Poseidon Preps to Restart Black Swan Operations

Thanks to improved pricing in the nickel market, Poseidon Nickel (ASX:POS) has announced that it is now in a position to restart its Black Swan nickel operations.

For some time now, the company has been weighing the option of resuming the operation, which includes its Silver Swan underground mine and the Black Swan open-pit mine and processing plant. Black Swan’s processing plant was originally built in 2007, but was put on care and maintenance in early 2009 due to a period of low nickel pricing.

Last summer, Poseidon released a feasibility study surrounding a potential restart of the operation. It laid out predicted revenues of AU$288.6 million with a pre-tax net present value of AU$43.6 million and a 92 percent internal rate of return.

For the time being, Poseidon’s board has approved an accelerated work program at the operation. This includes rehabilitation of all accessways and structures at the Black Swan plant, along with mine escape ladderways at Silver Swan. Lastly, the program entails dewatering of the Black Swan open pit. All the work is scheduled to be completed within six months.

Costs for the work program are docketed at AU$2.9 million; the work is considered time critical and a necessary precursor to providing a basis for a fast restart. Once the aforementioned areas are rehabilitated, the company will have proper access for the site inspections needed to finalize the restart decision and lock down major plant refurbishment contracts.

“We are now entering an important and critical time for Poseidon aided with tailwinds from improving, sustained increased nickel prices,” Poseidon’s interim CEO David Riekie said in a statement.

“Lower operating cost structure and ongoing cost savings together with optimization processes have been our recent focus. These priorities have been designed to ensure that the largest portion of any benefit achieved with increasing nickel prices translates to an improved overall stakeholder return.”

Located in Western Australia, the operation is expected to produce 8,000 tonnes of nickel annually in smeltable-grade concentrate from Black Swan and direct-shipping ore from Silver Swan. The feasibility study released last year estimated a total capital cost of AU$56.7 million for the operation’s refurbishment and development.

Nickel prices made significant jumps through the recent summer months, propelled forward by optimism surrounding its role in the electric vehicle market. Alongside the electric vehicle hype, nickel made gains on the back of speculation regarding a potential nickel ore export ban in Indonesia, which has since been confirmed to start January 1, 2020.

Poseidon’s share price closed 5.08 percent lower on Wednesday (September 11) in Australia, ending the day of trading at AU$0.056.

As of September 10, nickel was trading at US$18,060 per tonne on the London Metal Exchange.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.