(,,) unveiled a definitive feasibility study (DFS) for the Windarra Gold Tailings project, a precious metal asset in the gold fields of Western Australia, with the study describing a robust project.

The nickel sulfide exploration and development company has established an ore reserve of 150,000 ounces of gold for the gold tailings asset, which is located in its larger Mt WINdarra Nickel project.

Poseidon estimates that Windarra could produce between 53,500 and 55,200 ounces of gold over a 45-month lifespan if the company uses low-cost, low-risk tailings mining methods and a processing facility of 1. 5 million tonnes per year.

Shares were up 18.2% higher in early trading to hit AU $ 0.13, while the company’s market cap is around A $ 309 million.

Although Poseidon is primarily focused on its nickel assets, the explorer sees the development of Windarra gold as a way to generate cash flow, reprocess historic gold tailings and establish a storage facility. tailings in the South Windarra pit.

“Robust and profitable project”

Peter Harold, Managing Director and CEO of Poseidon Nickel, said: “DFS results demonstrate a robust and cost-effective gold tailings reprocessing project at Windarra and Lancefield.

“Gold tailings present a project that can generate positive cash flow to invest in our nickel business, which is our primary focus. The tailings site project would be ideal for a partnership type agreement or an outright sale.

“We will actively seek a high quality partner to work with to bring this project into production or a part to acquire the project so that we can monetize the asset for the shareholders of Poseidon.”

DFS economy

Prior to the new study, the ASX-lister determined that Windarra Gold held approximately 180,000 ounces of gold in indicated and inferred mineral resources through the north and south dams and the nearby Lancefield tailings permit.

Now, in his definitive feasibility study for the Windarra Gold tailings facility, Poseidon has established an ore reserve based on between 5.54 million tonnes and 5.73 million tonnes of resources, grading 0.84 g / t gold and 2.1 g / t silver for around 150,000 gold. ounces and approximately 375,000 ounces of silver.

With respect to the economics of the project, the nickel explorer examined the costs associated with both a hydraulic mining and amphibious dredging operation.

In the latter’s case, Poseidon calculated a net operating cash flow of AU $ 30.6 million, a net present value of AU $ 21.7 million, and an internal rate of return valued at AU $ 50.6. %, all based on a gold price of US $ 1,750 and a trade of AU $ 1.00 to US $ 0.75. rate.

However, the application of the residual value assessment of DFS improves the net operating cash flow of the asset to AU $ 36.3 million, the net present value to AU $ 25.7 million and brings the internal rate of return to 53.9%.

The all-inclusive sustaining cost of the project is calculated at AU $ 1,393 per ounce of gold.

Overall, Windarra Gold production is estimated to be between A $ 25.8 million and A $ 29.5 million, depending on the extraction method chosen.

The return on investment is expected to occur between 27 and 28 months from the start of production of the tailings facility.

Already, the company has received a number of key approvals for the proposed gold tailings mining, including ministerial approval to renew the Lancefield permit and environmental approval for Windarra Gold.

Main findings and conclusions

Some of the perceived strengths of the project include its solid ore reserve, which sits just 0.75 meters from the surface – something Poseidon believes he can tap into for a relatively short project development timeframe, nine months.

Other positives include the modular design of the processing plant, which means it can be redeployed to another project after Windarra’s 45-month operating period is over.

In addition, Poseidon highlighted the “modest” baseline net present value, “attractive” internal rate of return and payback period as strengths of the project.

However, the company concedes that the increase in the resource base is limited during the current operational life of 45 months, while the economy is very sensitive to the price of gold and the exchange rate, although this can be hedged to mitigate risk.

In terms of DFS’s primary findings, Poseidon presented his gold recovery estimates. The company concluded:

• Interpretation of all relevant leach data from current and previous test work indicates that the average gold recovery from tailings in the Windarra North Dam is 38.0%;
• Interpretation of all relevant leaching data from previous trials indicates that the average gold recovery from tailings in the Windarra South Dam is 45.6%; and
• Interpretation of all relevant leach data from the current test work indicates that the average gold recovery from tailings at Lancefield is 28.1%.

Ultimately, the DFS had a clear recommendation: that Poseidon consider hiring a Joint Venture Partner (JV) to implement the project – a partner who has demonstrated expertise in engineering design and construction, but also the ability to manage the project during the operational phase.

The company believes that an equity-based JV partnership project implementation model would minimize mark-ups from construction contractors and drive project delivery performance across construction, schedule, capital costs and operating.

Going forward, Poseidon will look for opportunities to monetize Windarra Gold, particularly if it involves a divestiture or joint venture solution.