inco to boost heron to no2 in nickel

http://www.theaustralian.news.com.au/common/story_page/0,5744,12695064%255E643,00.html

Inco to boost Heron to No2 in nickel
Robin Bromby
March 30, 2005

JUNIOR miner Heron Resources is poised to become, in one giant leap, the country's No2 nickel producer.

Canadian giant Inco has thrown its experience and deep pockets behind Heron's 903 million tonne laterite nickel holdings around Kalgoorlie in Western Australia. They will cost $1.4 billion to bring to full production.

Heron and Inco will be looking at producing 50,000 tonnes a year, making Heron second to WMC Resources in nickel and three times bigger than the next ranked local player.

Investors seem at last to have put behind them misgivings about laterite nickel -- the ore type that proved too great a challenge for Preston Resources and Joseph Gutnick's Centaur Exploration, and ended Andrew Forrest's days at Anaconda Nickel -- and sent Heron stock roaring 13.5c higher to 42c.

Heron managing director Ian Buchhorn said Inco's feasibility team had completed its work at the huge Goro laterite project in New Caledonia and would now apply their technical solutions to the Kalgoorlie deposits.

It has been a long road for Mr Buchhorn, who since 2000 has kept Heron focused on laterite nickel despite its unpopularity with investors. He admitted last year that he had come under shareholder pressure over the previous four years to switch into dotcoms, tantalum or gold -- anything but laterite nickel.

But his focus was kept because of the looming shortfall in nickel supplies.

"Nickel demand is such that the world needs to find a new Kalgoorlie nickel project every year," he said yesterday.

Inco has agreed to finance a $US18 million ($23.4 million) feasibility study and a $US50 million bankable feasibility study on top of 95.5 per cent of all equity financing for development, as well as arranging all debt financing. In return, the Canadians will get a 60per cent stake and the right to buy all the nickel produced.

The Kalgoorlie project has an estimated 903 million tonnes at 0.74 per cent nickel and 0.05 per cent cobalt. No date has been set for production start-up.

Laterite nickel seems to be on the comeback trail because the more easily produced sulphide nickel cannot satisfy world demand. This is why BHP is moving to develop the Ravensthorpe laterite project in Western Australia and why Inco is about to move into the development phase at Goro.