A short while ago I reported how Poseidon Nickel's (OTC:PSDNF) acquisition of the Black Swan processing plant was a move which would reduce the initial capex of the Windarra/Black Swan mine, but also increase the operating expenditures. Poseidon has commissioned an experts' report which is even more optimistic than my estimates. The experts think the projects can be brought into production for just $26M and would produce 22 million pounds of nickel per year at a cash cost of $4.05/lbs.
This is a very positive surprise as I was using an assumption of $50M in capital expenditures and a cash cost of $5.75/lbs. This means that both the capex and opex come in much lower than what I expected. This is due to the lower than expected transportation cost which is just $0.83/lbs. The output is slightly (12%) lower than expected, but I expect the NPV to be higher due to the lower operating costs and lower upfront capex. If the experts are even remotely correct on the capex and opex, I have to admit I seriously underestimated the potential of Poseidon Nickel.
This report is an incredibly important step for the company as it finally has something tangible to show its prospective lenders and financiers that the acquisition of the Black Swan assets were a good move which will allow the company to slash its initial capital expenditures by 90% (yes, ninety percent) whilst the operating cost increases just a little bit. This is excellent news and the next six months will probably be very exciting for the company and its shareholders.
Disclosure: The author is long PSDNF. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.