Poseidon Nickel - A Smart Nickel Play in Middle Earth

Western Australia-based Poseidon Nickel has emerged as an attractive investment opportunity for nickel exposure, with three advanced nickel projects located in prime mining districts. With nickel demand surging thanks to the electric vehicle revolution, Poseidon offers investors near-term production potential, exploration upside and a tightly held share register.

Strong Nickel Fundamentals Provide Tailwinds

The nickel market is experiencing a seismic shift. For decades, stainless steel dominated nickel demand, accounting for 70% of consumption. But the rapid acceleration of the electric vehicle market has made nickel a critical ingredient for EV batteries. With governments worldwide mandating the phase-out of internal combustion engines, nickel demand for EVs is projected to rise from 137kt in 2021 to 978kt by 2025. This has led to a structural nickel deficit, evidenced by dwindling global stockpiles.

Poseidon is leveraged to benefit from the nickel bull market. The company's strategy is to fast-track its projects into production to generate 15,000 tonnes per annum of nickel within two years. Poseidon's three advanced projects provide optionality, exploration upside and expansion potential.

Flagship Black Swan Project Offers Production Within 18 Months

Black Swan is Poseidon's most advanced asset, located 50km northeast of Kalgoorlie. Historic production totals 180,000 nickel tonnes. Poseidon is assessing a restart focused on open pit and underground mining, with 1.1Mtpa and 2.2Mtpa throughput options. The 1.1Mtpa scenario could see Black Swan generate 5,000tpa nickel over a 5-year mine life.

A key advantage is Black Swan's existing infrastructure, including a processing plant, tailings facility, camp and sealed airstrip. This provides capital cost savings versus building a new mine. Poseidon aims to make an investment decision in 2022 once feasibility studies are complete. The first production from Black Swan could be achieved within 18 months of committing to restart.

Exploration success at Black Swan also offers upside. Poseidon's recent discovery of the high-grade Golden Swan deposit (6,000 nickel tonnes) indicates further discoveries may be lurking nearby.

Lake Johnson Offers Later Production Upside

The Lake Johnson project, acquired in 2014, provides Poseidon medium-term production growth. Historic mining generated close to 100,000 nickel tonnes between 1999-2008. Poseidon sees potential to recommence mining the Emily Ann and Maggie Hayes underground deposits, and progress exploration targets.

A 2019 scoping study outlined capital costs of A$35M to restart operations, producing 10,000tpa nickel over 8 years. While less advanced than Black Swan, Lake Johnson provides Poseidon options to optimise and expand production.

Windarra Tailings Project to Enhance Cash Flow

The Windarra mine was once Australia's largest nickel producer, generating 80,000 nickel tonnes until 1983. Poseidon has an agreement to develop Windarra's gold tailings, which will provide auxiliary cash flow. The project offers further upside - Poseidon may establish an ore sorting facility to upgrade Windarra's nickel ore and haul it to Black Swan for processing.

Strong Balance Sheet and Tight Capital Structure

As of June 2022, Poseidon held A$11M cash and no debt. Poseidon's strategy has been to minimise share dilution and preserve capital, reflected in its tight share register. Founders and management own 25% of the issued capital. The top 20 shareholders hold over 50%. This provides confidence that management's interests are aligned with shareholders.

Significant Upside Potential with Minimal Risk

With advanced projects and infrastructure in place, Poseidon offers a low -isk, fast-tracked exposure to surging nickel demand. If successfully executed, Poseidon's production and exploration upside should be recognised by the market and reflected in strong share price gains. The company's tight capital structure provides additional torque. Poseidon presents a compelling investment case among its junior nickel peers.

Poseidon Nickel could represent a good investment opportunity

• Favorable nickel market fundamentals - Nickel demand is projected to grow significantly in the coming years thanks to electric vehicle adoption. This should support higher nickel prices and provide tailwinds for producers.
• Advanced projects and infrastructure - Poseidon's projects benefit from extensive existing infrastructure, reducing restart costs versus building a new mine. This allows for faster restart timeframes.
• Exploration and expansion potential - There is upside potential from exploration at Black Swan and Lake Johnson. Poseidon also has options to expand production beyond the initial restart scenarios.
• Strong balance sheet - With no debt and A$11M cash, Poseidon is funded to progress its key development activities. The tight share register limits dilution risk.
• Significant production and valuation upside - If Poseidon achieves its targeted 15,000tpa nickel production, its valuation should rerate strongly. There is a substantial upside in successfully restarting operations.
• Proven management team - Poseidon's management has extensive nickel development and operating experience. This provides confidence in their ability to execute the restart strategy.
• Tight capital structure - The founders and management own 25% of issued capital and top 20 hold over 50%. This alignment of interests is favourable for minority shareholders.

In summary, Poseidon offers investors quality nickel assets with near-term production potential and significant upside. The risk-reward profile appears favourable for investors seeking leveraged nickel exposure.

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