12/09/2008 - 10:30

Heron nickel project to cost $1.2bn

12/09/2008 - 10:30

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A scoping study into Perth-based Heron Resources Ltd's Yerilla operation, which includes the Jump-up Dam project, has estimated a capital cost of $1.2 billion with a payback period of six-and-a-half years.

A scoping study into Perth-based Heron Resources Ltd's Yerilla operation, which includes the Jump-up Dam project, has estimated a capital cost of $1.2 billion with a payback period of six-and-a-half years.

The study calculated that over an 18 year mine life, the operation, which also includes the Boyce Creek and Aubils projects, will produce 21,000 tonnes of nickel and 1400t of cobalt each year.

The study was based on a resource of 135.3 million tonnes of ore grading at 0.77 per cent of nickel and 0.05 per cent of cobalt.

Cash operating costs have been estimated at $US5.70 per pound of payable nickel.

The study used an average nickel price of $US9.lb and an Australian to US dollar exchange rate of US75cents.

The Yerilla project will use atmospheric leach technology, a quicker process used to extract nickel compared to the heap leach technology which Heron was previously looking into for its Jump-up Dam project.

Escalating capital costs and market volatility forced Heron to place its heap leach demonstration plant on care and maintenance earlier this year.

Heron is using BHP Billiton's patented atmospheric leach technology through a technology share agreement.

 

Below is the full announcement:

 

Heron Resources Limited (ASX:HRR Heron) is pleased to announce positive results from the Scoping Study for its Yerilla Project located some 150 km north-east of Kalgoorlie in Western Australia. Heron has been able to deliver on its commitment to complete this Scoping Study on time and within budget because of the quality of the project assets and Heron's in-house project team.

Using Atmospheric Leaching Technology process, the study has identified an 18 year mine life with annual production of 21,000 tonnes of nickel in mixed sulphide intermediate product and a further 1,400 tonnes of cobalt sourced from 2.5 Mt of leach feed grading 1.06% Ni and 0.07% Co.

The study was based on a combined resource of some 135.3 Mt at 0.77% Ni and 0.05% Co (details provided in Table 1) with a cash operating cost estimate of US$5.70 per pound of payable nickel net of credits.

Capital cost of the project is estimated at A$1.2 billion payback is estimated to be 6.5 years.

Financial modelling for sensitivity analyses assumed a pre-tax 8% discount rate, US$9.00/lb average nickel price and 0.75 A$:US$ exchange rate. The study uses a long term sulphur price, based on expert studies by British Sulphur Consultants a division of international market forecasting consultancy CRU.

Heron Managing Director, Mathew Longworth, said the level of detail contained in the scoping study was similar to the requirements of a pre-feasibility study, with some of the test-work conducted at BHP Billiton's testing facilities. Heron is fortunate to have had the support of BHP Billiton in undertaking this study through the use of its Technology Centre and contributions from BHP Billiton's technical experts through our technology sharing agreement.

He said "the study has provided Heron with confidence to proceed with more detailed test-work to further calculate the project's financial dynamics."

Mr Longworth also said "Heron will now review the results of the study and determine the optimum development options for the Yerilla Project. As previously advised this will likely include the desire to identify an equity partner for the project given its large capital requirement. Further studies will be undertaken to investigate opportunities for further improvements in important aspects of the project, including resource beneficiation, leaching performance, and water quality."

The application of the BHP Billiton patented atmospheric leach technology to the expanded 135.3 Mt resource base which incorporates the Jump-up Dam, Boyce Creek and Aubils projects, has significantly improved the project's financial integrity in comparison to the stand - alone Jump-up Dam Heap Leach Project pre-feasibility study which Heron completed in January this year. Heron has access to the atmospheric leach technology through the Technology Sharing and Product supply agreement executed with BHP Billiton in January 2008.

This expanded resource base and change to atmospheric leaching technology has allowed an increase in the production rate and the application of beneficiation to increase leach feed grade. It has also significantly reduced the production rampup period and the amount of nickel inventory in circuit. The atmospheric leach technology also eliminates the project risks associated with laterite heap leaching, while facilitating treatment of a larger range of ore types.

The Yerilla Project involves mining 3.2 Mt of ore per annum from shallow open pits located at Jump-up Dam, Boyce Creek and Aubils. A proportion of the ore is beneficiated through simple scrubbing, attritioning and size separation to produce 2.5 Mt per annum of upgraded leach feed material. The ore is classified into high and low iron streams which feed the primary and secondary leach circuits respectively. Leaching takes place in conventional agitated leach tanks with sulphuric acid at normal atmospheric pressure. The sulphuric acid is produced on site in a sulphur burning acid plant, which also provides all the project's power requirements via steam turbine generators. The nickel intermediate product is recovered from the leach solution after neutralisation and precipitation.

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