MinRes has signed a binding heads of agreement with Poseidon Nickel to acquire the Lake Johnston nickel concentrator plant and tenure in the southern Goldfields region of Western Australia (WA).

This move forms part of MinRes’ strategy to develop a lithium processing hub in the southern Goldfields region to process lithium ores from its operations and third-party sources.

The consideration includes a A$1m ($657,219) payment by MinRes upon execution of the binding heads of agreement, A$6.5m upon completion of the sale and purchase agreement, and a further A$7.5m 12 months post-completion.

Poseidon Nickel CEO Craig Jones said: “The proposed Lake Johnston divestment will also reduce our annual expenditure commitments by approximately $1.4m 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 $15m 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.”

The Lake Johnston nickel plant with a flotation circuit, which has a front-end capacity of 1.5 million tonnes per annum, is poised for conversion to treat lithium ores including dense media separation fines.

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Licensed to operate until 2041, the facility has an active groundwater extraction licence and on-site infrastructure, a 200-person camp, electrical infrastructure, workshops and laboratories.

This is expected to streamline processing for MinRes’ Bald Hill and Mt Marion lithium operations, as well as accommodate new discoveries and third-party ore in exchange for project equity.

Covering an area of 86km² and situated about 185km south-west of Kalgoorlie, the acquired tenure includes one exploration licence and ten mining leases.

MinRes managing director Chris Ellison said: “We intend to bring our expertise in spodumene production to Lake Johnston, which has the potential to service projects throughout the world’s most prospective region for lithium.”

The transaction is contingent upon the satisfaction of conditions precedent including the completion of legal due diligence of the sale assets to MinRes’ reasonable satisfaction.

Last year, Lithium Australia announced a joint venture with MinRes pertaining to its LieNA disruptive lithium extraction technology.