Poseidon Nickel has appeared on the radar screen of a North American suitor, with the company entering a trading halt yesterday ahead of a “potential control transaction”.
WestBusiness understands a US private equity firm with a track record of investing in resources but no history in Australia is in negotiations with the company in the hope of agreeing on a friendly cash deal.
Poseidon is 11 per cent owned by mining billionaire Andrew Forrest but its recent quarterly report showed it held just $2 million in cash at the end of June.
The company owns the historically infamous Windarra mine near Laverton, where a nickel discovery in 1969 sparked a buying frenzy in the former Adelaide-based Poseidon NL.
Between 1969 and 1970, shares in the former company soared from 80¢ to $280 with the excitement quickly spreading to other nickel players in the area.
But Poseidon’s share price collapsed just as quickly and within six years, the company was broke. It still represents one of the biggest bubbles in Australian sharemarket history.
The modern day company’s recent focus has been on its historic Black Swan and Silver Swan nickel mines, 50km north-east of Kalgoorlie.
Poseidon recently appointed former Independence Group chief operating officer Robert Dennis to drive a $57 million restart of the operations, based on a favourable feasibility study released last month. Mr Dennis is the company’s first chief executive since David Singleton stepped down in January 2016, owing to a slump in the nickel price.
Poseidon was effectively dormant through the downturn but has since ramped up activities in an improving nickel price environment.
Prospects for nickel have improved in recent months, partly on the back of its use in the lithium-ion batteries that power electric vehicles.
The company’s Black Swan open pit and Silver Swan underground mine, which include a 2.2 million tonne per annum plant, could be seen as a cheap entry into a near-term producing nickel asset.
Black Swan is expected to produce 8000t of nickel a year over an initial three-year mine life. The company also owns the 1.5Mtpa Lake Johnston processing plant, 117km west of Norseman.
At 3.9¢, Poseidon has a market value of about $43 million.