Nickel miner Poseidon Nickel is developing an alternate strategy for its Silver Swan project after a sales agreement with Caeneus Minerals fell through.

Poseidon in May signed a binding agreement for Caeneus to acquire a beneficial interest in the tenement holding the Silver Swan underground mine. Caeneus had also been granted the right to mine, remove and sell nickel ore above a grade of 2%, as well as to undertake exploration for nickel from the existing underground decline to below a depth of 100m.

The deal had been valued at A$1.5-million.

However, Caeneus had now informed Poseidon that it had been unable to source project finance and would not be able to meet the commercial terms of the transaction. As a result, its option over the the Silver Swan project had lapsed.

Under the terms of the agreement, Caeneus was still liable for a A$950000 payment to Poseidon in either cash or shares.

Poseidon would develop an alternate strategy for Silver Swan to support its own activities.

The company believed that Silver Swan might be able to produce sufficient cash flow to at least fund the care and maintenance costs of all its operations, despite weak commodity prices. The company was working to confirm historic resource estimates at Silver Swan and was hoping to publish the results of this within the next month.

It was also reviewing the project to confirm assessments from Caeneus that mining at Silver Swan had been suspended just as one access drive had intersected mineralization and two others were within reach of further mineralization.

Poseidon told shareholders that its primary strategy remained the start of operations at the Lake Johnston project; however, the opportunity to undertake limited operations at Silver Swan in the interim could provide a step to this, while nickel prices remained subdued.

The potential high grades at Silver Swan meant that the mine could be economic, even at current prices, and could, therefore, provide some operating income.

• [Editor:Juan]