Mineral Resources Limited (ASX: MIN) has entered into a binding heads of agreement, subject to conditions, with Poseidon Nickel Limited (ASX: POS) to acquire the Lake Johnston nickel concentrator plant and tenure.
MinRes intends to develop Lake Johnston as a lithium processing hub in the southern Goldfields region. The acquisition aligns with the strategy to process fines from the company’s Bald Hill and Mt Marion lithium operations, new discoveries made by MinRes in the region and third-party ore in exchange for project equity.
Lake Johnston is a nickel concentrator plant with a flotation circuit that has front-end capacity of 1.5 million tonnes per annum and is capable of being converted to treat lithium ores, including dense media separation fines.
The asset is licenced to operate to 2041 and has an active groundwater extraction licence. On-site infrastructure includes an airstrip, 200-person camp, electrical infrastructure, workshops and laboratories. Internal studies by MinRes indicated repurposing a brownfields site would reduce the approvals timelines by circa two years compared to a greenfields development, in addition to significant capital savings.
Located approximately 185km south-west of Kalgoorlie-Boulder, the acquired tenure covers 86km2 with one exploration licence and 10 mining leases. MinRes will own the tenure outright, including all mineral rights.
MinRes will pay $1 million on execution of the binding heads of agreement, $6.5 million on completion of the sale and purchase agreement and $7.5 million 12 months after completion. The transaction is conditional upon satisfaction of conditions precedent, the assignment of third-party agreements on terms acceptable to MinRes and the consent of the Minister for Mines and Petroleum being obtained under the Mining Act.
“This is an exciting opportunity to develop MinRes’ third lithium processing hub in the Goldfields and the first to include flotation capacity to treat fines,” 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.”
Commenting on the binding heads of agreement with MinRes, Poseidon Nickel CEO Craig Jones said:
“The proposed transaction will crystallise value for shareholders through the monetisation of one of our assets and will enable the company to continue with its strategy to progress the exciting exploration targets identified at Windarra, maintain Black Swan as our near-term production asset and progress new opportunities that are complementary to our portfolio.
“Under the binding heads of agreement, Poseidon will be paid $15 million in cash while retaining an exposure to any exploration success at Lake Johnston with royalties from any future minerals or metals production from the project tenements.
“The proposed Lake Johnston divestment will also reduce our annual expenditure commitments by approximately $1.4 million and remove the rehabilitation provisions for that project from our balance sheet.”
