Heron picks up historic mine Kristie Batten -- MINING NEWS...

Heron picks up historic mine

Kristie Batten -- MINING NEWS --
Friday, 14 August 2009

NICKEL developer Heron Resources has secured an option to acquire the historic A1 gold mine in the Woods Point district of eastern Victoria.

The mine was discovered in 1861 and produced around 450,000 ounces of gold from 530,436 tonnes of ore until 1992.

Historic mining was all hand-held and focused on high-grade reefs. Heron says the average grade from records appears to be around 30 grams per tonne gold.

The company says there has been insufficient modern drilling to establish a JORC-compliant resource but it believes there is good resource potential.

Heron will pay $A760,000 for the two-year option and will pay $240,000 and issue 20 million fully paid ordinary Heron shares to exercise the option.

During the option period, Heron will drive an exploration decline to the 10 level, where it will carry out drilling, bulk sampling and mapping with the aim of establishing a mineral resource estimate.

A feasibility study will then be completed, evaluating gravity concentration options which have low capital and operating costs and minimal environmental impact.

Heron is expecting the cost of the evaluation program, including development of the decline to the 14 level, and the feasibility study to be $18 million, which will be funded from existing cash reserves.

A statutory work plan for the evaluation has been submitted to the Victorian Department of Primary Industries, with work expected to begin in October.

The company said a best-case scenario would see it pouring gold from the mine 30 months from today.

Heron’s strategy is to secure early cash flow to fund the development of its Yerilla and Kalgoorlie nickel projects.

Heron managing director Mathew Longworth told MiningNews.net that the acquisition was in addition to nickel.

“I think we’ve been forecasting that we’ve been looking for opportunities for near-term cash production for over 18 months now and this is sort of the first step in that direction,” he said.

“The real logic in that strategy is to enable the company to continue developing our nickel operations with the cash flow from another commodity, such as this one from gold, so that we’re able to continue to operate without having to raise funds through the sale of share capital.”

Longworth said it was too early to say how much gold A1 would be able to produce.

“We’re hoping for somewhere around 25,000-30,000 ounces per annum and with a focus on trying to maximise the margin on those ounces, rather than go for a large number of ounces with low margin, so we’re really looking for high-margin ounces,” he said.

Meanwhile, the company will continue to advance its two nickel projects after recently signing an agreement with Ningbo Shanshan Co over the Yerilla project.

“With Yerilla, we’ve got Chinese partners working on that with us and we’re working closely with them on moving that one forward,” Longworth said.

“We’re in the process of looking at alternative partners for the KNP.”

Original joint venture partner Vale Inco pulled out of the KNP in May.

“Both of those other projects will always be with partners, whereas this project [A1] will be a 100 per cent Heron project,” Longworth said.

Heron shares remain untraded at 19.5c this morning.