bfs?, page-2

to tastarga...some balance re: herald resources
It would appear you sat through the presentation with negative
perceptions of Dairi to start with even though you have commended both Terry Allen and Michael Wright in past posts. I should make it clear I have an interest in Herald Resources that has been purchased through Tony Locantro.(You have also made comments on Tony in past emails). I am not doubting your knowledge or integrity, however the esteem that you appear to be held in on Hotcopper could cause some undue damage in relation to Herald Resources. Some of your points I have had covered and feel this is required to present a balanced view of the company:

"Terry Allen let a couple of things out of the bag at Diggers n Dealers. Add US$15million to build a pipeline for the concentrate slurry from his Indonesian zinc project to the coast/build port facilities."

The pipeline has been identified as an option to generate cost savings for $25m to $30m over the mine life. The benefits will really start to kick in after 6.5 years. In past presentations Herald have stated that it is possible they could be mining at Dairi for many years to come. In terms of threats, the bulk of the pipeline will be away from major towns and poses very little threats in terms of sabotage etc.

"That takes the project to around US$100m -this is going to be fun to finance!!!"

Other companies have done it OXR, LAF. Once you are producing at such a high-grade you develop a strong interest from smelters. It should be noted that Macquarie Bank are funding HER’s Meluak Project in Aceh through Corona Gold where they have already taken a placement at a hefty premium to shareholders of Herald and may yet fund a raising up to $10m. They have already taken small placements/credit facilities in Herald to assist with Dairi. Yes finance is always a hurdle but hurdles provide the basis for re-ratings (if you have followed KCN, JBM and even DRE in earlier times you will see HER’s behaviour has been no different). HER have always stated they could easily sell Dairi and based on this I do not see any major issues with finance.

"In discussions with the various ‘experts’ on hand , there is a very high probability that this ore body will kill someone once it gets going. The ore body dips at 45 degrees and the hanging wall (roof) unfortunately comprises loose black shales-they collapse too easily. Bit of a shame given the terrific grades/metallurgy.
Looks too difficult."

Obviously a flat or vertical ore body at Dairi would be easier, but like Three Mile Hill, an oblique one will just cost a bit more to mine - that’s what the 24% Zn eq grade pays for. Rock-bolting and remote boggers should assist in this regard, not to mention the use of pasting/backfilling. Combine that with a different, safer form of mining especially for the hanging wall and the fact that they DON'T intend to go near the hanging wall zone at all where any doubt exists about its competence. To that end they have excluded significant hanging wall resources from the quoted reserve figures, which means that Herald actually have tonnage UPSIDE if they decide they can actually mine them once they are down there.

Furthermore, I think it should be remembered that IGO was plagued with similar perceptions of ore body problems during the start-up stages of their Long Nickel Mine, but as one can see now (as illustrated by the success of the mine, and more obviously, IGO's share price), these types of problems are very solvable.

I appreciate your post and comments on HER, and I trust my reply offers some balance to the discussion.