2000 Annual Report - Heron Resources Limited

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Operations Review 2.0 Continued Figure 3 - Joint Venture Areas 100000 mE Sandstone 300000 mE 500000 mE Victory JV Edjudina Laverton JV Laverton Leonora Murrin Murrin Laverton Nickel 6800000 mN Edjudina Nickel Lawrence Find JV Snake Hill JV Ghost Rocks Kookynie JV Menzies Edjudina Laverton JV 6600000 mN Bungalbin JV Southern Cross Frances Lesley JV Blister Dam Goongarrie Cawse Mungari NW JV KALGOORLIE Gindalbie Terrane JV Boorara Shear Transline JV Bulong Kalpini Kurnalpi Nickel Southern Laverton Tectonic Zone JV Mulgabbie Nickel Kurnalpi JV Mt Martin Kurnalpi Southern Cross Bullabulling Kambalda Karonie South JV Widgiemooltha JV Norseman Karonie South Maggie Hays Hill Norseman 6400000 mN Balladonia Salmon Gums Port of Esperance Southern Ocean Photo Strip: Geologist Colin Earle supervising the Goongarrie drilling. Colin was seconded to Heron from the Centaur Cawse operation. Colin’s contribution during 2000 is much appreciated. His good humour along with the willing assistance of other Cawse minesite personnel has made for an efficient Strategic Alliance. ‘The Painting of the Man’ Tony Champion “I drew a man on the mine. This man is standing on the mine. The blue sky is the boss of his land.” page 6 Heron Resources NL Annual Report 2000
2.0 Continued Operations Review STRATEGIC ALLIANCE The Heron-Centaur Strategic Alliance Toll Milling Agreement was completed early in the reporting year. It is a mechanism that was formulated to move Heron towards production while minimising the project risk to Heron through eliminating high levels of debt funding, and resultant high debt service charges. Concomitantly, the Strategic Alliance will crystallise economies of scale for both parties through the larger ore throughput of the merged resource base. The proximity of the Cawse processing plant to Heron’s project areas, the strong similarity of Goongarrie ore types to Cawse ROM ore feed, and the successful commissioning and ramp up of Cawse Stage I during 2000 suggests a high level of synergy exists between the Heron and Centaur operations. PRE-FEASIBILITY STUDY Heron has completed most of the studies required for a PFS for the Goongarrie Nickel Project. • Metallurgical testing is current, testing upgrade, settling, rheology, leach recovery and post-leach neutralisation. • Baseline Flora and Fauna Studies have been finalised, with typical Eastern Goldfields flora regimes documented. • Archaeology and Ethnographic Surveys are well advanced, with no sites documented. • Native Title Access Agreements are being negotiated in Good Faith for the grant of Mining Leases. • A Hydrological Consultant has been retained, and a bore hole water level monitoring regime established. • Confirmation Diamond Drilling was successfully completed under difficult ground conditions. The drilling has: • Validated RC grade estimates, notably at higher nickel cut-off grades. • Quantified the In-situ Bulk Density, Siliceous Ore SG is 1.8 - 2.3 2.0 used in resource estimation. Limonite Ore SG is 1.3 - 1.8 1.6 used in resource estimation. • Heron has quantified the Geotechnical response of the ore environment, which has facilitated in-house scoping pit designs. The mining management of Tertiary palaeo-channel aquifers overlying the ore zones is an important issue. Traffickability issues may ultimately be addressed by the use of 6WD articulated dump trucks for Goongarrie mining. IN TERMS OF THE PFS, GOONGARRIE SOUTH IS STRONGLY ADVANTAGED BY THE EXCELLENT LOCATION AND ESTABLISHED INFRASTRUCTURE OF THE EASTERN GOLDFIELDS. CORPORATE ADVANCES DURING 2000 Nickel Industry Alliance Strategies • Capital costs are the main challenge for Nickel Laterite production, with Heron’s current estimate being $1.4 billion for a standalone 4mtpa Pressure Acid Leach (“PAL”) processing plant. For a company of Heron’s size, a strategic partner is required who contributes financial and technical resources to this style of project. • In terms of risk minimisation, industry alliances facilitate: • Economies of scale in mining, processing and utilities, to reduce unit operating costs. • Shared infrastructure including rail, gas and water, and sourcing ore and servicing projects over a wide ranging operating area. • Potential for utilising an off-site “Back-end” for metal refining, supporting an off-site “brownfields” expansion of refining capacity. • Strategic Off-take and marketing agreements to help facilitate the banking of a project. • Resource blending, using Heron’s high quality Limonite Ore to leverage off and blend with less favourable ore to provide a constant long-term blended ore feed. This can improve the metallurgical performance of problem clay ore types (notably Nontronite Ore), and may increase the resource and thus project life. Joint Venture and Industry Association Strategies Joint venturing is a key component of Heron’s tenement management strategy. It allows Heron to control the large land bank which is integral to the long term development of Nickel Laterite resources. Heron has in operation or has offers on the table involving some 21 Joint Ventures, alliances, options and Memorandums of Understanding involving oil shales, gold, base metals and iron ore. These industry associations cover some 155 tenements that will see a minimum Department of Minerals and Energy (“DME”) commitment of $1.5 million spent by our partners annually whilst Heron is free-carried. In addition a minimum total outlay of $10.65 million can be spent on Heron’s joint ventured tenements before equity is transferred to the partner. By this process Heron is entirely free-carried in its gold and non-nickel developments, and in terms of risk-minimisation and success optimisation, the Heron non-nickel portfolio provides a very low risk and low cost means of asset creation. As an example, through its Bungalbin Iron Ore Production Royalty, Heron has a potential long term income stream. Heron Resources NL Annual Report 2000 page 7
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2000 Annual Report - Heron Resources Limited

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