Poseidon Nickel (OTC:PSDNF) has shifted its attempts to bring three past-producing nickel mines into the fifth gear and has now released a resource estimate at Maggie Hayes which is compliant with the 2012 JORC code. Maggie Hayes is one of the mineralized zones at the Lake Johnston project, which was acquired by the company less than 4 weeks ago. Poseidon Nickel had to update the resource estimate as the historical estimate wasn't allowed to be used by the regulator.
The Maggie Hayes underground mine now contains 3.8 million tonnes at an average grade of 1.41% nickel for a total nickel content of 53,100 tonnes (almost 117 million pounds) with an in-situ value of roughly $850M. The resources are evenly spread between the indicated and inferred category, so the level of confidence is already relatively high given the fact that an indicated resource estimate could already be compiled. This is just a first estimate and Poseidon says that it has identified additional data, which hasn't been included in this resource estimate yet. This obviously means that it's very likely the resources at Lake Johnston will be expanded even further as this first estimate was only based on Maggie Hayes and ignored the Emily Ann zone as well. Poseidon probably wanted to have a JORC-compliant resource estimate rather quickly and an update should obviously not be expected before 2015.
Maggie Hayes will be the first part of Lake Johnston to restart production, and this should be quite cheap given the fact that the mine was only placed on care and maintenance in April of last year. Poseidon Nickel should have its feasibility study on Lake Johnston ready within a few weeks, and I'm expecting a low initial capital expenditure and a competitive cost per pound of nickel (around $5-5.5 would be in line with my expectations).
Disclosure: The author is long PSDNF.
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