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Poseidon Nickel Boosts Cash Reserves By $3.7 Million In Oversubscribed Placement

Poseidon Nickel (ASX:POS) has raised $3.7 million at $0.08 per share for pre-production activities at Mount Windarra in Western Australia.

Notably, the placement was heavily oversubscribed and was only capped by the company's remaining placement capacity.

The strong current nickel price and outlook given supply concerns resulting from an Indonesian unprocessed ore ban are extremely bullish for bringing Mount Windarra into early production.

The next steps for Poseidon are to commence dewatering and final refurbishment of the Mount Windarra mine, which is to begin immediately.

Poseidon is continuing to review Options to bring Mount Windarra into early production.

The placement was undertaken with Petra Capital and Patersons Securities to professional and sophisticated investors; the oversubscription from savvy market participants is a clear vote of confidence in the company, and the likelihood of increased share prices in the near future.

The Cerberus nickel deposit at Windara has a total Indicated and Inferred resource of 4.55 million tonnes at 1.51% for 68,600 tonnes of nickel, including a Probable reserve of 1.22Mt at 1.3% for 15,880 tonnes of nickel.

The mining cost has been estimated at A$76/t in the DFS.

Capital costs to restart mining at Mt Windara this year could be under $15 million, poised to exploit what many analysts believe will be a strong market for nickel in the short and medium term.

Investors are looking for nickel exposure as nickel prices trend higher following Indonesia's ban on export shipments of unprocessed ore as it seeks to push domestic processing.

Indonesia had accounted for 18-20% of global nickel supply, shipping 41.5 million tonnes of nickel ores in the first nine months of 2013.

Neat term production and cash flow

Poseidon remains in active discussions with various parties to determine the best processing option for its nickel ore, either via treatment at an existing facility or by building a new plant at the Mount Windarra site.

This will be achieved by installing staged mono pumps in line with the existing sand filter to provide a permanent system ahead of restarting the underground refurbishment activities.

The final refurbishment programme to reach the known ore body will cost approximately $4 million and can be completed over a 4-6 month period.

Analysis

Capital costs to restart nickel production at Mt Windara could be under $15 million, primarily as a result of the investment made to date.

There is much to look forward to for Mt Windarra, with the Indonesian nickel ban improving market conditions for the metal, a trend that is forecast to continue for some time.

Poseidon Nickel represents a rare opportunity to be an owner of the only 'new' nickel sulphide producer ready to meet expected supply shortfalls.

This does not take into account the potential for steady cash flows at attractive margins from parallel gold production; the current market cap. of circa $38m, does not come close to capturing this upside for Poseidon.

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