Herald attracts smelter interest on Indonesian zinc, lead mine

West Perth-based Herald Resources Ltd has attracted a high level of interest for offtake agreements for its Indonesian zinc and lead mine in Indonesia, executive director Michael Wright told the Paydirt Asia Pacific DownUnder Conference today.

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Emerging Australian base metal producer, Herald Resources Ltd, says it is attracting a high level of interest and demand from smelters around the globe for offtake agreements on the Company's imminent zinc and lead mine in Indonesia.

Addressing the second day in Perth today of the 2007 Paydirt Asia Pacific DownUnder Conference, Herald's Executive Director, Mr Michael Wright, said the smelter interest was strong, given the quality and the quantity of the concentrates, albeit from a modest mining operation, planned for the Company's 80%-owned, high grade Dairi project in North Sumatra.

The mine is due to commence maiden production approximately 12-18 months from final forestry permitting.

"The zinc price has plateaued at a high level, stockpiles have been used up, and with the China India steel story driving demand, demand has stayed high," Mr Wright said.

"This demand spike is directly fuelling the push by smelters for an early Dairi offtake deal with Herald, particularly as testwork suggests a very clean concentrate low in impurities and iron content," he said.

"The smelters' position has been exacerbated as there are few new zinc mines in the world coming on stream in recent years due to a decade of underinvestment in exploration and development.

"The current lead concentrate market is also extremely tight with stockpiles at record low levels," Mr Wright said, "so that augurs well for our future revenues and sale agreements.

"We believe the metal price outlook will remain good for some time and while Dairi's high grade, seven year reserves will make it highly profitable, this is just the start of the Dairi story as its exploration potential can provide for hopefully a 10-20 year mine life."

Zinc is used mainly in galvanising, as well as in alloys, brass, bronze and chemicals while lead's application is dominated by its end usage in batteries.

Dairi will be Indonesia's first major zinc and lead mine and at current prices is expected to generate US$150 million a year cash flow on what Mr Wright says "will be a very profitable operation".

Road and off-site works are proceeding ahead of final forestry approvals.

Dairi has 6.6 million tonnes of reserves grading 14.6% zinc and 8.8% Pb.

It will commence production at a rate of one million tonnes per annum (tpa) predicated on the Anjing Hitam ore body only, with significant further extensional and exploration drilling planned at other prospects such as Lae Jehe.

Forecast annual production of 320,000 tonnes of concentrate comprises 220,000 tonnes of zinc and 100,000 tonnes of lead, containing a total of 175,000 tonnes of zinc and lead metal.