After more than eight years amassing a Western Australian landholding of almost 20,000 square kilometres, Kalgoorlie-based exploration company, Heron Resources believes it is ready for the big league.
Last week the junior revealed plans to develop a $1.4 billion nickel laterite project near Kalgoorlie.
The ambitious plan to produce 50,000 tonnes of nickel a year for 20 years marks a sea change for the explorer that, unlike many of its peers, has resisted the call to Perth.
Together with long-time gold-miner Croesus Mining, Heron is one of the few miners remaining in Kalgoorlie.
And while the junior’s share price has been on a bit of roller coaster ride – peaking at 45 cents following Centaur’s failed bid for Heron in 2000 and falling to 10 cents on the back of Bulong’s collapse in 2003 – it maintains a significant shareholder base in Kalgoorlie and remains one the Goldfields’ most aggressive explorers.
“There used to be at least 10 [locally based] mining companies that would all hang about outside . . . the Kalgoorlie Mines Department,” one well-known Kalgoorlie miner remarks.
Despite its local status, Heron’s aggressive land acquisition policy has also polarised its peers over the years.
While the big miners prefer to deal in large tenement packages, Heron’s ability to play the pegging game can put its fellow explorers off side.
It is a point not lost on managing director Ian Buchhorn – a South Australian with a geology and mineral economics background.
“If you are on the ground you hear about things, you have a bit of an advantage – you can get to the ground quicker than someone else,” he said.
Heron’s spinoffs along the way – gold float Avoca Resources and the nickel sulphide explorer Pioneer Nickel – have rewarded Heron shareholders, giving them vendor shares at no cost as an in specie distribution or dividend.
However, on July 7 Heron’s world changed.
“From that day we were able to tell the world that independently we have got 862 million tonnes of 0.7 per cent nickel, then the whole environment of Heron just changed at that moment,” Mr Buchhorn said.
Despite the inevitable change this brings, a new outlook is something Mr Buchhorn relishes.
“It is great. We’ve been working towards this for a long time and we have copped a lot of flak about being the only people who have had any faith in nickel laterites,” he said.
“The move should cause dramatic management changes as Heron evolves.”
Heron now looks likely to open an office in Perth and is keen to recruit expert metallurgists and engineers.
“Hopefully I’ll stay in Kal but if I have to go to Perth, if that’s what the shareholders require, then I’ll do it,” Mr Buchhorn said.
Getting this project right is not only critical to Heron, but to the WA laterite nickel sector. Too many have seen it go wrong before.
Until the late 1980s nickel was extracted from mineral sulphides.
New processes such as high-pressure acid leach (HPAL) plants allowed nickel to be extracted from large, low-grade nickel laterite deposits, however, technical problems dogged many systems.
Centaur Mining & Exploration’s Cawse laterite plant near Kalgoorlie was sold in late 2001 after the company was placed in receivership.
It was unfortunate for Heron, which was to underpin the development of Cawse stage two with its laterite ore.
Before Centaur collapsed, Preston Resources, was suspended from trading in 1999, hampered by debt after it acquired the Bulong laterite nickel mine in 1998.
Bulong’s assets were sold late last year and Heron obtained its tenements.
Shortly before its collapse, Centaur – headed by mining entrepreneur Joseph Gutnick – led an unsuccessful takeover bid for cash-strapped Heron.
This more than doubled its share price but also forced Mr Buchhorn to inject a couple of million dollars of his own money into the company.
To fund this he sold his “retirement fund” – a portfolio of executive-type rentals in Kalgoorlie – increasing his controlling stake in Heron to its current 29 per cent.
Laterite project setbacks aside, there has been some recent encouragement in the sector.
One boost is BHPB’s commitment to its $1.9 billion Ravensthorpe nickel project.
However, more importantly, Heron says it has learnt from the mistakes of others.
Rather than use the high acid consuming saprolite ore used in Bulong and Murrin Murrin’s production, Heron is proposing to use goethitic ore.
Mr Buchhorn said goethitic ore was the “Rolls Royce” of laterites and about 505 million tonnes of the ore grading 0.71 per cent nickel and 0.05 per cent cobalt occurs on Heron’s tenements.
Heron also hopes to use other saprolite resources in a proposed unique acid neutralisation process.
However, a substantial amount of work remains at a time when a lot of other nickel producers are also positioning themselves for the upbeat global nickel market.
Heron wants to raise $16 million through an Alternative Investment Market listing later this year, with the help of Argonaut Capital, to fund a pre-feasibility study and a large drilling campaign.
This is expected to be finished in 2005 by which stage Heron hopes to take on a large partner to take the project through to a bankable feasibility study.
Construction is expected to begin in 2007.