update

Heron Resources (Hold HRR)
We had the opportunity to meet with the company’s Managing Director, Matthew Longworth, in Sydney this week. The company has received a very positive outcome from the results of the Scoping Study recently completed on its 100%-owned Yerilla Project, which lies 150km northeast of Kalgoorlie. Using atmospheric-leaching technology, the study has identified an 18-year mine life with annual production of 21,000 tonnes of nickel and 1,400 tonnes of cobalt, sourced from 2.5 million tonnes of leach-feed grading 1.06% Ni and 0.07% Co.

The capital cost of the project is estimated at A$1.2 billion and pay-back is estimated at 6.5 years. Heron will now review the results of the study and determine the optimum development options for the project. Obviously, given the huge capital cost, this will include the desire to identify an equity partner for the project.



The use of BHP’s atmospheric-leach technology has significantly improved the project robustness in comparison to the previous Pre-feasibility Study released in January 2008 that was based on the use of heap-leaching technology. In fact, Heron has been blessed to have had the support of BHP with the use of its Technology Centre and contributions from its technical experts through a mutual technology-sharing arrangement.

Heron currently boasted a strong cash position of around $37 million at the end of the June quarter, so it is well placed to fund ongoing work at Yerilla.

Heron Resources is in the envious position of having two of the world’s largest diversified resource houses on its share register, providing dynamic tension. These major shareholders are BHP Billiton and Brazil’s Vale, which each maintain respective stakes of 15.6% and 13.46% in Heron.

Heron’s primary project is the Kalgoorlie Nickel Project (KNP) in joint venture with Vale (HRR 40%, Vale 60%), a project that has enormous medium to longer-term upside. The project hosts a potentially world-class nickel laterite development, situated in the heart of the Kalgoorlie Goldfields district.

With all of this ongoing activity and a strong cash balance, Heron Resources will continue to remain firmly held within the Fat Prophets Mining & Resources Portfolio. We will be reviewing the company as a possible ‘Traffic Light’ candidate.