Kalgoorlie Nickel Project
(Heron 100% CVRD-Inco earning 60%)

CVRD-Inco may earn 60% in the KNP by sole funding all feasibility studies, securing project finance, making a decision to mine and loaning Heron all but 4.5% of the equity component. This means Heron has a 40% interest in a 95.5% geared project and has to only make minimal equity contribution to construction.

History of Consolidation - Eastern Goldfields District

Flow Sheet Selection

The key target for Step 2 of the KNP PFS was to determine an economically feasible flow sheet to treat the mineralisation present in the KNP. Different styles of nickel laterite mineralisation are more suited to particular types of processing. For example Heron has found saprolite and clay based mineralisation is well suited to heap leach treatment whilst pressure acid leach may be better suited to treating limonite dominated types of mineralisation. It is worth noting that Norilsk's Cawse nickel operation has been successfully treating siliceous limonite mineralisation from the Walter Williams Formation (WWF) for nearly ten years. The WWF is the same formation that hosts the Goongarrie and Siberia resources of the KNP.

CVRD-Inco investigated the application of Pressure Acid Leach (HPAL), Atmospheric Acid Leach (AAL) and Heap Leach (HAL) to various ores from the KNP. Findings were in line with Heron's experience and previous Heron test-work.

Pressure Acid Leach (HPAL)

A total of ten composite samples from four KNP deposits were subjected to HPAL test-work which initially involved the batch scale testing of individual samples at CSIRO's Bentley facilities. Semi continuous pilot scale processing was undertaken at Dynatec Laboratories in Ontario, Canada on two composite beneficiated samples from Goongarrie Hill and Highway. All test-work involved beneficiated samples to approximate the potential leach feed grades and mineralogy expected to feed into an autoclave in a full scale processing plant.

Results were encouraging and in line with those previously experienced by Heron's test-work. The HPAL batch tests were carried out at 247°C and 260°C to target a final free acidity of approximately 35 and 50 grams per litre. In general, nickel and cobalt extractions of >96% were achieved in 60-90 minutes and acid consumption ranged from 250 to 350 kilograms per tonne largely dependent on the magnesium content of the ore. The continuous pilot plant campaigns were run in saline water with both feed materials achieving over 95% Ni extraction within 60 minutes at 260°C with minimal autoclave scaling.

Atmospheric Acid Leach (AAL)

AAL involves the leaching of beneficiated slurry of nickel laterite ore in tanks at atmospheric temperatures and pressures. Atmospheric leaching of nine coarse and three fine fraction beneficiated samples from the KNP were tested by this flow sheet at 95°C with 700 kilograms per tonne addition of acid. Nickel, magnesium and iron extraction ranged from 50 to 80% dependent on the mineralogy. The nickel, magnesium and iron leached rapidly in the first two hours but then reached a plateau with the ores reacting slowly once the free acid decreased to below 50 grams per litre.

Heap Leach (HAL)

HAL is the process where nickel bearing laterite ore is prepared and stacked into heaps and irrigated by dilute sulphuric acid to leach out contained nickel. This is the process which Heron is studying at its 100% owned and managed Jump-up Dam project and is one of the options CVRD-Inco are considering.

A total of eight samples from five KNP deposits were the object of preliminary tests for their suitability for heap leach nickel extraction in one metre columns at CSIRO's laboratories. To the end of September 2007, leaching recoveries varied between 20 and 90% with leach times between 100 and 120 days under acid concentrations of 50 and 200 grams per litre.

Beneficiation

Beneficiation test-work continued during Step 2 with the beneficiation of 15 x 80 kilogram samples of various material types and ten tonnes of bulk samples from Goongarrie Hill and Highway of siliceous limonite material to produce feed for the batch and the continuous pilot test work respectively. The mass passing -75µm was generally in the order of 33%. Beneficiated batch test grades ranged from 1.12 to 1.80% Ni with the two continuous pilot test composites grading 1.25% Ni and 1.40% Ni. Upgrade results are slightly lower than those returned from Heron test-work as CVRD-Inco did not include an attrition or active scrubbing step in their test-work. Heron is encouraged by these results based on core and Calweld drilling and believes beneficiation will play a pivotal role in delivering enhanced grades to either HPAL or AAL process flow sheets.

Resource Definition

CVRD-Inco completed 70 reverse circulation drill holes at Siberia and Highway, and this drilling was augmented by 11 core holes drilled at Highway, Siberia, Goongarrie Hill and Kalpini. This drilling targeted extensions to resources at both Highway and Siberia North. CVRD-Inco have reinterpreted the drilled sections confirming extensions to mineralisation and are updating resource estimates. Estimates are domained on basic ore types which assists with understanding the proportions of mineralisation available for each processing flowsheet.

Step Three

On 2 October 2007 CVRD-Inco informed Heron that they had completed the program and budget as approved for Step 2 and would be informing Heron of their decision to move forward or not within the two month period allowed by the KNP agreement.

Should CVRD-Inco make the decision to proceed, the agreement calls for the completion of a full PFS to be managed by independent engineers and delivered by no later than January 2009. Heron's assessment is that considerable resource drilling, metallurgical test work and engineering must be completed as part of this study. To accomplish this in the timeframe allowed requires CVRD-Inco to considerably increase the level of work and resources assigned to the KNP.

Water testing at Jump-up Dam is proving to be very successful and important for the long term success of the operations.

Briony Robertson, Investor Relations

Any enquiries at all, give Briony a call on (08) 9215 4444 or email.

Resource Estimate for Aubils Nickel Laterite Deposit

Heron is pleased to announce the completion of a mineral resource estimate on its 100% owned Aubils nickel laterite deposit.

Updated Resource Estimate for Boyce Creek

Heron Resources is pleased to announce the completion of an updated mineral resource estimate on its 100% owned Boyce Creek deposit located some175 kilometres north east of Kalgoorlie.

Fat Prophets Report on Heron Resources Limited

"... the Heron Resources story has never looked better from our point of view."

Exploration Update - Langey Phosphate Project

Heron Resources has in the past year applied for a number of exploration licences in the Langey Crossing area. The applications were made as Heron considers the ground prospective for sedimentary phosphate mineralisation.