Horizon Minerals (ASX: HRZ) is set to take over Poseidon Nickel and its mothballed mining plant with a $30m all-scrip deal that will give Horizon a neat opportunity to commercialise its myriad of gold deposits scattered around Kalgoorlie.
Horizon is offering 0.1156 of its shares for each Poseidon share and aims to raise a minimum of $14 million via a two-tranche placement at 4.5c per share to bolster its balance sheet, with the price offered at a 28.6 per cent discount to its last closing price.
The end result will see Horizon shareholders owning 70 per cent of the combined entity and Poseidon shareholders will own 30 per cent.
Horizon has amassed a war chest of gold deposits in and around Kalgoorlie over time and its move to pick up Poseidon’s 2.2m tonne per annum mothballed mining plant just might represent the breakthrough it needs to get more of its deposits into production.
The company’s existing multi-deposit resource of 1.8 million ounces of gold going 1.84 grams per tonne gold is now based within 50-to-75km of the 2.2 million tonne per annum facility.
While Poseidon’s Black Swan mining plant, located 40km north east of Kalgoorlie, was used to process nickel just a few years ago, Horizon will refurb the front end of it and install a gold processing back end. Notably, the company says the existing Black Swan infrastructure would cost $150m to replace today.
Importantly, Horizon says all regulatory approvals are already in place at Black Swan and converting it into a gold plant could result in a 100,000 ounce a year operation.
Poseidon also comes gift wrapped with a resource of 42.1 million tonnes grading 1 per cent nickel for 422,700 tonnes of contained metal, in addition to copper metal of 18,300 tonnes and 7800 tonnes of cobalt.
28.9 million tonnes of that resource base grading 0.77 per cent nickel for 222,000 contained tonnes of metal are within shouting distance of Black Swan. The rest is scattered across Poseidon’s Windarra and Lake Johnston projects.
Lake Johnston, to the east of Norseman, comes replete with its own 1.5 million tonne mill and associated infrastructure. Whilst that facility was previously used to mine nickel, more recently, it was proposed to be converted into a lithium production facility.
Horizon’s pick up of Poseidon gives it an almost immediate ability to mine gold at a time when the gold price is at record levels but notably, Poseidon is no slouch when it comes to battery metals resources and infrastructure either. The coming together of the two will give Horizon a serious leg-up during any upswing in the battery metals market.
Even without Black Swan, Horizon has already pushed the go button on the toll treating of two of its key deposits, Boorara near Kalgoorlie’s Super-Pit and Phillips Find to the north of Coolgardie.
Management recently gave approval for the mining of four open pits at the Boorara site that contains 1.24 million tonnes of ore grading 1.24 grams per tonne gold for 49,500 ounces and mining has already kicked into action. The site sits adjacent to Northern Star’s massive Super Pit mine in Kalgoorlie that has produced more than 60 million ounces of gold.
Horizon recently appointed contractor Hamptons Transport to conduct the mining activities, with plans for the mining to occur for a 14-month period. Ore will be processed at Norton Gold Fields’ nearby Paddington plant. It is expected to generate a wall of cash for the company over 14 months that Horizon says could be as high as $30 million………and that’s at the very conservative gold price of AUD$3600 an ounce.
Today’s gold price is sitting at a near record-high of more than AU$4096 an ounce.
Management struck an impressive deal on the mining services and load-and-haul contracts at Boorara, with no payments to Hamptons required until the first gold pour has been sold and funds are in the bank.
The company also says mining at Phillips Find is imminent with equipment arriving on site or expected to do so in the coming days. It plans to mine two open pits at the project in the same goldfields region in a bid to cash in on the precious metal’s continuing record high price.
A deal with experienced Kalgoorlie-based contractor BML Ventures is underpinned by a plan to produce 15,000 ounces of gold, with ore from the site to be treated at the nearby Greenfields mill and cash flow to be split in half after all costs have been deducted.
Horizon says the JV will provide a low-risk opportunity to generate cash from the surging gold price, with BML funding all project costs and taking responsibility for all management, technical, operational and maintenance roles.
The company recently entered into a binding toll milling agreement with FMR Investments, the owner of the Greenfields Mill, to treat 200,000 tonnes of its ore. That ore will come from the Phillips Find project – an asset now in its portfolio as a result of a recent merger with Greenstone Resources.
Horizon’s appetite for doing value accretive deals, whether it is taking over other companies with strategic assets or just picking up stranded deposits has been insatiable over the last couple of years.
The latest deal with Poseidon however just might represent the final piece of the puzzle that will allow it to lift from smallish-scale toll treater to continuous large-scale miner.
And maybe, just maybe, when the lithium market comes roaring back, Horizon will capture that freight train on the way past too, making good use of its newly minted friend’s out wide assets.
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