One of Twiggy Forrest’s primary punts, Poseidon Nickel (ASX: POS), is heavily invested in one of the world’s highest grade nickel mines – Silver Swan, and its 400,000t nickel resource base across three pedigree nickel provinces in Western Australia.
The SmallCaps website reports in addition to its huge nickel resource, the company has two strategically located multi-mineral plants with massive processing capacity that it is looking to ‘toll treat’ neighbouring gold producers as well as securing their own gold mine.
With a 9 per cent nickel grade at Silver Swan, Poseidon Nickel is targeting the emerging electric vehicle, consumer electronics, and green energy markets for its nickel ore.
Poseidon Chief Operating Officer Michael Rodriguez told Small Caps, the company’s view is the nickel price will follow that of cobalt’s which has shot from around US$12 per pound to almost US$30 per pound in less than 12 months.
This is on the back of the burgeoning electric vehicle market and the specialised lithium-ion batteries used to power the vehicles. In addition to lithium, cobalt, manganese and other minerals, the high powered, durable, rechargeable batteries require high purity nickel to add fire resistance and stability.
The amount of nickel consumed in the battery is predicted to grow, according to several analysts.
However, historically prolonged subdued nickel prices have caused the Western Australia operations to be placed on care and maintenance, while Poseidon rides out the slump.
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During Western Australia’s mining boom, Poseidon Nickel was a resources play to be reckoned with. By early July 2007, its share price rocketed past the A$2.00 mark.
But, since the global financial crisis, Poseidon’s share price has followed the downward dip of its beloved commodity, with its stock currently trading at around $0.02.
Should the nickel price begin to recover and remain stable, sitting above the US$6 per pound mark, Mr Rodriguez said the Poseidon board is poised to pull the trigger to fast-track Silver Swan into production.
“What our board is looking for is a tightening in that volatility, so we don’t trigger a significant cash draw only to find the price retreats and have a false start.”
He added the board was also anticipating a reduction in the London Metals Exchange nickel stockpile which was at 387,940t on 20 October 2017.
Building value in the interim
Poseidon has remained opportunistic by securing two massive processing plants and begun exploring tenements prospective for lithium, gold and other minerals.
Looking to lock-in long term value, the company has also recently established several non-binding agreements with gold producers to hire out up to 3 million tonnes per annum (mtpa) gold processing capacity at Black Swan.
“Our goal of a co-processing environment at Black Swan makes complete sense because it actually drags down the break-even cost of nickel, because now you have shared services,” Mr Rodriguez said.
In addition to diversifying, since 2007, Poseidon’s nickel resources have flourished from 40,000t to 400,000t.
Poseidon is also quietly completing all its pre-operation work to fast-track nickel production when the decision to restart production is finally made.