Photo by: Bloomberg
PERTH (miningweekly.com) – ASX-listed nickel miner Poseidon Nickel has used this year’s Paydirt Nickel conference to announce the signing of a conditional offtake agreement with mining giant BHP Billiton’s Nickel West division.
“The deal with BHP is a revolutionary one for this company. In a period when capital is constrained around the world, for us to secure 90% of the capital out of the project really changes things for us,” said Poseidon MD David Singleton.
The offtake agreement would be structured in the form of an ore tolling and concentrate purchase agreement, under which Poseidon would supply ore from the Windarra operation, which would then be hauled to Nickel Wests’ Leinster concentrator for toll treatment.
Nickel West would purchase the concentrate produced from the Windarra operation, while Poseidon would pay a treatment charge to Nickel West for every tonne of ore processed.
Singleton said that the agreement reduced the capital costs for the Windarra project from the original A$290-million estimate to only A$11-million.
The offtake agreement would run for an initial two years, with first ore deliveries scheduled in February next year. The contract was for a minimum of 350 000 t/y of ore, and a maximum of 500 000 t/y, but could be extended to 700 000 t/y by mutual agreement.
Poseidon had initially planned to use the 2.2-million-tonne Black Swan processing plant to treat the Windarra ore, acquiring the Western Australian operation from Russian major Norilsk Nickel in July this year.
Singleton said on the sidelines of the conference that while up to 700 000 t/y of ore from the Windarra mine would now be treated by Nickel West, the Black Swan investment was still considered a lucrative one.
“Black Swan is a standalone operation and doesn’t need Windarra to make it work. Furthermore, the Nickel West contract is capped at 700 000 t/y, so we do have the ability to transfer the remaining Windarra ore to the Black Swan plant.”
Singleton noted that the Nickel West contract also only extended to the Mt Windarra deposit, leaving the Cerberus deposit unattended.
“The Nickel West contract kickstarts what we are doing at Windarra, but Black Swan can be fed from Windarra and go into production itself.”
The Black Swan project consists of a 2.2-million-tonne-a-year plant and an openpit mine estimated to contain about 185 800 t of nickel.
Meanwhile, Singleton said that Poseidon was advancing its financing discussions to bring Windarra into production, with the hopes of securing the financing in the next few months.
“We were previously looking at some A$300-million in financing, but following the Nickel West deal we are now looking for significantly less than A$20-million, making it unnecessary to fund the project in the US markets, and allowing Poseidon to fund the project primarily out of Australia.”
Following production start at Windarra, Poseidon’s focus would shift to the recently acquired Lake Johnston project, which was also acquired from Norilsk, after which it would switch to Black Swan.