Poseidon Nickel monetises Lake Johnston via $15m sale to Mineral Resources
Company retains exposure to nickel and lithium exploration success and future production from the project tenements
Sale reduces annual expenditure commitments by roughly $1.4m and removes rehabilitation provisions
Special Report: Poseidon Nickel will receive a fresh $15 million cash injection after cementing a deal with Mineral Resources for the sale of Lake Johnston.
The lucrative transaction with Mineral Resources (ASX:MIN) not only provides Poseidon Nickel (ASX:POS) with an immediate cash boost but exposure to future lithium and nickel exploration and production upside.
POS today confirmed it had entered into a binding heads of agreement with MinRes to divest Lake Johnston to for $15 million in cash and royalties on future production.
The Lake Johnston region is emerging as an exciting new major lithium province following potentially significant discoveries that sent investors into a frenzy and caught the eye of the majors.
Timely review of lithium potential
POS recently reviewed the lithium potential at its Lake Johnston project, which revealed some very promising findings, including elevated levels of lithium similar to those reported by others in the region.
This prompted interest from MinRes, which said today that it plans to build a lithium processing hub in the region to process fines from its Bald Hill and Mt Marion lithium operations.
Lake Johnston hosts a nickel concentrator plant with a flotation circuit that has front-end capacity of 1.5Mtpa and is capable of being converted to treat lithium ores, including dense media separation fines.
Internal studies by MinRes indicated repurposing a brownfields site would reduce the approvals timelines by around two years compared to a greenfields development, in addition to significant capital savings.
POS will receive an initial $1 million non-refundable cash payment followed by a $6.5 million cash payment on completion of a formal sale agreement and the remaining $7.5 million 12 months after completion.
The company will also be granted a 0.75% free-on-board royalty on lithium minerals and a 1.5% net smelter return royalty on all other minerals and metals extracted from the Lake Johnston tenements.
A significant cash boost
POS chief executive Craig Jones says the company is very well funded for other activities across its portfolio.
“The proposed transaction will crystallise value for shareholders through the monetisation of one of our assets and will enable the company to continue with its strategy to progress the exciting exploration targets identified at Windarra, maintain Black Swan as our near-term production asset and progress new opportunities that are complementary to our portfolio,” Jones says.
“The proposed Lake Johnston divestment will also reduce our annual expenditure commitments by approximately $1.4 million and remove the rehabilitation provisions for that project from our balance sheet.
“Combined with significant cost reduction initiatives implemented over the past six months, the reset cost base along with $15 million cash consideration from the proposed sale of Lake Johnston strengthens the company’s balance sheet and provides sufficient funding for ongoing working capital requirements to successfully execute the company’s current strategy.”
This article was developed in collaboration with Poseidon Nickel, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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