Australia's Poseidon seeks capital to rework nickel mine

Tue Jan 28, 2014 1:18am EST

Related Topics

* Poseidon wants to raise capital to help pay for nickel mine

* Company reworking site of Australia's boom-bust nickel stock crash

* Sentiment for nickel turning as Indonesia export ban lifts price

By James Regan

SYDNEY, Jan 28 (Reuters) - Poseidon Nickel, the reincarnation of the company behind one of the most spectacular stock crashes in Australia, is in talks with investors to raise capital to help finance the development of a long-dormant nickel deposit as the outlook for the metal brightens.

People familiar with Poseidon's financing needs said the minerals exploration firm, which has a market value of A$43 million ($37.61 million), could issue debt or convertible notes to help foot the $197 million bill needed to get its outback Mount Windarra deposit up and running.

Perth-based Poseidon was granted on Tuesday a trading halt on the Australian Securities Exchange pending what it said was an announcement in relation to a proposed capital raising or other form of financing. It gave no further details.

Poseidon stock was last traded on Jan. 22, when it closed at 10.5 Australian cents, up 46 percent in a week.

The company, like Australian nickel miners, is set to benefit from a blanket ban on raw nickel ore exports by Indonesia which has raised concerns about supply.

London Metal Exchange nickel has climbed as much as 10 percent in the past three weeks and was last quoted at $14,159 a tonne. Goldman Sachs forecasts a 13 percent rise in nickel prices this year.

"This is a good chance for Australian nickel miners to shine after a long time in the wilderness," said Sydney-based sector analyst Gavin Wendt of consultants MineLife.

BOOM AGAIN?

Nickel stocks have largely been ignored or sold off by investors since prices of the metal dive-bombed in mid-2009 to less than $9,000 a tonne from record highs of above $51,000 a tonne in 2007.

Australia is the world's third biggest producer of nickel, which is used in the manufacture of stainless steel. China is the world's biggest buyer of the metal.

The Mount Windarra site, in Western Australia, was originally developed by another company also called Poseidon in 1969.

That Poseidon became the biggest boom stock in the country's history, galloping from A$1 a share in September 1969 to A$280 in February 1970. Investors made fortunes on the stock only to lose it when the company went bust in 1976 after nickel prices crashed. The event is known as the "Poseidon bubble."

The company's reincarnation, Poseidon Nickel, has been painstakingly prospecting for more nickel over the past five years at the Windarra deposit and last June announced a "large" discovery. Managing Director David Singleton at the time said the discovery showed the mine still held "significant upside".

Fortescue Metals Group Ltd founder and billionaire Andrew Forrest holds 30 percent of Poseidon's stock, some of it gained by underwriting an A$20 million rights issue in 2012.

Forrest stepped down as chairman of Poseidon in September. A capital raising by Poseidon could help in repaying a A$9 million loan plus interest Forrest made to the company. ($1 = 1.1432 Australian dollars) (Editing by Miral Fahmy)

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