Poseidon, Nickel West in offtake deal

Shares in Poseidon Nickel surged by over 10 per cent after it announced an offtake agreement with BHP Billiton Nickel West.

Under the ore tolling and concentrate purchase agreement, ore mined at Poseidon’s Mt Windarra nickel mine will be hauled to Nickel West’s concentrator at Leinster for toll treatment into a smeltable grade concentrate.

Poseidon said the processing of ore at Leinster would reduce the costs of commencing operations at Windarra from $290 million to $11 million.

The contract is for a minimum quantity of 350,000 tonnes of ore per annum, and up to 500,000 tonnes.

Nickel West has agreed to purchase all of the concentrate produced, while Poseidon will pay a treatment charge for every tonne of ore processed to be offset against payments by Nickel West for the concentrate produced.

 “The signing of an offtake deal with Nickel West continues a series of strategic steps that we have been committed to over the last year,” Poseidon chief executive officer David Singleton said.

“We have removed the capital funding risk for the company through the Black Swan acquisition, developed depth to the company with the acquisition of Lake Johnston, and provided a clear route to market through the offtake arrangement with Nickel West.”

The contract is valid for two years, and renewable for a further two years, with first ore deliveries due no later than February next year.

Poseidon said that its Mt Windarra and Cerberus ore bodies had enough production capacity to deliver both to Nickel West and to the Black Swan plant, which it is purchasing from Norilsk Nickel.

Poseidon’s share price rose by 10.8 per cent to 20.5 cents per share at 11:30am.