Kalgoorlie Nickel Project a rare combination of size, amenability to - - PowerPoint PPT Presentation

Kalgoorlie Nickel Project

“a rare combination of size, amenability to pressure acid leaching, political security, and environmental stability”

Why nickel laterites are back in fashion! A Presentation To the Sydney Mining Club

March 2006

Mathew Longworth Chief Operating Officer, Executive Director Heron Resources Limited

ASX: HRR

Disclaimer Forward Looking Statement

The material used in this presentation is intended to be a summary of selected geological data, current and proposed activities, as well as resource estimates based on information available to Heron Resources at the time. It does not include all available information and should not be used in isolation as a basis to invest in Heron Resources. Any potential investor should refer to Heron Resources’ ASX releases and statutory reports before considering investing in the company. This presentation includes information relating to a completed independent scoping study, completed independent resource estimate and a feasibility study which is in progress and includes “forward looking statements” which include, without limitation, estimates of potential nickel in concentrate production based on mineral resources that are currently being evaluated. While the Company has a reasonable basis on which to express these estimates, any forward looking statement is subject to risk. Risks include, without limitation: nickel metal prices, foreign exchange rate movements, failure to meet joint venture milestones, project funding capacity, concentrate off-take contracts and estimates of future capital and operating costs. The Company does not undertake to release publicly any revisions to forward looking statements included in this presentation to reflect events or results after the date of this presentation, except as may be required under applicable securities laws.

Overview of Presentation Why Laterites Company Profile

Track Record and Nickel Focus

Kalgoorlie Nickel Project

the right Partner the right Project the right Location

Sulphide Nickel Project Nickel and Corporate Strategy

Company Profile – Corporate

Listed ASX August 1996

Focus on acquisition and exploration Aim to develop a long life nickel mine

Capital Structure

165m shares at A$0.48, mkt cap A$79m A$11 million cash at bank, debt free

Significant Shareholders

Directors and associates 25.5% Inco Limited 9.9% BHP Billiton 9.6%

Track Record of Value Creation A dollar invested In Heron on listing is worth $1.80 In addition there have been two in specie distributions

Avoca in 2002 equal to 0.56 cents Pioneer 2003 equal to 0.07 cents

Today’s value of a dollar invested in Heron on listing $2.43

Laterites never went out of fashion

If you are serious about nickel you are serious about nickel laterites Each of Inco, BHPB, Falconbridge and Rio Tinto have assessed every laterite on the

• planet. WHY?

– Demand – Supply – Technology

Inco and BHPB have converged on the KNP

Demand is Driven by China

• “While global primary nickel demand for the 2004-08 period is forecast to

increase at a moderate compound average growth rate of 3.5%, almost all

• f this is coming out of China.” source Alan Heap Citigroup “Outlook for supply and &

demand- the China factor” AJM Conference, Sydney 8- 9 September 2005.

“Growth in sulphide ore sources will be insufficient to meet demand”

WA Production Year on Year Source GSWA 2005

Laterite Sulphide

1998 1999 2000 2001 2002 2003 2004

40 80 120 160 200

DJF237 13.12.05

“Growth in sulphide ore sources will be insufficient to meet demand” WA Resources and Reserves

Laterite Sulphide

DJF239 13.12.05

1996 1997 1998 1999 2000 2001 2002 2003 2004

5,000 10,000 15,000 20,000 25,000 30,000 35,000

Dominance of the laterites

1000 2000 3000 4000 5000 6000 7000 8000 1 2 3 4 5 Ranked on Contained Nickel (kt) Contained Nickel (kt)

Sulphides Laterites

Mt Margaret/Murrin KNP Ravensthorpe Weld Range Wingellina Mt Keith Leinster Yakabindie Honeymoon Well Cosmos

KNP Location

Located North and East of Kalgoorlie Centred around a centralised processing plant Total resource base of 903mt at 0.74% Ni and 0.04% Co

Inco – the Right Partner for KNP

Inco selected following global search A premier integrated nickel producer

Market Capitalisation US$8 billion Estimated net cash US$1.8 billion 200,000tpa nickel, second largest producer Proposed merger Falconbridge, No 1

World leader in nickel laterite projects

PT Inco – 60,000tpa Ni production Goro – planned 60,000tpa Ni production

Inco Farm-in & JV Attractive Terms

Subject to meeting technical milestones, Inco sole funds Feasibility Study

Pre-Feasibility, minimum US$18m Full Feasibility, minimum US$50m

Inco earn 60% oncompletion of Feasibility and securing project funding

Inco procures all project debt funding Heron equity fund cap 4.5% of total equity Inco lends Heron its remaining equity funds

Inco JV – Funding Mechanisms Assumptions

• $1.4 billion

$1.4 billion project construction cost Debt : equity = 70 : 30, $980m Debt, $420m Equity

Debt project finance procured by Inco Equity finance

KNP JV 60:40, Inco $252m, Heron $168m Heron capped at 4.5% of equity, $19m $19m Inco lends Heron $149m, repay cashflow

Inco Farm-in -Timing Milestones

Step 1, confirm 120mt at 1.5% Ni

Diamond drilling, screening studies Completion deadline July 2006

Step 2, flow sheet selection

Batch metallurgy and mini-pilot, Sep 2007

Step 3, resource and engineering

Resource drill out, plant design, Jan 2009

Feasibility Study

Bankable, completion deadline July 2011

Inco Farm-in - Step 1 & 2 Metallurgy

Run-of-mine siliceous ore

Consisting of yellow-brown limonite and coarse silica 0.8% Ni

Scrubbed slurry into pilot plant trommel screen deck Screened rejects

Silica fragments 60% Reject grade 0.3% Ni

Screened slurry

Limonite 40% Leach feed grade 1.5% Ni

Screen Upgrade

Inco Farm-in – Step 3 Resource Definition lots of Work for Inco

6658500 mN 6657000 mN

SIBERIA NORTH PROJECT RECENT DRILLING MAX LEACH FEED GRADE NICKEL (%) 75 MICRON SCREENED

Max Ni (%)

1.5 to 10,000 1 to 1.5 0.75 to 1 0.5 to 0.75 0.25 to 0.5 to 0.25

West Mineralised Zone East Mineralised Zone

Weighted average leach feed grades shown using a 1.0% Ni cutoff

500 1000 Metres

Cross Section

1.86% Ni (Avg) 1.61% Ni (Avg) 1.45% Ni (Avg) 1.2% Ni (Avg) 1.57% Ni (Avg)

Weighted average leach feed grades Shown using a 1.0% Ni cutoff

KNP – Nickel Screen Upgrade

321200mE

12m @ 0.57% Ni 8m @ 0.96% Ni 24m @ 1.00% Ni 8m @ 2.21% Ni

321600mE 400RL

4m @ 1.13% Ni 18m @ 0.75% Ni 4m @ 1.02% Ni

321400mE 321800mE

6m @ 0.67% Ni

321000mE

GOOGARRIE HILL PROJECT Section 6678320N

Nickel Head Grade

Note x 4 vertical exaggeration

24m @ 1.00% Ni

24 metres at 1.00% Nickel grade without screening

nontronite ore, no upgrade

KNP – Nickel Screen Upgrade

321200mE

12m @ 0.57% Ni 1.05% Ni LFG 8m @ 0.96% Ni 1.65% Ni LFG 24m @ 1.00% Ni 1.72% Ni LFG 8m @ 2.21% Ni 1.22% Ni LFG

321600mE 400RL

4m @ 1.13% Ni 1.19% Ni LFG 18m @ 0.75% Ni 1.68% Ni LFG 4m @ 1.02% Ni 2.09% Ni LFG

321400mE 321800mE

6m @ 0.67% Ni 0.95% Ni LFG

321000mE

GOOGARRIE HILL PROJECT Section 6678320N

Nickel Screen Upgrade

Note x 4 vertical exaggeration

24m @ 1.72% Ni LFG

24 metres at 1.72% Nickel Leach feed grade after screening at 0.075mm, based on bottle roll testwork

nontronite ore, no upgrade

KNP – the Right Project

Among largest undeveloped Ni projects

Heron’s vast nickel footprint is unique Focus on Goongarrie-Siberia siliceous ore 455mt at 0.7% Ni and 0.05% Co Screen beneficiation 1.5% Ni leach feed Target 120mt leach feed, >4mtpa for 25 yrs

Limonite ore, premium metallurgy

Pressure Acid Leach (PAL) processing PAL proven at Moa Bay and Cawse

KNP – the Right Project

MINARA BHP BILLITON

Heron’s substantial tenement holdings underpin resource base Mainly 100% owned and unencumbered Historically under- explored Inco’s funding means this will change

HERON

Ravensthorpe

Kalpini Bulong Goongarrie

KALGOORLIE

Murrin Murrin

ESPERANCE LEONORA

The Right Location

Infrastructure

KALGOORLIE ESPERANCE KWINANA

Rail Gas Road Ports

Esperance Kalgoorlie

Leonora Laverton

Murrin Murrin Refinery

Kalpini Bulong Goongarrie

Milestone Driven Growth

20 40 60 80 100 120 140 160

01-Dec-03 01-Mar-04 01-Jun-04 01-Sep-04 01-Dec-04 01-Mar-05 01-Jun-05 01-Sep-05 01-Dec-05

Date Market Cap M AUD

Scoping study and resources Inco JV, Placement BHPB on Register Execution of formal agreement

What laterites can deliver

Proposed Sulphide Nickel Project

Explore Heron’s ultramafic holding Heron will control initial exploration Proposed that Inco will:

Fund 100% of costs on defined projects Keep KNP land holding in good standing

GHOST ROCKS 40 80 WINDARRA Laverton MURRIN MURRIN Leonora CARR BOYD CAWSE

Kalgoorlie

CARNILYA HILL KAMBALDA NEPEAN WIDGIEMOOLTHA GIBRALTAR HIGHWAY EMU LAKE SNAKE HILL LAKE REBECCA PINNACLES SOUTH YINDARLGOODA ROE HILLS SOUTH MINERAL PATCH WILDARA NORTH BARDOC ACRA NORTH

Goongarrie Bulong Kalpini

Heron tenements Nickel mines Yilgarn ultramafics

EMU LAKE

Heron Ni-Sulphide Prospect Sulphide Laterite

Sulphide Nickel Project Tenements and Nickel Sulphide Targets

Nickel and Corporate Strategy

Heron investment offers a unique mix of

Milestone driven upside, associated with development

• f world class nickel project

Ability to invest alongside major nickel players Inco & BHPB Exposure to strong long term nickel market Sulphide Nickel blue sky

Fully funded path towards 40% interest in long-life 50,000 tpa Ni operation

Strong shareholder returns Strong shareholder returns

fundamentals, & long-term near-term

Mathew Longworth

Chief Operating Officer and Executive Director Phone: +61 8 9091 9253 Email: mlongworth@heronresources.com.au

ASX: HRR