Poseidon flags new mine strategy

Poseidon Nickel is in negotiations to treat ore from its Mt Windarra mine at a third-party facility, allowing it to postpone the high cost of building a new plant of its own.

Poseidon has completed a definitive feasibility study and secured all necessary permits at the mine but has been forced to delay construction of an ore concentator due to a lack of funding. 

The company had hoped last year to finance construction through debt capital markets in the US but was constrained by the US Federal Reserve's decision to taper its quantitative easing program, which coincided with the nickel spot price reaching near 10-year average lows.

In an update to the ASX, Poseidon said it was negotiating a potential offtake agreement which would allow it to mine ore at Mt Windarra and ship it for treatment at a third-party facility.

If the deal goes ahead, Poseidon claims the agreement would allow it to deliver 350,000 to 700,000 tonnes of ore per annum for an initial period of two years.

Importantly, the agreement would allow Poseidon to commence production at Mt Windarra in as little as three to four months, which is the estimated time required for the completion of refurbishment works at the mine.

The company said it already had the vast majority of infrastructure at the site required to start production at the mine, including adequate power, water, accommodation and mobile capital equipment.

It also believes the commencement of mining at Mt Windarra could make it economic to reprocess gold stockpiles at the site.

The nickel miner remains in a voluntary suspension from trading on the ASX as it continues negotiations.

Poseidon shares last traded at 10.5 cents.