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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 LongworthChief Operating Officer, Executive Director
Heron Resources Limited
ASX: HRR
Disclaimer Forward Looking StatementThe 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 PresentationWhy LateritesCompany Profile
Track Record and Nickel FocusKalgoorlie Nickel Project
the right Partnerthe right Projectthe right Location
Sulphide Nickel ProjectNickel and Corporate Strategy
Company Profile – CorporateListed ASX August 1996
Focus on acquisition and explorationAim to develop a long life nickel mine
Capital Structure165m shares at A$0.48, mkt cap A$79mA$11 million cash at bank, debt free
Significant ShareholdersDirectors and associates 25.5%Inco Limited 9.9%BHP Billiton 9.6%
Track Record of Value CreationA dollar invested In Heron on listing is worth $1.80In addition there have been two in specie distributions
Avoca in 2002 equal to 0.56 centsPioneer 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 lateritesEach 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 of 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 20040
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 20040
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Dominance of the laterites
0
1000
2000
3000
4000
5000
6000
7000
8000
1 2 3 4 5
Ranked on Contained Nickel (kt)
Cont
aine
d Ni
ckel
(kt)
SulphidesLaterites
Mt Margaret/Murrin
KNP
Ravensthorpe Weld RangeWingellina
Mt KeithLeinster Yakabindie
Honeymoon Well Cosmos
KNP Location
Located North and East of KalgoorlieCentred around a centralised processing plantTotal resource base of 903mt at 0.74% Ni and 0.04% Co
Inco – the Right Partner for KNPInco selected following global searchA premier integrated nickel producer
Market Capitalisation US$8 billionEstimated net cash US$1.8 billion200,000tpa nickel, second largest producerProposed merger Falconbridge, No 1
World leader in nickel laterite projectsPT Inco – 60,000tpa Ni productionGoro – planned 60,000tpa Ni production
Inco Farm-in & JV Attractive TermsSubject to meeting technical milestones, Inco sole funds Feasibility Study
Pre-Feasibility, minimum US$18mFull Feasibility, minimum US$50m
Inco earn 60% on completion of Feasibility and securing project funding
Inco procures all project debt fundingHeron equity fund cap 4.5% of total equityInco lends Heron its remaining equity funds
Inco JV – Funding MechanismsAssumptions
$1.4 billion$1.4 billion project construction costDebt : equity = 70 : 30, $980m Debt, $420m Equity
Debt project finance procured by IncoEquity finance
KNP JV 60:40, Inco $252m, Heron $168mHeron capped at 4.5% of equity, $19m$19mInco lends Heron $149m, repay cashflow
Inco Farm-in -Timing Milestones Step 1, confirm 120mt at 1.5% Ni
Diamond drilling, screening studiesCompletion deadline July 2006
Step 2, flow sheet selectionBatch metallurgy and mini-pilot, Sep 2007
Step 3, resource and engineeringResource drill out, plant design, Jan 2009
Feasibility StudyBankable, completion deadline July 2011
Inco Farm-in - Step 1 & 2 Metallurgy
Run-of-mine siliceous ore
Consisting of yellow-brown limonite
and coarse silica0.8% Ni
Scrubbed slurryinto pilot plant
trommel screen deck
Screened rejectsSilica fragments 60%Reject grade 0.3% Ni
Screened slurryLimonite 40%
Leach feed grade 1.5% Ni
Screen Upgrade
Inco Farm-in – Step 3 Resource Definition lots of Work for Inco
6658500 mN
6657000 mNSIBERIA NORTH PROJECT
RECENT DRILLINGMAX LEACH FEED GRADE NICKEL (%)
75 MICRON SCREENED
Max Ni (%)
1.5 to 10,0001 to 1.50.75 to 10.5 to 0.750.25 to 0.50 to 0.25
West MineralisedZone
East MineralisedZone
Weighted average leach feed gradesshown using a 1.0% Ni cutoff
0 500 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 gradesShown using a 1.0% Ni cutoff
KNP – Nickel Screen Upgrade321200mE
12m @0.57% Ni
8m @0.96% Ni 24m @
1.00% Ni 8m @2.21% Ni
321600mE
400RL
4m @1.13% Ni18m @
0.75% Ni
4m @1.02% Ni
321400mE 321800mE
6m @0.67% Ni
321000mE
GOOGARRIE HILL PROJECTSection 6678320N
Nickel Head GradeNote x 4 vertical exaggeration
24m @1.00% Ni
24 metres at 1.00%Nickel grade withoutscreening
nontronite ore,no upgrade
KNP – Nickel Screen Upgrade321200mE
12m @0.57% Ni1.05% Ni
LFG
8m @0.96% Ni1.65% Ni
LFG
24m @1.00% Ni1.72% Ni
LFG
8m @2.21% Ni1.22% Ni
LFG
321600mE
400RL
4m @1.13% Ni1.19% Ni
LFG
18m @0.75% Ni1.68% Ni
LFG
4m @1.02% Ni2.09% Ni
LFG
321400mE 321800mE
6m @0.67% Ni0.95% Ni
LFG
321000mE
GOOGARRIE HILL PROJECTSection 6678320N
Nickel Screen UpgradeNote x 4 vertical exaggeration
24m @1.72% Ni
LFG
24 metres at 1.72%Nickel Leach feed gradeafter screening at0.075mm, based onbottle roll testwork
nontronite ore,no upgrade
KNP – the Right ProjectAmong largest undeveloped Ni projects
Heron’s vast nickel footprint is uniqueFocus on Goongarrie-Siberia siliceous ore455mt at 0.7% Ni and 0.05% CoScreen beneficiation 1.5% Ni leach feedTarget 120mt leach feed, >4mtpa for 25 yrs
Limonite ore, premium metallurgyPressure Acid Leach (PAL) processingPAL 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 unencumberedHistorically under-exploredInco’s funding means this will change
HERON
Ravensthorpe
Kalpini
Bulong
Goongarrie
KALGOORLIE
MurrinMurrin
ESPERANCE
LEONORA
The Right Location
Infrastructure
KALGOORLIE
ESPERANCEKWINANA
RailGasRoadPorts
Esperance
Kalgoorlie
Leonora Laverton
Murrin MurrinRefinery
Kalpini
Bulong
Goongarrie
Milestone Driven Growth
0
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
Mar
ket C
ap M
AU
D
Scoping study and resources
Inco JV, Placement
BHPB on Register
Execution of formal agreement
What laterites can deliver
Proposed Sulphide Nickel ProjectExplore Heron’s ultramafic holdingHeron will control initial explorationProposed that Inco will:
Fund 100% of costs on defined projectsKeep KNP land holding in good standing
GHOST ROCKS
0 40 80
Kilometres
WINDARRA
Laverton
MURRIN MURRINLeonora
CARR BOYD
CAWSE
Kalgoorlie
CARNILYA HILL
KAMBALDANEPEAN
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
Herontenements
Nickel mines
Yilgarn ultramafics
EMU LAKEHeronNi-SulphideProspect
Sulphide Laterite
Sulphide Nickel Project
Tenements and Nickel Sulphide
Targets
Nickel and Corporate StrategyHeron investment offers a unique mix of
Milestone driven upside, associated with developmentof 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-termnear-term
Mathew LongworthChief Operating Officer and Executive Director
Phone: +61 8 9091 9253Email: mlongworth@heronresources.com.au
ASX: HRR
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