Poseidon Nickel (ASX:POS) has signed an agreement to sell a contractual right to mine the Silver Swan underground mine on its Black Swan tenements in Western Australia to Caeneus Minerals (ASX:CAD) for $1.5 million.
Silver Swan is not in the company’s current development plans due to its depth and complexity.
The sale will reduce project overhead costs by up to $300,000 per month and could provide future scrip income.
In addition, the two companies plan to enter into an offtake agreement for the ore which Poseidon will process either through its Lake Johnston or Black Swan concentrator plants after they are re-commissioned.
This allows Poseidon to continue to focus on the broader redevelopment of the Windarra and Black Swan Nickel Operations which includes the Black Swan open pit mine and 2.2 million tonne per annum concentrator.
The Black Swan open pit mine, which is located on the same tenements as Silver Swan, has a long potential mine life, with the ore to be treated through a refurbished Black Swan concentrator plant.
Poseidon has recently announced its intention to transport stockpiled ore from Black Swan (which is not part of this agreement) to be processed at Lake Johnston until such a time as the Black Swan concentrator is restarted.
Silver Swan Agreement
Under the agreement, which is subject to completion of due diligence and Caeneus shareholder approval, Caeneus will acquire a beneficial interest in tenement ML 27/200, which contains the Silver Swan underground nickel mine.
It has been granted a right to mine, remove and sell nickel ore above a grade of 2% as well as to undertake exploration for nickel from the existing underground decline below a depth of 100 metres.
Poseidon will also grant Caeneus a licence to enter the tenements and the right to utilise specified existing surface infrastructure to facilitate underground mining operations.
Caeneus will pay Poseidon a deposit of $150,000 through the issue of 10,714,286 CAD shares valued at $0.014 and $15,000 in cash.
A cash completion payment of $1,350,000 plus GST is expected on or before 1st August 2015.
Caeneus will also reimburse care and maintenance costs from 1st April 2015 to 1st August 2015 estimated at $1.2 million and continuing thereafter.
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