heron starts talks for $1.5 billion nickel

Heron Starts Initial Talks for $1.5 Billion Nickel Mine Partner

By Jesse Riseborough

Nov. 4 (Bloomberg) -- Heron Resources Ltd., planning to build a $1.5 billion nickel mine in Australia, has held initial talks with groups in China, Japan and South Korea as well as global mining companies to help fund development.

¡°Initial contact and discussions have been fairly positive,¡± Managing Director Mathew Longworth said today in an interview in Melbourne. Heron is seeking to agree terms with a new partner within 6 to 12 months, he said.

Heron, 15.6 percent owned by BHP Billiton Ltd., last month said it had hired China-based Satori Investments and KPMG to find an investment partner for its Kalgoorlie nickel project after Brazil¡¯s Vale SA withdrew in May. The company aims to open a so-called data room soon, Longworth said.

Heron declined 1.8 percent to 27.5 cents at the 4:10 p.m. Sydney time close on the Australian stock exchange. The stock has gained 77 percent this year.

The project, in Western Australia state, has a resource of about 1 billion metric tons of nickel and a 30 year lifespan, according to the company. It estimates production at as much as 36,000 tons of nickel a year. The price of nickel for three month delivery on the London Metal Exchange has jumped 55 percent this year as demand from steelmakers rebounds.

BHP closed its $2.2 billion Ravensthorpe nickel operation this year and Bank of America Corp.-Merrill Lynch & Co. is helping the company study options for the mine. China Metallurgical Group and Minara Resources Ltd. are seeking to buy the mine, the Australian Financial Review reported Nov. 2.

¡°We are watching Ravensthorpe with interest,¡± Longworth said. Groups involved in any potential bidding process for the mine may also be interested in Heron¡¯s project, he said. ¡°If someone comes into Ravensthorpe and makes it work, it can only be positive for the sector.¡±

The company is ¡°not against¡± the possibility of selling new shares to a new partner, he said. Vale, the world¡¯s largest iron ore exporter, owns 13.5 percent.

To contact the reporters on this story: Jesse Riseborough in Melbourne at [email protected]

Last Updated: November 4, 2009 01:34 EST