Why is the Poseidon Nickel (ASX:POS) share price having such a great day?

Investors are chasing a spot in Poseidon Nickel after a key update today.

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Shares in nickel producer Poseidon Nickel Ltd (ASX: POS) are charging higher to trade 4.44% in the green at 9.4 cents.

Poseidon shares have been moving since a company announcement advising of updates at its Black Swan project and “Fill the Mill” strategy.

The company outlined progress at the site plus the favoured outcomes from a July 2021 scoping study undertaken for the project.

From the results, Poseidon reckons that growing its high and low grade indicated resource base at Black Swan will have the best economic outcome for the project moving forwards.

As such, its Fill the Mill strategy is “focused on growing [its] mine inventory at Black Swan with an aim to supporting a project life of more than five years”.

Here are the details.

What did Poseidon Nickel announce?

Poseidon also detailed a number of other progress updates for its Black Swan site.

The nickel miner advised that new high-grade discoveries at its Golden Swan prospect now add another 6,300 tonnes of contained nickel to its Black Swan resources.

In addition, drilling at its Silver Swan site is now underway with the aim of increasing “high-grade mining inventory”. Previous test work “confirms Silver Swan tailings improves the Fe:MgO ratio of concentrate” at this location.

With regards to its Fill the Mill strategy, outcomes from the July 2021 scoping study indicated Poseidon has two attractive production options for mining at Black Swan.

To maximise the production of total nickel tonnes at the site, Poseidon reckons growing the high and low grade indicated resource base at Black Swan is the most attractive option economically.

This includes the resource at Golden Swan, Silver Swan, Silver Swan tailings, and Black Swan disseminated open pit ore feeds, according to the announcement.

It also came up with “relatively low capital and operating expenditure estimates for the larger 1.1Mt plan” and notes recent improvements in the payability of nickel in concentrates due to a “tightening market”.

And with the spot price of nickel fetching near recent 5-year highs at US$20,134/tonne, Poseidon believes the outlook remains positive for the future.

The company also identified the possibility to have a long-life project that could also treat ore from its 100% owned Windarra project.

In addition, for its Black Swan site, the company has signed a 5-year water access agreement with Norton Gold Fields Pty Ltd to help “de-risk” the project.

In fact, since 2018, the company has made several advancements in ‘de-risking’ the project. It says it has done this by growing the mineral resource at Black Swan, looking at ways to remove impurities from the ore and gaining access to grid power to reduce operating costs.

What did management say?

Speaking on the announcement, Poseidon Nickel CEO Peter Harold said:

Since announcing our “Fill the Mill” strategy in July 2021 the Company has made considerable progress on workstreams progressing our Black Swan project towards a restart, targeting late 2022 plant commissioning.

He continued:

Of particular importance, we have released our maiden Golden Swan Resource, commenced resource drilling at Silver Swan to convert Inferred Resources to Indicated and begun drilling of the Black Swan disseminated orebody to increase confidence on the grade and the amount of serpentinite ore in this Resource. We have also released a maiden Resource on the Silver Swan tailings and commenced metallurgical test work on blending the various feed sources through the Black Swan 2.2Mtpa concentrator, derated to 1.1Mtpa.

Poseidon Nickel share price snapshot

It’s been a year of green for the Poseidon Nickel share price, having climbed 32% in that time after rallying 45% this year to date.

These returns have both outpaced the benchmark S&P/ASX 200 Index (ASX: XJO)’s performance. It’s risen almost 17% in the past 12 months.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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