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  • Poseidon Nickel Study Shows Black Swan Plant Will Increase Cash Flows 0 comments
    Aug 13, 2014 7:55 PM

    Poseidon Nickel's (ASX:POS) shares are set to trade higher this morning after an engineering study showed major capital savings and increased cash flows from trucking and processing of nickel ores from Mt Windarra at Black Swan nickel project in Western Australia.

    Project operating cash flows are set to increase significantly by using the Black Swan plant, engineering work has demonstrated - with a reduced capital cost for the Mt Windarra nickel project of $240 million.

    It also doubled the ore resources of the company. This takes a year off the development time.

    The company is also in advanced discussions with parties regarding debt financing for the project and securing an off-take contract for the Black Swan concentrate.

    Poseidon is acquiring the Black Swan Project which includes a processing plant from OJSC MMC Norilsk Nickel.

    Both the Mt Windarra mine and the Black Swan operation can be brought into production in less than 6 months from final financing.

    Black Swan additional benefits include higher tonnes of ore processing capacity, lower onsite operating costs and less reliance on a single mine operation.

    Another benefit is trucking ore from Mt Windarra is practical and costs are readily offset by operating, capital and financing savings.

    The cash cost estimate is US$4.05/lb, compared to US$3.35/lb at the Windarra site.

    David Singleton, managing director and CEO, commented: "The outcome of this engineering activity has clearly demonstrated what a transformational acquisition the Black Swan project has been for Poseidon.

    "The independent analysis has demonstrated that we have reduced the capital cost of the Mt Windarra nickel project by $240 million, as well as doubling the ore resources of the company and shaving a year off the development time."

    Cash flows increased using Black Swan

    Singleton added that the key outcome is that the project operating cash flows have been increased markedly by using the Black Swan plant.

    "Earlier in the year we announced a potential ore tolling and concentrate contract with a major party which, although delayed, we continue to progress.

    "The acquisition has now given us two clear strategic alternatives to either process Mt Windarra ore through Black Swan or to deliver Windarra into an ore tolling agreement and operate Black Swan in its own right."

    Initial operating life

    Windarra has an initial operating life of 7 years although further drilling is expected to continue to extend.

    Black Swan has an initial operating life of circa 7 years including 1.5 years using ore mined and stored on the ROM pad and a further 3 years before a cutback to the current open pit is required.

    The initial Black Swan option will produce 9,800 tonnes nickel in concentrate annually.

    Capacity increase potential

    There is the potential Black Swan output may increase nickel in concentrate to circa 14,000 tonnes nickel annually, with progressive output growth from mining the Cerberus ore body at Mt Windarra.

    Both the Mt Windarra mine and the Black Swan operation can be brought into production in less than 6 months from final financing.

    Black Swan and Mt Windarra will produce a smeltable concentrate grade of circa 12% nickel.

    Re-start

    The Black Swan concentrator expansion was commissioned in 2006 but only operated until February 2009 when it was put on care and maintenance when commodity prices were negatively impacted during the Global Financial Crisis.

    The concentrator is in good condition with an independently estimated restart capital cost of circa $9.4 million.

    In addition to the plant the site includes a large, low grade, high volume, open pit nickel sulphide ore body which can be used to supplement higher grade ore from the Mt Windarra mine owned by Poseidon.

    The operating plan is based on a total initial concentrator throughput of 1.1 million tonnes of nickel ore comprising 600,000 tonnes from Mt Windarra and a further 500,000 tonnes from the Black Swan open pit.

    Analysis

    Poseidon has taken another major step towards production following key outcomes from an engineering study relating to trucking and processing nickel ores from Mt Windarra at Black Swan.

    From the study, there is set to be a capital saving of $240 million relative to processing ores onsite at Mt Windarra, and considering the Black Swan purchase price of just $1.5 million, the acquisition is certainly a company maker for Poseidon.

    Both the Mt Windarra mine and the Black Swan operation can be brought into production in less than 6 months from final financing.

    There is the potential Black Swan output may increase nickel in concentrate to circa 14,000 tonnes nickel annually, with progressive output growth from mining the Cerberus ore body at Mt Windarra.

    The project operating cash flows are set to increase significantly by using the Black Swan plant is another key takeaway from the study.

    A key price catalyst is the result of advanced discussions underway with parties regarding debt financing for the project and securing an off-take contract for the Black Swan concentrate.

    Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.

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