heron inks deal with chinese

Heron inks deal with Chinese over Yerilla

Kristie Batten --- MINING NEWS ---
Friday, 29 May 2009

NICKEL hopeful Heron Resources has signed a binding framework agreement with private Chinese company Ningbo Shanshan Co on the development of the Yerilla nickel-cobalt project near Kalgoorlie.

Under the agreement, Shanshan will undertake a feasibility study into treating ore from the Yerilla project, using its own technology to produce a nickel and cobalt concentrate for further processing in China.

If the outcome of the study is positive, Shanshan will earn a 70% interest in Yerilla by sole funding construction and commissioning of the project.

Shanshan has appointed Changsha Engineering and Research Institute of Nonferrous Metallurgy to assist with the study and the design of the operation, while Heron and Shanshan are also seeking an Australian engineering firm to work on the project.

Heron managing director Mathew Longworth told MiningNews.net the two parties had been in discussions since mid-February.

“They’d been looking at a range of companies and identified our Yerilla project as something of interest,” he said.

Shanghai-listed Shanshan is building a pilot plant at its facilities in Changsha, China, to test the compatibility of the Yerilla ore with its processing technology.

Longworth said that work on the project was very much underway.

A 40-tonne bulk sample of Yerilla ore has been sent to China for the testwork and the companies will collect data from the tests for Australian project approvals.

“It will take a little while to ramp up as they complete the pilot plant and commence the piloting runs on the samples,” he said.

However, Longworth said the involvement of Shanshan meant the project would progress more rapidly.

As part of the deal, Shanshan will take a 4.99% stake in Heron at a 20% premium to the 15-day volume weighted average price.

Heron will not require shareholder approval for the transaction as it falls within the 15% limit.

If a decision is made to proceed to construction, Shanshan will be able to subscribe for a further 5% stake, and can increase its interest by an additional 5% on completion of construction.

The agreement is subject to regulatory approvals, as well as the Shanshan board and the Chinese Commerce Department’s approval.

Shanshan is primarily a clothing manufacturer, but it is also a large producer of lithium batteries, which require nickel and cobalt.

Yerilla has a measured, indicated and inferred resource of 135.3 million tonnes grading 0.77% nickel and 0.05% cobalt.

Heron completed a scoping study last year and found the project would cost $A1.2 billion and produce 21,000 tonnes per annum nickel and 1400tpa cobalt over an 18-year mine life.

“One of the great advantages of the Yerilla project is the amount of work which has been done on environmental approvals, environmental surveys, the resource work, all the infrastructure studies – which Heron has already completed, so it does provide a very good leverage off all of that work for both Heron and Shanshan,” Longworth told MNn.

Today’s announcement is welcome news for Heron after joint venture partner Vale Inco withdrew from its $US1.5 billion ($A1.9 billion) Kalgoorlie nickel project last week.

Shares in Heron jumped 14% or A2.5c this morning to 20c on the news.