Poseidon Nickel has unveiled plans to raise A$74.6m ($54.78m) through a fully underwritten entitlement offer to restart its Silver Swan and Black Swan nickel mines in Western Australia.
The proceeds from the capital raising will also be used to resume production from the Black Swan processing plant.
Poseidon has appointed Petra Capital as lead manager to the placement and underwriter to the entitlement offer.
The company has secured an A$5.8m ($4.24m) commitment from professional investors, including Squadron Resources, an investment firm affiliated to Fortescue Metals Group’s former CEO Andrew Forrest.
According to the agreement, the company will issue 116.7 million shares at $0.05 a share.
Squadron Resources and affiliated entities are expected to increase their stake in Poseidon to 221.6 million shares or 18% of the expanded capital following the share placement.
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Squadron Resources has also committed to sub-underwrite 100% of the entitlement offer.
Poseidon will raise an additional A$68.8m ($50.38m) through the entitlement offer, which allows eligible shareholders to apply for 11 new shares for every ten existing shares held.
Poseidon Nickel chairman Chris Indermaur said: “We are delighted by the response to the capital raising and welcome Squadron Resources’ support.
“Funds raised from the placement and entitlement offer will enable the company to bring the Black Swan and Silver Swan mines and processing plant back into production.”
A feasibility study released by the company in July confirmed the restart of the Silver Swan underground mine, and Black Swan open pit mine and processing plant will generate revenues of A$288.6m ($211.36m) with pre-tax net present value (NPV) of A$43.6m ($31.93m).
Poseidon Nickel managing director Rob Dennis said: “The company has always been positively leveraged to the nickel market but now, with a fully underwritten capital raising to allow us to be fully funded for the previously disclosed restart, investors have the opportunity to retain exposure and the company positioned to take advantage of the strong nickel market dynamics with a certainty of funding.”
The restart is expected to enable the company to produce around 8,000t of nickel per annum in a smeltable grade concentrate from the Black Swan process plant, and direct shipping ore (DSO) from Silver Swan.
The company is targeting the first production within 12 months.