QUARTERLY REPORT
30 SEPTEMBER 2016
COMPANY OVERVIEW
Poseidon Nickel Limited is a mid-tier ASX listed company focussed on developing its nickel assets in Western Australia. The Company has two nickel sulphide concentrators and five independent mines. All of the operations are located within a 300km radius from Kalgoorlie in the Goldfields region of Western Australia. Poseidon has the second largest nickel sulphide concentrator and associated JORC compliant nickel sulphide resource within Australia.
Poseidon plans to restart operations initially at Silver Swan Australia's highest grade nickel mine followed by Lake Johnston, Black Swan and Windarra. This is considered to be a low capital, low risk strategy. A critical element of the Company's growth platform is to acquire projects with strong geological prospectivity likely to lead to a substantial extension of the projects life through the application of modern nickel exploration techniques. These exploration techniques have been proven repeatedly at Poseidon as well as several other well-known nickel producers in Australia.
Poseidon secured the Lake Johnston and Black Swan (including Silver Swan) assets together with the Windarra Nickel Project which will mine ore to be processed at the Black Swan nickel sulphide concentrator.
ASX Code: POS
Lake Johnston
Black Swan
Windarra
POSEI DON NI C KEL LI M I TED Unit 8 Churchill Court 331-335 Hay Street Subiaco WA 6008
PO Box 190 West Perth WA 6872 T +618 6167 6600 F +618 6167 6649 www.poseidon-nickel.com.au ABN 60 060 525 206
COMPANY MILESTONES
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Silver Swan technical assessment progressing well
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MOU signed to explore opportunity to process Kidman lithium ore at Lake Johnston processing facility
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Excellent results returned from soil sampling over lithium bearing pegmatite zones
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Testing and development of the Bruker pXRF unit has been completed to produce a Lithium Index reading which has been calibrated to within 89% correlation with lithium laboratory results
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Eleven Lithium Targets have been generated to date and sampling has been extended
SIGNIFICANT EVENTS
OVERVIEW
The Company has continued to progress the feasibility work required for the restart of the high grade Silver Swan project which includes the technical support of a number of specialists for geotechnical and life of mine modelling. The work is progressing to schedule and will ensure that Poseidon is in a position to take full advantage of a sustained nickel price improvement.
As advised to the market on 27 July 2016, Poseidon has entered into a Memorandum of Understanding (MOU) with Kidman Resources Limited (Kidman) to evaluate the possibility of processing lithium hosted pegmatites at Poseidon's Lake Johnston processing facility which can provide an expeditious path to market for a spodumene lithium concentrate. The MOU provides a framework for the parties to work together to evaluate the proposed transaction and commercial agreement. The initial period of the MOU of 3 months has been mutually extended for a further 3 months as the parties continue to work to finalise an agreement.
LAKE JOHNSTON PROJECT UPDATE
Poseidon contracted the geological services of Corad Pty Ltd to complete soil and rock chip sampling over an area of ~4km2 in the northern portion of E63/1067 at the top end of the Lake Johnston tenement package (Figure 1). Historic and recent sampling has identified the area as hosting lithium bearing pegmatites with sampling to locate and define the most prospective zones for spodumene mineralisation now completed.
Corad collected 650 soil samples over several adjoining sampling areas and at varying sample spacings during the progression of the programme. Generally -1mm sieved samples were collected in the field and were brought back to the Lake Johnston laboratory for drying, sieving to -250 micron and analysing using a Bruker pXRF machine with propriety Lithium Index calibrations programmed into the machine. The initial 116 samples were analysed by Portable XRF Services under supervision of Geochemical Services in West Perth using the calibrated Bruker pXRF to produce a calculated Lithium Index. The samples were then sent to Intertek Laboratory for traditional multi-element analysis. Blind testing of the samples using the Bruker pXRF returned an 89% correlation with the laboratory results (Figures 2 and 3) which is an outstanding result as lithium is undetectable using XRF technology due to its low atomic weight.
Figure 1: Lake Johnston tenure package showing the area of lithium soil sampling in the northern portion of E63/1067
Geochemical Services created a propriety algorithm to estimate the lithium grade in samples using ratios of numerous pathfinder elements which include Cs, Ga, K, Nb, Rb and Ta. It has returned a 99% correlation with rock chip samples and an 89% correlation with soil samples compared to laboratory results which is outstanding given the time and cost savings this unit delivers. The results are more than adequate to highlight lithium anomalies and prospective pegmatite zones in preparation for follow-up field investigation, target prioritisation and drill testing.
Poseidon has subsequently purchased a Bruker S1 TITAN pXRF unit and the resultant soil sampling programme has generated at least eleven lithium pegmatite target zones (Figure 4). Poseidon is continuing to work with Geochemical Services to determine if the Bruker pXRF machine can be calibrated to differentiate spodumene mineralisation from lithium mica mineralisation so as to better utilise the unit in the field.
The Lake Johnston Atomic Absorption (AA) assay machine has also been recommissioned with Lithium-Tantalum tubes and has also achieved 99% correlation assaying rock samples using both commercial assay laboratory readings as well as the Bruker pXRF. Poseidon is now confident to use the equipment setup within the onsite laboratory for initial evaluation of Li-Ta bearing samples. All soil samples and rock chip samples can now be analysed cost effectively on site with a 1-2 day turnaround. QAQC samples will be sent to Perth labs for check assaying and continued monitoring of equipment accuracy. Drilling samples will be selected on site using these tools but as per standard practices, all anomalous samples will be sent for full laboratory analysis to meet JORC and ASX reporting requirements.
Figure 2: Soil sample results from the initial test area using traditional commercial laboratories methods versus a calibrated Bruker pXRF machine programmed to calculate lithium using propriety Lithium Index estimation. Results returned an 89% correlation
Figure 3: Correlation between the Bruker pXRF Lithium Index and traditional laboratory assays
demonstrate a correlation of 89% which is more than adequate for generating reliable soil sample anomalies. It is also faster and cheaper than traditional assaying