Kalgoorlie Nickel Project

Heron 100%

Kalgoorlie Nickel Project - location and deposits

Following a partner search aimed at introducing a development partner to the Kalgoorlie Nickel Project (KNP), no proposals acceptable to Heron were received. The Board resolved to maintain its 100% unencumbered ownership of the project, and keep the project under constant review as the nickel price continues to improve and technical developments for nickel laterite projects continue to evolve.

The Project has well documented advantages based on good local infrastructure, low sovereign risk, access to a skilled labour pool, low environmental risk for tailings disposal, and supportive government, environment agencies and community. The previous farm-in partner noted that the KNP is one of the most prospective nickel laterite tenement packages in the world, containing a significant resource of contained nickel metal.

Heron has since late 2009 restructured the KNP tenement holding to retain key resource tenements, with tenements considered highly prospective for mineralisation other than nickel, such as gold, now divested. Heron retains the nickel rights on a number of these tenements. The Pre-feasibility Study completed in mid 2009 had an expenditure of AU$34.5M (fully funded by the previous partner), further ensuring the Project tenements' minimum expenditure commitments are met and are maintained in good standing.

Since mid 2009, Heron's KNP work has focused upon mineral resource estimation, and optimising the metallurgical flow-sheet. These are largely desk studies, aimed at further optimising the vast amount of physical testing programs completed during the 2005-2009 Pre-feasibility Study.

The former farm-in partner estimated in their January 2009 PFS a cash cost for KNP nickel production of US$4.42 per pound, which compares favourably to the current nickel prices in excess of US$11.50 per pound (US$25,000+ per tonne). The Company has a significant option value in the KNP, with its nickel resource base, and will seek to crystallise this option value as the nickel price recovers from global financial crisis imposed lows.

The Company expects that with the continued strength in the nickel price and a number of laterite projects about to be commissioned which will further validate the technical feasibility of laterite nickel production, the Project's significant value will be preserved and enhanced, for the benefit of Heron Shareholders.