Black Mountain has been on the hunt for nickel assets in Western Australia and hopes to capitalise on the need for battery minerals in electric vehicles and other technology products.
The Fort Worth company’s offer values Poseidon at 6 cents a share, a 58.9% premium to yesterday’s 3.9 cent closing price.
Securities in the company closed at 5.5c today after achieving 5.9 cents during intraday trading.
No agreement to date
Poseidon reported the company had held discussions with Black Mountain about its proposed price and some indicative terms, including board agreement, but had not yet reached an agreement.
The company wrote: “Poseidon’s board has not made a recommendation as to whether to accept the proposal as a formal bid has not yet been received.”
“There is no certainty that any takeover will result from the continuing discussions.”
The informal bid proposes that Black Mountain extend Poseidon a $2 million immediate loan if the Australian company agrees to the prospective buyer undertaking a due diligence process.
Poseidon reported: “The loan has a 12-month repayment term (from initial loan date) with 7.5% interest payable at the end of the term.”
The company was in the advanced stages of planning a significant capital raising when it received the informal offer and its board opted to publicly release the details.
Poseidon has recruited Steinepreis Paganin as a legal advisor as its board begin an evaluation process.
Capital raising still ‘viable’
The company said the significant equity raising that was to be handled by Petra Capital “still remains a viable alternative transaction proposal”.
Poseidon is hoping to recommission two wholly-owned nickel operations 50 kilometres northeast of Kalgoorlie-Boulder after a feasibility study predicted $288.6 million in revenue.
The nickel-sulphide player’s Black Swan Project consists of the shuttered Silver Swan high-grade underground mine and nearby Black Swan open pit mine.
Poseidon has previously indicated a nickel price of more than US$6 a pound would prompt a decision to mine, given its net direct cash costs are estimated at $3.18 a pound.
The nickel price was at US$5.89 on Wednesday.
Poseidon’s staged approach was to restart Silver Swan, then the Black Swan open pit once achieving cashflow.
The company has recently attracted attention with the proposed listing of the Terry Streeter-backed Moho Resources Limited (ASX:MOH).
Moho is rattling the tin for $6 million and holds the Silver Swan North nickel-gold project which abuts Poseidon’s Black-and-Silver-Swan ground.
Black Mountain hopes to complete a due diligence review within a three-week period.