Poseidon Nickel Ltd (ASX:POS, OTC:PSDNF) has chosen to partner with Green Gold Projects Pte Ltd (GGP) to develop and operate the Windarra Gold Tailings Project in Western Australia, a move the company says is in the best interest of shareholders as it focuses firmly on the restart of its Black Swan Nickel Project.
Poseidon managing director and chief executive officer Peter Harold said: “This agreement is a significant milestone in the company’s strategy to monetise the Windarra Gold Tailings Project. Green Gold Projects is an experienced developer and operator and is currently active in 30 projects globally.
“The binding Heads of Agreement outlines the proposed partnership with Green Gold for the processing of the Windarra Gold Tailings Project, with a final agreement subject to Green Gold being satisfied with the outcome of metallurgical testwork and a bankable feasibility study being completed at their expense.
“Upon achieving these milestones, Green Gold will earn a farm-in interest in the project. In return, Poseidon will receive consideration in the form of cash payments - upfront and upon project financing and a free carried profit interest of 8%.
"The funding, development and operation of the project will be the responsibility of Green Gold. The proposed partnership with Green Gold is an ideal outcome for Poseidon given our focus on the development of our nickel projects.”
Best for shareholders
The Windarra Gold Tailings Project consists of the Windarra and Lancefield tailings, with a combined mineral resource of 5.96 million tonnes at 0.84 g/t gold and 2.10 g/t silver, containing 161,000 ounces of gold and 399,000 ounces of silver.
Poseidon completed a definitive feasibility study (DFS) on the project in mid-2021, which indicated a robust project with a net present value (NPV) of about $20 million and an internal rate of return (IRR) of 45-50% assuming a gold price of US$1,750/ounce and an exchange rate of A$1.00 = US$0.75.
While the outcome of the DFS was positive, Poseidon is focused on the restart of the Black Swan Project and decided that finding a partner to develop and operate the Windarra Gold Tailings Project is the best outcome for shareholders.
While there was significant interest from various parties, GGP was selected given its experience as a developer and operator of similar projects, and has a patented technology that can improve the project's economics.
Conditions to proceed
The parties have agreed that certain conditions need to be met in order to reach a final agreement to develop the project, and these include:
- Metallurgical testwork performed by GGP on the Windarra and Lancefield tailings to determine if its patented technology can improve gold recovery.
- The rights and obligations of the Lancefield tailings Right-To-Treat Agreement are assigned to GGP.
- GGP receiving Foreign Investment Review Board and any other anticipated approval if required.
Subject to the satisfaction of these pre-conditions, Poseidon will grant GGP the right to farm-in to the project subject to the completion of the following milestones:
- Milestone 1: GGP making a non-refundable upfront payment of A$250,000 upon satisfying the preconditions mentioned above to earn an initial 13.8% interest in the project.
- Milestone 2: GGP completing a positive bankable feasibility study on the project to earn a further 13.8% interest in the project.
- Milestone 3: GGP making a final investment decision, securing funding for the project, and making a non-refundable payment of A$1.0 million to Poseidon to earn a further 64.4% interest in the project.
The agreement further specifies that the project must be in production within three years from the date that the last farm-in milestone is satisfied, and that GGP will be solely responsible for meeting any rehabilitation or other environmental liabilities arising from the project.