December 2005
Best of the Best
As you would expect in the midst of what is predicted to be a prolonged boom period for the resources industry, several companies and their front men have made a dash for the esteemed title of Resourcestocks chief executive officer of the year. …
Ian Buchhorn can chalk up his five votes and share of best man duties to his potentially company making deal with nickel monster Inco. …
9 December 2005
Heron maps flight path
Utter the words nickel laterite around the streets of Kalgoorlie and most will cringe, associating it with a persistent hangover or food poisoning. But while the bad taste that is Bulong, Cawse and to an extent Murrin Murrin still lingers in the minds of many, there are some trumpeting it to the masses that it is indeed alright to like laterite.
The brass band comes in the form of Kalgoorlie stalwart company Heron Resources and its aptly named flagship the Kalgoorlie Nickel Project.
Perhaps the most immediately compelling indication that Heron has a very serious project on its hands is the distinguished company it keeps. Heron has managed to attract the likes of the soon-to-be-largest-nickel-miner Inco to the party, along with fellow heavyweight BHP Billiton as a major shareholder.
Heron and Inco have come together for a road trip of sorts, signing a joint venture over the laterite ground, with a four milestones and a strict timeline set in place to ensure the KNP isn't lost in the portfolio of the major.
"The way the JV is set up, it's got very strict technical milestones that have to be met." Heron's managing director Ian Buchhorn said.
"Inco have to complete a BFS and only get equity once they secure project funding to make sure we're not diluted out at the end.
"Everything has to be done by July 2011, this was one of the critical things we were able to negotiate with Inco, and with BHP in the wings as our third largest shareholder, it probably helped us get these firm milestones in place."
"This is a really ambitious timeframe; if you look at how long these projects normally take, it's a lot longer than this."
In a nutshell, the four milestones covering the KNP include the confirmation of 120 million tonnes at 1.5% nickel by July; flow sheet selection by September 2007; resource drill out and engineering studies by January 2009; and, completion of the BFS by July 2011.
But it is not easy for Buchhorn and Co. to escape the past disasters that were Bulong, Cawse and Murrin Murrin.
"That is the most common question when you try to do a presentation, everyone sidetracks you and starts telling you all the stories they've heard about Murrin Murrin or Bulong," Buchhorn said.
"You have to look what has happened in the past, the projects have been rushed, Centaur went into receivership, Preston went into receivership, and Minara just managed to avoid a near death experience.
Heron's exploration director Mathew Longworth points out the company is attempting to distance itself from other laterite operations on a number fronts including, selecting the right ore type, getting the engineering right (the first time), ensuring their partners were well funded and more importantly, experienced with laterites.
"Anaconda had big partners in Anglo and so on, but they'd never done a laterite operation in their life before," Longworth said.
"What we've done to really distinguish ourselves from those previous operations, is if it takes a little bit longer and we get it right, then it's better to do that than to be retro engineering it five to six years on after having spent $1–2 billion dollars.
"A little bit up front loading will save a lot of grief and a lot of investor heartache at the back end."
You can talk all day about you beaut ore and flash engineering, but like any company, Heron needs to back rhetoric with results, and realistically, results from the laterite operation are potentially 8–10 years away, leaving shareholders a lot of time to ponder their investment.
"Market wise, with the six year thing, it is most commonly asked question at every AGM or shareholder meeting," Buchhorn said.
"Is the world going to wake up in six years time and see there's a positive BFS and Inco are going to back the project and say, 'lets re-rate Heron from $100 million company to a billion dollar company', is it going to happen overnight… no.
"It's going to happen… as we reach Step 1. Step 2. Step 3. So our expectation is it's going to be a steady bunch of plateaus."
However, there is a light on the horizon in terms of near term benefits for Heron investors, namely nickel sulphide potential, which according to Buchhorn could see production and cashflow within two years of a discovery.
"The beauty of the sulphides, they'll be in the current price cycle, so if we make a sulphide discovery you can get it into production in two years," Buchhorn said.
"We know for a fact our laterite is in the second, third, fourth, fifth, sixth cycle, so that's a long way out. Our view is that with a sulphide success, we can get cashflow very quickly.
"We've got this huge ultramafic holding, we've already got a deal with Inco on the laterites, so its commonsense that Inco will also be the sulphide partner… discussions have been put on hold because we want to get the laterites up and running and working, we don't want any sidetracking issues.
"For the laterites Inco don't get their equity until they bank the project, for the sulphides, they don't get the equity until they make a discovery, so again we don't want to be tied up for years and years without anything happening.
"We're still finalising the sulphide JV, but it's enough to say the terms are very similar to the laterite JV."
The luxury of having Inco on board also gives Heron offtake options. Buchhorn said the company would look at constructing a concentrator, similar to the one at LionOre's Silver Swan operation, and then ship the concentrate over to one of Inco's North American smelters.
Walking the nickel laterite path has been like strolling over broken bottles for some, but only time (close to eight years to be precise) will tell if Heron can bring some dignity to the nickel laterite name in and around Kalgoorlie, and in the process, make a lot of very patient investors very happy.
To download article see www.miningnews.net
November 2005
Inco gets a leg-up with junior Heron
Cover story:
… For an indication of how things might be done in the future, the Heron Resources Ltd deal with Inco might be a good pointer. In the deal, announced earlier this year, there is little room for short-termism – but it provides an enticing and compelling vision of a long-term, very large development at the Kalgoorlie Nickel Project (KNP). The intention is to grow the project, over time, into an internationally significant nickel producer. …
27 October 2005
Heron joins nickel's big hitters
With the hands-on financial and technical backing of the second largest nickel producer in the world, Heron Resources could have its world-class $1.4 billion Kalgoorlie nickel project in production by 2013.
Initial Heron scoping studies envisage production of 50,000 tonnes a year over 25 years, putting it among the top ranking nickel mines in the world. …
18 October 2005
Nickel deal on track
Canadian nickel miner Inco is sticking to a $1.4 billion joint venture with Aussie junior Heron Resources despite launching a takeover bid for rival nickel producer Falconbridge.
Inco's vice-president of exploration, Nick Sheard, will attend a meeting of Heron shareholders in Kalgoorlie on Friday.
The meeting is to approve the joint venture to develop Heron's 120 million tonne Kalgoorlie Nickel Project. …
26 September 2005
Inco digs in Down Under
The world's second-largest nickel producer Inco will split its global operations in two and open a head office in Australia as it faces stiffening competition from BHP and concentrates on China's rocketing demand for metals. …
Inco is a growing force in Australian mining: in August it finalised a joint venture with Heron Resources to produce 55,000 tonnes of nickel around Kalgoorlie in what will be Australia's second-largest nickel project. …
19 September 2005
Heron joins forces with Echelon in iron ore
Heron Resources Limited and Echelon Resources Limited are pleased to announce that Heron has agreed to merge its iron ore interests into Echelon, creating a new iron ore explorer and emerging producer.
Heron MD Ian Buchhorn said "Heron has been assembling a package of iron ore assets for the past six years, initially as part of a stainless steel strategy. With Heron deciding on a nickel flow-sheet unsuited to stainless steel production, it concluded that the time was right to realise the value of these assets upon achieving critical mass. This decision has coincided with Heron concluding its partnership agreement with Inco Limited on its world class Kalgoorlie Nickel Project."
5 September 2005
Ochre iron ore transaction moving forward
As part of its strategy to divest non-nickel assets, Heron Resources advises that Argonaut Capital Limited has been mandated by Heron to:
- review and consider development opportunities for the Company's iron ore assets.
- advise the Company on a strategy to maximise Heron shareholder returns from these assets.
Heron looks forward to rewarding shareholders with maximum value for the iron ore assets while continuing to focus on the core nickel business.
17 August 2005
Diggers and the big picture
“Other than Heron Resources, we saw little of substance from the juniors.”
Forget the hyperbole and the short-term noise, here are some of the key issues to emerge from the Diggers and Dealers 2005 forum according to Credit Suisse First Boston analysts' Michael Slifirski and Julian McCormack. Be warned, it's not a particularly pretty picture, especially from a junior's perspective.
Unconvincing juniors, as reflected in a focus on high and sustained commodity prices rather than the asset quality or organic growth prospects, seemed to sum up the talkfest for the Melbourne-based analysts.
Slifirski and McCormack said there was little attention given to greenfields exploration and discoveries, with brownfields additions and incremental mine life extensions dominating discussions.
"The major theme from juniors [was about] successfully applying their lower cost structure to extract value from remnants regarded as irrelevant by the majors," the analysts said.
"Presentations sought to justify market capitalisations, based on what they might discover rather than what they currently have.
"Asset rationalisation by majors has delivered company making assets from advanced exploration projects. Remnant mining has not.
"Other than Heron Resources, we saw little of substance from the juniors.
"The regime of continuous disclosure has [been] compounded with a sustained period of under-investment in exploration, culminating in a series of professional but lack-lustre company reviews, largely focussed on a necessary belief in the sustainability of current commodity prices, rather than organic growth driven from the drill bit."
Even those that are drilling aren't delivering according to Slifirski and McCormack, with the "market spark of a good discovery remaining missing", and major producers' new production opportunities being "generally far more exciting than those the explorers and juniors have to offer".
The other problem here, according to the CSFB analysts, is that that explorers are carrying significant valuations based on expectations of discoveries of new orebodies.
"Such expectations have generally not been fulfilled in Australia for quite some time," the analysts said. On this score, Africa and South America appeal they said.
Other issues noted included a sense of the growing need for consolidation, particularly from the numerous, small, life-constrained nickel players that were spawned by the WMC divestments in the Kambalda region.
"Reinvestment [of strong cash-flow] into exploration is hoped to deliver life but with the risk of substantially reduced future cash generation when commodity prices retreat from current record levels," Slifirski and McCormack said.
"With limited lives, leverage to reserve additions is high, as is market expectation. Price-earnings ratios in excess of mine life suggest that nickel price sustainability and reserve growth is expected and fully priced."
Damningly, the analysts were also critical with what they called an "overwhelming desire to build".
"All presenters were keen to grow their businesses into bigger businesses, with little emphasis on giving cash back to shareholders in the short term," they said.
"We saw no evidence of companies recognising the opportunity to harvest cash from good assets, to give back to shareholders.
"Empire building appears to be the main game."
To download article see www.miningnews.net
5 August 2005
Open Briefing: Heron Resources MD on Outlook and Strategy
Open Briefings aim to enhance corporate disclosure by delivering a CEO briefing directly to the broadest possible pool of shareholders, prospective investors, analysts and advisors. …
An Open Briefing is an accurate record of interview of a company representative, usually the CEO, by a Corporate File analyst. In Open Briefings, Corporate File analysts ask questions typically raised by analysts and fund managers in private briefings.
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25 June 2005
We need to turn statistics around
[A letter to the editor from Brian Wyatt, Executive Director of the Goldfields Land and Sea Council]
… There are plenty of examples where Aboriginal people have seized opportunities for employment, education and economic development that were presented to them, for the benefit of their own families and communities, and Australian society in general.
In this regard, the efforts of the Argyle diamond mining company in the Kimberley (employment) and Heron Resources here in the Goldfields (education) have been outstanding …
May 2005
Man of the Moment: Ian Buchhorn
After years of trying to convince a sceptical market of the benefits of lateritic nickel, Heron Resources chairman Ian Buchhorn finds himself in unfamiliar but welcome territory. …
18 April 2005
Inco joins BHPB at Heron
Inco has joined BHP Billiton on the registry of joint venture partner Heron Resources after subscribing for a 10.5% stake in the junior. …
Inco is to spend around $US68 million on bankable feasibility studies at Heron's North Kalgoorlie nickel laterite project. The Canadian major will initially earn a 25% interest at the completion of the BFS, and move to 60% of the project after it secures financing. …
To download article see www.miningnews.net
8 April 2005
BHPB takes Heron stake
Heron Resources' Kalgoorlie nickel project in Western Australia has attracted its second major mining company in the last ten days, with BHP Billiton acquiring an 11.2% stake in the budding laterite junior.
The stake is understood to have been sold by American company OMG, which owns the Cawse laterite project near Kalgoorlie. …
If BHPB's current takeover of WMC Resources is successful it will become the second largest nickel producer in the world.
Late last month, the world's largest producer Inco announced it would send around $US68 million on bankable feasibility studies at Heron's project. …
To download article see www.miningnews.net
29 March 2005
Heron attracts Inco
Ian Buchhorn's patience has paid off after nickel major Inco was secured as a partner at Heron Resources' $1.4 billion Kalgoorlie laterite nickel project. …
Aside from the laterite project, the two companies are negotiating a separate joint venture covering the nickel sulphide in the region. …
To download article see www.miningnews.net
