deal looks good

I had a half hour conversation with Ian Buchorn yesterday about the Inco JV agreement. He’s a very nice guy. He was expecting a flood of calls about the signing delay, but believe it or not, my phone call was the first he had had about it! So he was “rapt”, in his words, to be able to speak to someone about it.

I have Ian’s permission to reproduce the key elements of the conversation, as what he said is in the public domain, but I think it may help in clarifying number of issues for HRR holders – make of it what you will. It is intended as general background information about the company’s joint venture with Inco, and not investment advice. I expressly recommend that no one invests in HRR on the basis of this post alone, and that you do your own research and/or consult professional investment advisors.

HEADLINE
I asked Ian on a scale of 1-100 what he thinks the chances of the JV agreement being signed. It is very close to a certainty that the Inco-Heron JV laterite agreement will be signed. Inco wanted to sign the agreement on June 1, but Ian wanted to go over the details to fully satisfy himself. The very large number of tenements that Heron has is a key reason for the delay. It’s likely only a very left of centre event such as a Native Title claim etc. will stop it, and further down the track there is also FIRB approval. We can expect a signing any time, but most likely between June 10 and June 14, when the key Inco guy is back in Australia, although it could possibly be done via e-mail.

Furthermore, in a previous post I raised as a possibility for delay, that Inco may require further work to validate the size of the resource. This is a non-issue. There is full agreement between Heron and Inco about the size and quality of the Heron laterite resource.

OTHER DEVELOPMENTS
In addition to the laterite agreement, Ian is also very excited about a forthcoming sulphide JV agreement with Inco, which he thinks is potentially be even bigger than the announced laterite agreement. (Close followers of Heron will know this was foreshadowed in the March Quarter Activities Report.) The sulphide announcement is likely to be coming very soon, and may even precede the laterite announcement, as the laterite agreement will form the template for the sulphide agreement.

Re: the Inco alliance, Ian is extremely happy with the way things have progressed to this point. I asked Ian about Inco talking to other nickel players in Australia, and he said it can be regarded as separate issue to Inco’s relationship to Heron. Inco regards the large Heron resource as its anchor investment in Australia. Any other deals it does outside of HRR will largely be incremental.

The current record prices for nickel are not in HRR’s framework – the KNP and other HRR nickel assets are being readied for the next nickel cycle, which is 5 years + away. HRR’s share registry remains tightly held, as we all know. Furthermore, there is no prospect of a capital raising in the foreseeable future. The potential spin offs of other Heron assets are already known to the market and these will come after the Inco deals are bedded down. Ian’s seven geologists are flat out on Inco related work at the moment.

In terms of HRR’s potential market capitalization down the track Ian suggested MRE is a good benchmark, as the resource is of similar size.

I am deliberately avoiding any subjective comment on my part. Those who have read my previous posts on other stocks will know I’m not averse to a bit of a “pump” on the odd occasion or three, to get the buggers moving my way! - although with most HC posts the collective weight is little more than a silent cry into the vortex that the market just doesn’t hear!

HRR is a speculative stock to anyone unfamiliar with it, but Ian’s comments should provide reassurance to current holders.