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Poseidon Nickel Defines Initial Reserve At Black Swan

Poseidon Nickel (ASX:POS) has now delivered a Probable Ore Reserve from the recently acquired Black Swan project in Western Australia.

The Reserve provides more certainty with the project mine life and revenues, and the company can increase the mine life with more drilling.

Better still, the Reserve came without any need for drilling, saving money.

The Initial Reserve of 3.37 million tonnes at 0.63% nickel for 21,500 tonnes contained nickel represents a nominal three years of plant throughput.

This includes 1.19 million tonnes of ore that was previously mined from the open pit but was not processed prior to the facility being put into care and maintenance.

Golder Associates defined the reserve.

David Singleton, managing director and CEO, commented: "Achieving a nominal 3 year reserve life even before we have carried out any additional drilling is an important milestone for Black Swan.

"Acquisition activities are now well advanced and we still expect completion to occur this year."

Calculation of the Ore Reserve

The calculation of an Ore Reserve follows the completion of the Projects Feasibility Study and initial JORC 2012 compliant Resource which has previously been announced.

Poseidon has been able to complete the Reserve definition work prior to formal completion of the purchase of the Project which is expected to occur before the end of the year.

The company said that it should be stressed that this Ore Reserve is an initial update as Poseidon has not yet undertaken any drilling at the site with the aim of increasing the reserve life further.

Poseidon believes that the outcome of the study gives additional confidence on the future viability of the project as the analysis takes economic considerations fully into account when calculating the Ore Reserve.

At this stage, Poseidon does not believe that it needs to undertake further resource drilling to confirm additional project reserves given the low start-up capital requirements of the project but rather will carry out additional drilling in parallel with potential production operations.

The company said that it will continue to work on long lead items while completion activities are underway.

Black Swan concentrator

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.

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.

Mill feed for the first 6 months will be sourced from the existing stockpiles which allow Poseidon to delay production from the Black Swan pit by 6 months from startup to allow for dewatering of the pit.

During this time the stockpiles will be reclaimed and processed, with the water from the pit being utilised in the plant during the stockpile treatment process.

Mine re-start

Poseidon said that the existing mine support infrastructure (workshops, admin and roads) appears to be in a sound condition and will not require any major investment of time or money to restart operations.

The cost to restart mining operations is estimated to be between A$1.3M and $1.5M whilst the mining operating cost is estimated to be between A$16/bcm and A$18/bcm (circa A$6.13/t to A$6.90/t of ore).

Total site operating costs are estimated to be between A$16M and A$22M per year. It is estimated that the project will produce 96Kt of concentrate at an average grade of 13.5% nickel.

Analysis

Poseidon Nickel now has an Initial Ore Reserve at Black Swan which increases the confidence levels of the project and all without the company needing to do any additional drilling.

There is significant scope to increase the mine life with further drilling.

Recently the company received a huge vote of confidence in its operations by raising A$30 million at $0.18, and also negotiated nickel off-take with BHP Billiton (ASX:BHP) for Black Swan and Lake Johnston from Norilsk.

Proactive Investors maintains its 12 month price target for Poseidon Nickel of $0.40 - $0.52.

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.