Heron targeting bigger KNP Kristie Batten -- MINING NEWS STORY...

Heron targeting bigger KNP

Kristie Batten -- MINING NEWS STORY --
Tuesday, 16 February 2010

HERON Resources has completed a review of the Kalgoorlie nickel project prefeasibility study completed by former joint venture partner Vale Inco last year, resulting in a larger project and lower operating costs.

The Vale PFS completed in January last year was based on a 2.5 million tonne per annum production rate to produce 22,200tpa nickel.

In its review, Heron also examined 3.75Mtpa and 5Mtpa production scenarios.

Pre-production capital costs were estimated at $A2.1 billion in the original PFS, while capex was scaled up to $2.8 billion and $3.4 billion for 3.75Mtpa and 5Mtpa respectively.

Heron said the 3.75Mtpa leach feed scale was preferred as it provided the best project performance.

Under that scenario, the project would produce 36,700tpa of nickel over a mine life of 35 years.

Operating costs are estimated at $US4.17 per pound of nickel, down from $4.54/lb in Vales PFS.

Heron incorporated new resource estimates, further metallurgical and mining studies into the review.

The previous resource estimates for the Highway, Goongarrie Hill, Goongarrie South, Siberia North and Big Four deposits were based on in situ geological resources, while the updated estimates were generated using an approach that accounts for recoverable resources.

Only five of the 14 resource areas were included in the review to allow direct comparison with the original Vale study.

The KNP has resources totalling 959Mt grading 0.74% nickel and 0.04% cobalt.

Construction of the project would take around three years with a further three-year ramp-up period to full production.

Heron said costs would be analysed more thoroughly in a full feasibility study.

Meanwhile, the search for a new JV partner continues and the company will commit to advancing the project further once a partner is found.

KPMG in Perth and Satori Investments in Shanghai were appointed last year to help with the search, and a number of interested parties have signed confidentiality agreements to access a data room that has been created.

Shares in Heron gained half a cent today to A27.5c.