Poseidon suspends operations

The global financial turmoil has hit the Andrew Forrest-chaired Poseidon Nickel Ltd, with the company suspending mining activities at its Mt Windarra underground mine in the Goldfields.

The company said it believed the suspension is the "most sensible" course of action and will ensure the optimum use of its cash reserve with development studies to continue at the project.

The historic mine, which sparked the Poseidon bubble of the early 1970s, was undergoing refurbishment with some 700 metres of the underground tunnel already rehabilitated.

Poseidon said rehabilitation activities will be temporarily suspended at the end of the month, with some nine workers to be affected.

The company is currently evaluating the potential to establish a 20,000 tonne per annum nickel operation.

Shares in Poseidon slumped 27 per cent, or 8.5 cents, to 23c at 15:53 AEST.

Below is the announcement:

Mt Windarra

Since rehabilitation of the Mt Windarra underground mine commenced in March, Poseidon has been extremely encouraged with progress at the site, where it is evaluating the potential to establish a world-class nickel operation producing in the order of 20,000 tonnes of nickel per annum.

To date, Poseidon has announced JORC-compliant Indicated and Inferred resources of 60,370 tonnes contained nickel at Mt Windarra, and believes there is significant potential for further increases as exploration progresses along the previously unexplored 24kms strike length host ultramafics on its Windarra tenements.

Poseidon has also now rehabilitated some 700m of the Mt Windarra decline, in the process confirming that the decline remains in good condition, which suggests refurbishment expenditure can be kept to a minimum.

Given the rapid progress of this decline refurbishment program while Poseidon proceeds with prefeasibility studies into the optimum development scenario for the project, the Company has decided to temporarily suspend underground rehabilitation activities at the end of October.

Poseidon believes this is the most sensible course of action in the current period of global uncertainty and will ensure the optimum use of the Company's cash reserves while development studies for Windarra continue.\

Unfortunately, this decision will also result in a small reduction in workforce numbers at Windarra, with some 9 workers expected to be affected.

Poseidon notes that it remains extremely confident in the outlook for the Windarra Nickel Project and will provide a further update on progress of the prefeasibiliy study as results come to hand.

As part of the study, Poseidon has now completed its continuous pilot testing program of fresh nickel sulphide ore at Lakefield Ore Test. The Company is now undertaking an intensive review of the results data, which is expected to be completed over the next two to three months. The results of this review will be supplied to Bateman Engineering in order to update expect operating costs in the project scoping study model.

Denny Bore

Intensive exploration drilling program at the Denny Bore nickel discovery, 12km south of the main Mt Windarra deposit, continues to generate extremely positive results. Three rigs are currently operating at Denny Bore, with the aim of extending the mineralisation up-dip towards the surface.

Poseidon expects to complete this current phase of intensive extension drilling by the end of October, at which point the Company expects to have a clearer understanding of the mineralisation, including the near-surface extent of the nickel zones. Based on the results to date, we are increasingly confident of confirming Denny Bore's potential to become a second operating mine at the Windarra Project.

As announced previously, Poseidon has confirmed the presence of an extensive zone of nickel sulphide mineralisation at Denny Bore. Notably, this drilling has confirmed that the mineralisation extends toward surface with the last reported results confirming these nickel zones extend at least 280m closer to surface than the original discovery intercept which was recorded at a downhole depth of 796m.

Typically, the intersections at Denny Bore have been high grade and sub-1m in thickness. Characteristically the nickel mineralisation in each hole features a zone of lower grade disseminated nickel sulphide at the top of the mineralised zone, followed by the higher grade massive nickel sulphide at the base of the komatiite channel within the Windarra Ultramafic unit.

Importantly, when the intercepts are interpreted into typical mining widths of around 2m in thickness, the grades typically average between 2.2-3.5% Ni which is consistent with Kambalda style nickel mineralisation.