Poseidon Nickel : Quarterly Report to 30 September 2019

Corporate Directory

ASX Code: POS

Shares on Issue: 2,638M

Market Cap: ≈$142M

Cash and investments at 30 September 2019

$56.5M

Board of Directors

Non-Executive Chairman

Geoffrey Brayshaw

Non-Executive Directors

Felicity Gooding

Karl Paganin

Interim CEO

David Riekie

CFO & Joint Company Secretary

Brendan Shalders

Joint Company Secretary

Eryn Kestel

Key Shareholders

Black Mountain Metals: 19.8%

Squadron Resources: 17.1%

Key Operating Nickel Assets (100%)

Black Swan/Silver Swan

Lake Johnston

Windarra

Principal & Registered Office

Unit 8 Churchill Court

331-335 Hay Street

Subiaco 6008

Western Australia

1. 1. [phone]
   1. [phone]
2. [e-mail]

1. www.poseidon-nickel.com.au

QUARTERLY REPORT

30 SEPTEMBER 2019

HIGHLIGHTS

SILVER SWAN RESOURCE UPGRADE

• JORC 2012 INDICATED Restart Resource more than doubled to 10,130 tonnes of nickel metal at a grade of 9.4% Ni
• JORC 2012 Indicated + Inferred Resource increased 30% to 16,030 tonnes of nickel metal at a grade of 9.5% Ni
• Life of Mine (LOM) schedule set to increase based upon the 30% growth in the Indicated Resource, higher grade and increased continuity of massive sulphide mineralisation

BLACK SWAN RC DRILLING

• 2,500m underground RC Drilling trial below the Black Swan open pit progressed well, with eight holes (~50% of program) completed to date
• Innovative RC Drill technique being used for the current program is a first for nickel exploration in Australia, and offers potential for Research and Development status and support

CORPORATE & MARKET

• Key management appointments made with David Riekie joining the Company as Interim CEO, and Brendan Shalders as CFO and Joint Company Secretary
• Strong nickel price growth over the September quarter continue to support the restart plan for nickel mining operations at Silver Swan and Black Swan

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Poseidon Nickel Limited (ASX: POS, "the Company") is pleased to report on its activities for the September Quarter 2019.

SILVER SWAN RESOURCE UPGRADE

During the quarter the Company announced a 30% increase in the JORC 2012 compliant Silver Swan Indicated and Inferred Resource Estimate, recently prepared by Optiro Pty Ltd (Optiro). The current total Silver Swan Resource stands at 168,000t @ 9.5%Ni for a total of 16,030 nickel tonnes. The estimate was classified in accordance with the JORC 2012 Code and has been reported above a 4.5% nickel cut-off as presented in Table 1.

Table 1 - Silver Swan Resource Estimate - August 2019

Silver Swan Resource - August 2019

Area		Indicated	Inferred	Total

As

Ni metal

As

Ni metal

As

Ni metal

kt

Ni %

ppm

(t)

kt

Ni %

ppm

(t)

kt

Ni %

ppm

(t)

Tundra-

68

9.2

3,200

6,260

59

9.8

3,290

5,800

127

9.5

3,240

12,060

Mute

	Peking			26			9.7			2,520			2,560			1.2		8.8		4,330		100			27			9.7			2,590			2,660
	Duck
	Fledgling-			12			9.9			2,100			1,160			0									12			9.9			2,100			1,160
	Canard
	Goose			1.7			9.0			3,180			150			0									1.7			9.0			3,180			150
	Total			108			9.4			2,910			10,130			61		9.7		3,310		5,900			168			9.5			3,060			16,030
	resource
Totals may not sum correctly due to rounding

The impressive growth in the Indicated and Inferred Resource Estimate has resulted in the doubling (107%) of tonnes, an improved nickel grade and a 112% increase in contained nickel metal from 2015.

There has been a 28% reduction of tonnes and an 8% increase in the nickel grade in the Inferred category, resulting in a reduction of 22% of contained nickel metal due to the conversion of these to the indicated category.

Importantly, the doubling of the Indicated Resource is expected to positively impact the work currently being undertaken on the Silver Swan Reserve and LOM schedule.

The Silver Swan Mineral Resource Estimate has been classified in accordance with the guidelines of The Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code, 2012). The Mineral Resource classifications can be seen in Figure 1.

Figure 1 - Silver Swan 2019 Resource

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BLACK SWAN RC DRILLING TRIAL

Poseidon successfully commissioned in August a 2,500m underground RC drilling program from the Gosling Access Drive, 200m below the Black Swan open pit. The program has been designed with a research and development focus, and is utilising a Cubex 5200, track mounted long-hole rig supplied by Metres Down Under, with gyro survey support and development from Downhole Surveys.

Earlier this year Poseidon successfully located high-grade blebby disseminated sulphides 900m below the Black Swan open pit. The aim of that particular program was to provide information on the continuation of the Black Swan mineralisation at depth and to obtain core for metallurgical testing. Hole PBSD001A intersected 223m @ 1.02% nickel in an interpreted hangingwall position of the deposit (see ASX announcement 6 May 2019 "Successful Phase 1 Drilling Under Black Swan Open Pit").

Aided with these historical drilling results (from both surface and underground into the Black Swan Deposit below the open pit) Poseidon was able to establish the potential for geological continuity of mineralisation from the base of the current pit to the new intersections 900m below (Figure 2).

Figure 2 - Deep diamond intercepts in relation to historical drilling and the Black Swan open pit. The RC trial area lies directly below the open pit.

The drilling technique utilises a traditional long-hole drill rig coupled with RC in-the-hole hammers (ITH), and a purpose-built air and water injection technology to run an underground RC system (see Figure 3). The 1.5m RC rods are custom made and the sample is collected in a purpose-built rotary cone splitter (see Figure 4). The hole diameter yields a 650% increase in sample size from traditional NQ2 sized core.

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Figure 3- Underground RC drill rig in use

Figure 4- Purpose built underground RC rotary splitter

To date, eight underground drill-holes have been completed with no sample dilution and no sample loss as the system can be fully flushed between samples. A maximum drill depth of 174m has been achieved and a maximum drill rate of 109m in a 10-hour shift. Estimated drill costs are half that of a diamond hole of the same length, and the drill rates are much faster. In addition, the 140mm hole is of adequate size to alleviate statistical variation seen in sample results from traditional NQ2 core (50mm diameter), meaning that less holes will be required to test mineralisation with higher confidence in the results.

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WINDARRA NICKEL PROJECT

The Mt Windarra underground mine and its associated infrastructure remained on care and maintenance.

The Company is expecting to commence RC drilling at the Crazy Diamond prospect, located 2km North of the Cerberus Deposit discovered in 2008, during the December quarter. A drilling campaign by Poseidon in 2011 aimed at the prospective base of the Windarra Ultramafic also discovered additional mineralisation between the top of the Windarra Ultramafic and the base of the Upper Ultramafic. The shallow RC drilling will follow up soil anomalies located along this trend (see Figure 5).

Figure 5- Location of the Crazy Diamond Prospect showing soil anomalies along the base of the Upper Ultramafic

The process of the termination of the Poseidon Nickel Agreement Act progressed and is expected to provide clarity to the Company's revised obligations and opportunities. The Department of Jobs, Tourism, Science and Innovation (DJTSI) is still in the process of finalising the termination documents for consideration.

LAKE JOHNSTON OPERATIONS

Lake Johnston Operations remain on care and maintenance. A geochemical exploration campaign was completed during the quarter to the south of Maggie Hays and results are expected in the December quarter.