Poseidon Nickel unveils robust definitive feasibility study for Windarra Gold Tailings Project, shares higher

Poseidon Nickel Ltd has unveiled a definitive feasibility study (DFS) for the Windarra Gold Tailings Project, a precious metals asset in Western Australia’s Eastern Goldfields, with the study outlining a robust project. The nickel sulphide exploration and development company established a 150,000-gold-ounce ore reserve for the gold tailings asset, which sits within its broader Mt WIndarra Nickel Project. Poseidon estimates Windarra could produce between 53,500 and 55,200 gold ounces over a 45-month lifespan if the company uses low-cost, low-risk tailings mining methods and a 1.5-million-tonne-per-annum processing facility. Shares have been as much as 18.2% higher in early trading to A$0.13 while the company's market cap is approximately A$309 million. Although Poseidon is primarily focused on its nickel assets, the explorer is considering Windarra gold’s development as a way to generate cashflow, re-treat historical gold tailings and establish a tailings storage facility at the South Windarra Pit. “Robust and profitable project” Poseidon Nickel managing director and CEO Peter Harold said: “The results from the DFS demonstrate a robust and profitable project re-treating the gold tailings at Windarra and Lancefield. “The gold tailings present a project which can generate positive cash flows to be invested into our nickel business, which is our primary focus. The tailings project would be ideal for a partnership style arrangement or an outright sale. “We will be actively looking for a high-quality partner to work with to bring this project into production or a party to acquire the Project so we can monetise the asset for Poseidon shareholders.” DFS economics Prior to the new study, the ASX-lister determined that Windarra Gold held some 180,000 gold ounces in indicated and inferred mineral resources across both the North and South dams and the nearby Lancefield tailings licence. Now, in its definitive feasibility study for the Windarra Gold tailings asset, Poseidon has established an ore reserve based on between 5.54 million tonnes and 5.73 million tonnes of resource, grading at 0.84 g/t gold and 2.1 g/t silver for around 150,000 gold ounces and roughly 375,000 silver ounces. Turning to project economics, the nickel explorer considered the costings associated with both a hydraulic mining and amphibious dredging operation. In the latter’s case, Poseidon calculated a A$30.6 million net operating cashflow, a net present value of A$21.7 million and an internal rate of return valued at 50.6%, all based on a US$1,750 gold price and a A$1.00–US$0.75 exchange rate. Applying the DFS’ residual value assessment, however, improves the asset’s net operating cashflow to A$36.3 million, the net present value to A$25.7 million and brings the internal rate of return up to 53.9%. The project’s all-in sustaining cost is calculated at A$1,393 per gold ounce. Overall, Windarra Gold is estimated to cost between A$25.8 million and A$29.5 million to bring into production, depending on the mining method selected. Payback should take place between 27 and 28 months from when production at the tailings project kicks off. Already, the company has received a number of key approvals for the proposed gold tailings operation, including ministerial approval to renew the Lancefield licence and an environmental approval for Windarra Gold. Key findings and conclusions Some of the project’s perceived strengths include its robust ore reserve, which lies just 0.75 metres from the surface — something Poseidon believes it can leverage for a relatively short, nine-month project development timeframe. Other positives include the modular processing plant design, meaning it can be redeployed to another project once Windarra’s 45-month operating period runs its course. In addition, Poseidon has highlighted the project’s “modest” base-case net present value, “attractive” internal rate of return and payback period as project strengths. However, the company concedes there is limited upside to the resource base within the current 45-month operational lifespan, while the economics are highly sensitive to the gold price and exchange rate, although this can be hedged to mitigate risk. In terms of primary DFS conclusions, Poseidon outlined its gold recovery estimations. The company concluded: Interpretation of all relevant leach data from current and previous testwork indicates that the average gold recovery from the tailings in the Windarra North dam is 38.0%; Interpretation of all relevant leach data from previous testwork indicates that the average gold recovery from the tailings in the Windarra South dam is 45.6%; and Interpretation of all relevant leach data from current testwork indicates that the average gold recovery from the tailings at Lancefield is 28.1%. Ultimately, the DFS had one clear recommendation: that Poseidon consider engaging a Joint Venture (JV) partner to implement the project — one that has the demonstrated engineering design and construction expertise, but also the capability to manage the project during the operations phase. The company believes an equity-based JV partnership project implementation model would minimise construction contractor mark-ups and incentivise project delivery performance across construction, schedule, capital and operating costs. Moving ahead, Poseidon will seek out opportunities to monetise Windarra Gold, particularly if this involves a divestment or a joint venture solution.