Annual Report, 29 October 2021
We are committed to becoming a nickel producer and delivering further share price appreciation and capital growth to all of you.
It has been a busy year at Poseidon with significant advancements on a number of fronts, including:
- the discovery and drill out of the Golden Swan mineralisation which will add to our high-grade inventory at Black Swan;
- the decision to focus on a higher nickel production profile at Black Swan with the “Fill the Mill” strategy based on the relatively low restart capital estimate and attractive operating cost estimate for the 1.1Mtpa processing plant together with the improved nickel price outlook;
- a review of the geological prospectivity of our Lake Johnston project by NewExco highlighting the excellent potential for Lake Johnston to host additional nickel sulphide mineralisation;
- the finalisation of the Windarra/Lancefield Definitive Feasibility Study demonstrating attractive project economics at the current gold price;
- building up our executive team with key appointments in exploration and project development and retaining the services of mining and geological consultants who are veterans in nickel;
- broader recognition of the Company by the wider investment community allowing us to raise significant new equity to fund the work streams undertaken during the year and our future activities; and
- share price appreciation and a significant increase in market capitalisation.
This has all occurred during a time of an unexpectedly strong nickel price which has been driven by the growth in stainless steel demand and production and the electric vehicle (EV) revolution which has gathered significant momentum this year. With most car manufacturers committing to go all electric by 2030, or before, nickel demand in EV batteries is going to ramp up dramatically, with some commodity price forecasters expecting nickel demand to grow fourfold over the next 30 years.
Consequently, the outlook for the nickel price in the short, medium and long term is very bullish. This led us to review our development plans during the year and shift our focus from a small, high-grade Direct Shipping Ore (DSO) or concentrate production option from Golden Swan/Silver Swan to a larger production scenario focussing on utilising the larger milling circuit at Black Swan and feeding it with a combination of open pit, tailings and high-grade underground ore to maximise the production of nickel units to increase revenue and margin. This is now our Base Case production scenario as we aim for a restart of the Black Swan operations in late 2022, subject to the project economics stacking up.
While our primary focus is bringing Black Swan back into production and consequently most of the activities over the year were at Black Swan, we did advance both Lake Johnston and Windarra during the year with the NewExco geological review of the Lake Johnston tenements and the completion of the Definitive Feasibility Study on the Windarra/ Lancefield gold tailings both of which delivered positive outcomes.
We also restructured the balance sheet to provide adequate funding to carry out our new strategy by repaying the US$17.5 million convertible note held by Black Mountain and raising $38 million in new equity. This has given us significant financial horsepower for both project studies and pre-development funding together with funds to continue to explore for additional nickel resources across our asset base.
In summary, we have a unique mix of Western Australian nickel sulphide assets which have all had significant historical production and host a combined resource base of close to 400,000 tonnes of contained nickel with significant exploration potential. In addition, we have two nickel sulphide processing plants, on care and maintenance and in relatively good condition and three gold tailings dams at Windarra which contain a sizeable gold resource of around 180,000 ounces and the ability to treat tailings from the nearby Lancefield tailings project. These assets together with a positive commodity price environment, experienced personnel, and loyal and supportive shareholders are the necessary ingredients to create a mining company with nickel as our primary metal.
In closing, I would like to take this opportunity to thank my fellow board members, Peter Harold, our Managing Director and CEO, our executive team and the rest of Poseidon’s loyal staff and contractors for their efforts over the past year and their ongoing commitment to the business. I would also like to thank Morgans for their assistance with the two equity raisings we undertook this year and welcome the new shareholders they have brought onto our register. And finally, to all our existing shareholders who have remained supportive of the Company, many of whom participated in the recent, heavily oversubscribed Share Purchase Plan, we are committed to becoming a nickel producer and delivering further share price appreciation and capital growth to all of you.
Derek La Ferla