re: article--calculations This item is not clear perhaps:"Gerick...

re: article--calculations This item is not clear perhaps:

"Gerick said Sherlock could produce a nickel cobalt hydroxide containing 30% nickel at about $US3500 per tonne. The ability of the product to feed directly into a refinery is also expected to allow Sherlock to seek a premium price on its product".

That really means that to get 100% of nickel, it would cost $US 11666 per tonne or $US5.30/lb.

They will also produce some 1600 tonnes of copper and 200 tonnes of cobalt. That could amount to $US7-8 mill extra but I don't know if these credits have been used to offset the $US 5.30/lb cost.
They were going to produce 8000 tonnes of nickel, so the extras would be about $US1000 per tonne which will reduce the risk somewhat.

There is the currency risk as well.

Add to that some loss at the refinery, sea transport and refinery cost and it becomes a hazardous operation in my opinion.

The cost of $US5.30/lb would include the interest cost I presume. They want to raise 75 mill conv notes with a total value of $15 mill with an interest rate of 12%.

That is an interest payment of $1.8 mill/year which carries on regardless of the nickel price falling to a level below cost.

So, the debenture holder may need to be careful as well.

I do think that Conv. notes or debentures could be used on the GIP project which IMHO carries less risk.

Because SHN will be producing over say 10 years, it is possible that a long period may see nickel at say $US5000/tonne which is well below cost.

There are additional costs, eg Administration.

The latest situation is:
Shares 370 mill.
Conv notes: 75 mill

4.3 mill options, not listed.

15 mill options 30 Sept 2006, 4.5 cents.

_______________________________________

I may need to contact SHN for some elucidation.

I could be wrong in my assumption.

Gerry