasibility Study,” Mr Harold said.
“Economic analysis for the Black Swan project shows free cash flows of circa $333 million, NPV8 $248 million and an IRR of 103% at the current spot nickel price and exchange rate. “The Black Swan project is highly leveraged to the improving nickel price outlook with the NPV8 increasing to $470 million based on an input assumption of US$15.00/lb nickel price and foreign exchange AUD:USD $0.65. These positive economic outcomes are set against an environment where capital and operating costs have increased significantly since the 2018 Feasibility Study was completed.
“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.
Production data from when Black Swan last operated in 2009 showed high MgO levels were present in the concentrate.
“Recent metallurgical breakthroughs with the addition of a rougher concentrate regrind stage in the processing flowsheet and blending in a small amount of Silver Swan Tailings have confirmed we can produce a high-grade nickel concentrate containing ~15% Ni, < 6% MgO and a Fe:MgO ratio of 5:1.
“We have received indicative offtake terms from a number of groups which confirm this is a sought after concentrate with excellent nickel payability. This is a significant de-risking of the project compared to the 2018 study.
“Resource drilling, mineral resource estimate updates and mining studies have increased the combined project Ore Reserves to 3.5Mt averaging 1.0% nickel for 35kt nickel contained, which combined with the Silver Swan tailings and existing stockpiles has extended the Project life to over four years of processing. This increased project life together with the high spot A$ 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.
During the study we have maintained an ESG focus to ensure our nickel concentrate production meets the expectations of our stakeholders.
“By developing an ESG framework focused on achieving identifiable benefits to the environment, social and governance elements we aim to deliver real benefits to all Black Swan stakeholders.
“Moving forward we will progress discussions with potential offtake and financing partners toward definitive terms that will support a Final Investment Decision. Concurrently we continue to work on the 2.2Mtpa ore feed feasibility study which includes the processing of the talc carbonate ore to produce a rougher concentrate, with a lower nickel grade and higher MgO when compared to typical conventional smelter concentrate specifications.
“This could unlock significantly more material and would result in higher annual nickel production and improved project economics, with potential customers including Pure Battery Technologies proposed Kalgoorlie pCAM refinery or local HPAL plants.”