It’s all about the timing for Poseidon

The second incarnation of the infamous nickel mine that sparked the Poseidon bubble of the early 1970s is sure to have many closely watching the development of Poseidon mark 11, especially because of Andrew Forrest’s involvement.

Last week marked the official reopening of the Mt Windarra mine’s underground tunnel, nearly 40 years after prospector Ken Shirley, working for the original Poseidon outfit, discovered nickel in the area.

At the time, a worldwide shortage of nickel and market speculation boosted the company’s share price from $1 to $280 in a matter of months.

It was not until five years later that the project produced its first nickel under a joint venture between Poseidon and Western Mining Corporation Ltd, with the latter taking over the reins in 1983.

Now, 17 years after a low nickel price of $US1.80 per pound forced the mine to close in 1990, circumstances are similar to those of the booming 1970s, with the current nickel price at $US14/lb and nickel consumption forecast to increase by 110,000 tonnes each year until 2011.

Poseidon Nickel Ltd chief executive David Singleton likened this to three large nickel projects, such as BHP Billiton Ltd’s Ravensthorpe operation, coming online each year; a feat hard to achieve with significant cost pressures affecting the industry.

While the demand for nickel is there, it will be the combination of non-executive chairman Mr Forrest and the mine’s technical challenges that will have many closely watching Poseidon and its ability to deliver Mt Windarra to its former glory.

Chief operating officer Rob Dennis, who worked at Mt Windarra for six years from 1982, was at first sceptical when called to work at the mine.

But he was sold on Mr Forrest’s vision, which included a 60,000t/year operation.

“Windarra is technically tricky, but there are enough changes in technology that I’m confident that we can get this thing back up and going again,” Mr Dennis said.

One hurdle facing the company is the ability to blend two different types of nickel offered by the project to produce a nickel metal, which will achieve a higher price on the market, as opposed to a concentrate, which is normally sold to BHP Billiton.

Currently, Mt Windarra has a nickel resource of 60,000t and Mr Singleton estimates a further 50,000t of nickel, worth about $1.5 billion, is lying in nearby deposits and old waste dumps.

“We’ve never seen this as a small play, we’ve always seen this as a very significant restart of a mine that’s been a very significant part of Western Australia’s nickel history for the last 30 to 40 years,” Mr Singleton said.

“If we do that and we go through to making a nickel metal, Poseidon will be the third largest producer of nickel metal after BHP and Minara [Resources].” The company is aiming for a 20,000t/year operation within three years and is currently in the process of dewatering the mine, which has now exposed 900 metres of the tunnel.

This is expected to be completed in nine months.