Poseidon Nickel's Ore Reserves Jump 121% At Mt Windarra
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Seeking Alpha Analyst Since 2009
Poseidon Nickel's (ASX: POS) 121% increase in Probable nickel ore reserves at Mt Windarra will have positive repercussions for cash flow and payback in the early life of the mine, with the company focused on returning the historic Mt Windarra mine to production.
Poseidon will be the only new nickel sulphide producer ready to meet expected supply shortfalls in 2014/2015.
Mt Windarra's Reserves increased to 498,000 tonnes at 1.78% nickel for 8,850 tonnes of nickel metal, with Resources up 17% to 80,200 tonnes of nickel metal.
The much higher reserve grade is now more in line with the historical mine performance.
Importantly the project is located close to existing mining infrastructure which could increase project production with minimal extra capital cost, and is located 260 kilometres north-east of Kalgoorlie in Western Australia.
David Singleton, CEO and managing director, commented: "We're extremely pleased to have added substantially more nickel to our mine plan, which will have positive repercussions for cash flow and payback in the early life of the mine.
"These results build on our track record of solid resource growth, which has been at an average annual rate of 24% in nickel tonnage terms since 2007."
There is also plenty of potential Reserve and Resource upside from within the existing Mt Windarra orebody and from new, adjacent, drill targets.
Highlighting this potential (which are not included in today's upgrade) are results which are all true widths such as:
- 17.53 metres at 3.52% nickel, including 5.1 metres at 7.1% nickel;
- 10.5 metres at 4.36% nickel; and
- 8.68% metres at 2.36% nickel.
Poseidon will look to commence a new drilling program at later stage following review and planning, which will build on the original six-month program from December 2012.
Poseidon targets production ahead of nickel shortfall
Poseidon is continuing to work towards bringing Mt Windarra back into production ahead of a widely expected medium term shortfall in nickel supply.
In regards to finance, Singleton added: "We are continuing discussions around project finance with a number of parties and will update the market with developments in that area as soon as practicable."
Most successful intersection to date
A short period of follow-up drilling at Mt Windarra has returned the most successful intersection to date.
Drill hole WUG0046 was drilled to intersect D Shoot and continue through to test a gap off the northern edge of C Shoot in order to extend the known mineralisation.
It intersected all four mineralised shoots and returned some of the best grades and true widths seen to date including: 8.28 metres (true width 5.08 metres) at 7.10% nickel.
Drilling intersected high grade massive nickel sulphide in D Shoot with individual assays up to 12.01% nickel. It also extended C Shoot by 30 metres to the north and returned individual assays of up to 10.4% nickel.
Drill hole WUG0046 also intersected F Shoot 45 metres below and 33 metres south of existing F Shoot drilling with individual assays up to 13.32% nickel. It also clipped the southern edge of G Shoot confirming its position.
Analysis
Drilling results suggest there is further upside in resource and reserves within the Mt Windarra orebody.
There is also upside in from new, adjacent, drill targets. This would be positive for future cash flows for the project and payback period.
That the company is in continuing discussions for project finance with a number of parties is positive in a tough funding environment.
The defining benefits of Mt Windarra is that it's a generally a low risk project, while being low in complexity - while be close to all important infrastructure.
A DFS has completed with highlights including production of 9,600 tonnes contained nickel plus 45,000 ounces of gold in three years. All required approvals in place.
The average C1 cost is US$3.35/lb over the initial 10 year life of mine, and therefore the project is also in a strong competitive position due to being in the second quartile cash cost position, with low capital intensity to catch any shortfall in nickel supply.
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