Poseidon Nickel makes major nickel discoveries at Windarra project in WA
Poseidon Nickel (ASX:POS) has discovered large new zones of nickel at its Windarra Project from a drill program that commenced in November 2012.
The nickel mineralisation has been discovered close to existing mining infrastructure which could increase project production with minimal extra capital cost.
Significantly, these discoveries are a bonus to the existing positive project economics of Windarra.
The Windarra Nickel Project is located 260 kilometres north east of Kalgoorlie in Western Australia.
In April, a Definitive Feasibility Study (DFS) for the Windarra Nickel Project demonstrated how it could become a low cost, long life nickel operation where Windarra could be producing at a cost of US$3.35 per pound, net of gold credits.
These latest drill intercepts are likely to lead to further high grade nickel zones being added to the current Mt Windarra resource which would give the Project significantly more production during the first two operational years at least.
Further drilling is underway to determine the extent of the vertical depth of the new zones.
Poseidon Nickel managing director, David Singleton, said that the results showed that the Mt. Windarra mine still has significant upside with deposits of nickel near to existing infrastructure which can be cheaply revealed with modern technology.
"Such discoveries will provide a stream of bonuses to the already robust economics of the Project. Our discovery cost, prior to this campaign, has been circa 10 cents for every pound of nickel in resources and these drilling results should continue that cost trend.
“I’m particularly pleased with the uncovering of the new, apparently mineable mineralised zone, adjacent to F Shoot. It demonstrates that the detailed insights that our geologists have acquired over the last five years of painstaking work is creating breakthroughs in nickel discovery.
“With these additional high grade zones, we will now move to upgrade both the mineral resources and ore reserves at Mt Windarra, and incorporate these upgrades into our finance model,” said David Singleton.
The results, from the expanded C Shoot and newly discovered area, which is adjacent to F Shoot, give additional high grade mineralised zones to the Mt Windarra ore body.
Significant drilling results at C Shoot included:
- 10.44m at 2.22% nickel from 413.31m, within 15.75m at 1.67% nickel
- 5.58m at 2.76% nickel from 465.42m, within 10.86m at 2.05% nickel
- 9.0m at 2.88% nickel from 393.0m, within 16.7m at 2.24% nickel
- 10.0m at 2.66% nickel from 393m.0m, within 19.25m at 1.84% nickel
Significantly, these zones could as much as double the size of the estimated mineable ore body in the areas drilled and add very significant tonnages to the overall resources at Mt. Windarra.
Current resource
Current Total mineral resources at Mt Windarra stand at 3.95 million tonnes at 1.73%, for 68,300 tonnes of contained nickel.
Upgrades incorporating these extensions into both the Resource and Reserve calculations are expected to be released in the short term.
Discussion of results
At the newly discovered nickel zone, which is adjacent to F Shoot, drilling has been designed to deliver resources of sufficient JORC confidence category to allow immediate conversion to mining reserves.
The mineralised zone is approximately 3 metres in width and currently extends over 350 metres high by 130 metres along strike and remains open at depth.
Previously, the C Shoot zone was interpreted as being around 4–5 metres in thickness, however this recent drilling has demonstrated that C Shoot is 8-9 metres in thickness on average with a lower grade halo that can expand out to 12-15 metres thickness in places. This is expected to have positive implications for an increase in resources at Mt Windarra, alongside increases in the JORC confidence category of the resource.
WA State Government Project approvals
Poseidon has received advice from the WA State Premier, The Hon. Colin Barnett, that permission has been given for an extension to the Project approvals to 30 June 2014 subject only to similar conditions previously announced.
Project financing
Poseidon said this would provide ample time for the finalisation of finance for the Project.
Poseidon Nickel has engaged Credit Suisse to assist in developing the various alternatives towards financing the Project.
Credit Suisse is a major international investment bank which recently led a successful major debt financing for The Fortescue Metals Group (ASX:FMG).
These enhancements to the Mt Windarra ore body will be included in financing package documentation being prepared.
Analysis
The new discoveries have the potential to increase project production with minimal extra capital cost. The discovery cost at around $0.10 for every pound of nickel in resources indicates how compelling the project economics are in tandem with the results from the DFS.
The drilling results should see an upgrade to the resource base and ore reserves at Mt Windarra, and incorporate these upgrades into the finance model in a positive fashion.
Today's results offer significant upside to project economics and are value accretive in the short to medium term for Poseidon Nickel.
