Poseidon Nickel Ltd (ASX:POS, OTC:PSDNF) will sell its Lake Johnston assets to Mineral Resources Ltd (ASX:MIN), enabling the company to intensify exploration activities and focus on operational efficiencies.
New opportunities
The freshly inked Binding Heads of Agreement sets out the sale of the Lake Johnston nickel concentrator plant and associated tenure, for which Poseidon will receive A$15 million from MinRes.
The payment consists of an A$1 million non-refundable payment upon execution, with A$6.5 million to follow after the completion of the Sale and Purchase Agreement, and a A$7.5 million deferred payment 12 months post-completion.
Additionally, Poseidon secures a 0.75% free-on-board (FOB) royalty on lithium minerals and a 1.5% net smelter return royalty on other minerals and metals extracted from the Lake Johnston tenements.
The sale aligns with Poseidon’s objective to reallocate resources and capital towards lucrative exploration ventures and potential new opportunities.
This capital influx is set to bolster Poseidon's financial capacity to advance its core strategy – focusing on the discovery of high-grade nickel deposits.
The funds will also support the company’s ongoing care and maintenance activities at its Black Swan project, ensuring resource conservation and operational sustainability.
This will enhance Poseidon's market position and future growth prospects in the nickel and lithium sectors.
Completion of the transaction is contingent upon due diligence, acceptable third-party agreement terms, and the acquisition of necessary approvals, including the consent of the Minister for Mines and Petroleum.
Crystallising value
“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,” CEO Craig Jones said.
“Under the Binding Heads of Agreement, Poseidon will be paid $15 million in cash while retaining an exposure to any exploration success at Lake Johnston with royalties from any future minerals or metals production from the project tenements.
“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.”