The Mt Windarra decline.
The Mt Windarra decline.

UPDATE 1.15pm: Poseidon Nickel has announced a $3.8 million capital raising as it works towards bringing the historic Mt Windarra project back into production.

Poseidon will use the $3.8 million raised in the placement, priced at seven cents a share, to update its current resource and reserve model at Mt Windarra to fully reflect recent drilling.

In addition, Poseidon will update its capital and operating studies, the company said.

Poseidon said it believed it could cost less that $15 million to re-start mining at Mt Windarra because of investments made to date.

The company expects to re-start mining before the end of the calendar year.

Poseidon also said negotiations for an offtake agreement for its nickel ore were continuing.

Earlier this month, WestBusiness reported Poseidon was close to striking a deal with BHP Billiton's Nickel West to treat Mt Windarra ore at the mining giant's Leinster processing plant, allowing the company to avoid the high cost of a building a processing plant.

"Poseidon Nickel believes that it is in a position to capitalise on what many institutions believe will be a strong market for nickel in the short and medium term," the company said.

"The recently announced Indonesian nickel ore export ban has the potential to disrupt supplies of approximately 20 per cent of the world's nickel ore.

"If the export ban is maintained, structural nickel supply shortages predicted for 2016 could occur much earlier."

The company also announced this morning it was eyeing a potential parallel gold mining operation at Mt Windarra.

Poseidon said a standalone gold mining operation could last up to six years and yield more than 50,000 ounces.

It estimated the cost of a gold processing plant at less than $10 million and said it could operate at costs less than $800 an ounce.

Poseidon also announced non-executive director Christopher Indermaur would replace Bud Scruggs as chairman and that former Poseidon chief operating officer Robert Dennis would join the board as a non-executive director.

Shares in the company closed off 1.5 cents, or 14.29 per cent, at nine cents after returning to the boards this morning following a month-long suspension.

The West Australian

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