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Kalgoorlie Nickel Project a rare combination of size, amenability to pressure acid leaching, political security, and environmental stability Why nickel laterites are back in fashion! A Presentation To the Sydney Mining Club March 2006


  1. Kalgoorlie Nickel Project “a rare combination of size, amenability to pressure acid leaching, political security, and environmental stability” Why nickel laterites are back in fashion! A Presentation To the Sydney Mining Club March 2006 Mathew Longworth Chief Operating Officer, Executive Director Heron Resources Limited ASX: HRR

  2. Disclaimer Forward Looking Statement The material used in this presentation is intended to be a summary of selected geological data, current and proposed activities, as well as resource estimates based on information available to Heron Resources at the time. It does not include all available information and should not be used in isolation as a basis to invest in Heron Resources. Any potential investor should refer to Heron Resources’ ASX releases and statutory reports before considering investing in the company. This presentation includes information relating to a completed independent scoping study, completed independent resource estimate and a feasibility study which is in progress and includes “ forward looking statements ” which include, without limitation, estimates of potential nickel in concentrate production based on mineral resources that are currently being evaluated. While the Company has a reasonable basis on which to express these estimates, any forward looking statement is subject to risk. Risks include, without limitation: nickel metal prices, foreign exchange rate movements, failure to meet joint venture milestones, project funding capacity, concentrate off-take contracts and estimates of future capital and operating costs. The Company does not undertake to release publicly any revisions to forward looking statements included in this presentation to reflect events or results after the date of this presentation, except as may be required under applicable securities laws.

  3. Overview of Presentation � Why Laterites � Company Profile � Track Record and Nickel Focus � Kalgoorlie Nickel Project � the right Partner � the right Project � the right Location � Sulphide Nickel Project � Nickel and Corporate Strategy

  4. Company Profile – Corporate � Listed ASX August 1996 � Focus on acquisition and exploration � Aim to develop a long life nickel mine � Capital Structure � 165m shares at A$0.48, mkt cap A$79m � A$11 million cash at bank, debt free � Significant Shareholders � Directors and associates 25.5% � Inco Limited 9.9% � BHP Billiton 9.6%

  5. Track Record of Value Creation � A dollar invested In Heron on listing is worth $1.80 � In addition there have been two in specie distributions � Avoca in 2002 equal to 0.56 cents � Pioneer 2003 equal to 0.07 cents � Today’s value of a dollar invested in Heron on listing $2.43

  6. Laterites never went out of fashion � If you are serious about nickel you are serious about nickel laterites � Each of Inco, BHPB, Falconbridge and Rio Tinto have assessed every laterite on the planet. WHY? – Demand – Supply – Technology � Inco and BHPB have converged on the KNP

  7. Demand is Driven by China “ While global primary nickel demand for the 2004-08 period is forecast to � increase at a moderate compound average growth rate of 3.5%, almost all of this is coming out of China.” source Alan Heap Citigroup “Outlook for supply and & demand- the China factor” AJM Conference, Sydney 8- 9 September 2005.

  8. “Growth in sulphide ore sources will be insufficient to meet demand” � WA Production Year on Year Source GSWA 2005 200 160 Sulphide 120 80 Laterite 40 0 1998 1999 2000 2001 2002 2003 2004 DJF237 13.12.05

  9. “Growth in sulphide ore sources will be insufficient to meet demand” � WA Resources and Reserves 35,000 Laterite 30,000 25,000 20,000 15,000 10,000 Sulphide 5,000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 DJF239 13.12.05

  10. Dominance of the laterites 8000 Mt Margaret/Murrin 7000 KNP 6000 Contained Nickel (kt) 5000 Sulphides 4000 Laterites Ravensthorpe Weld Range Wingellina 3000 2000 Mt Keith Leinster Yakabindie 1000 Cosmos Honeymoon Well 0 1 2 3 4 5 Ranked on Contained Nickel (kt)

  11. KNP Location � Located North and East of Kalgoorlie � Centred around a centralised processing plant � Total resource base of 903mt at 0.74% Ni and 0.04% Co

  12. Inco – the Right Partner for KNP � Inco selected following global search � A premier integrated nickel producer � Market Capitalisation US$8 billion � Estimated net cash US$1.8 billion � 200,000tpa nickel, second largest producer � Proposed merger Falconbridge, N o 1 � World leader in nickel laterite projects � PT Inco – 60,000tpa Ni production � Goro – planned 60,000tpa Ni production

  13. Inco Farm-in & JV Attractive Terms � Subject to meeting technical milestones, Inco sole funds Feasibility Study � Pre-Feasibility, minimum US$18m � Full Feasibility, minimum US$50m � Inco earn 60% oncompletion of Feasibility and securing project funding � Inco procures all project debt funding � Heron equity fund cap 4.5% of total equity � Inco lends Heron its remaining equity funds

  14. Inco JV – Funding Mechanisms � Assumptions � $1.4 billion $1.4 billion project construction cost � � Debt : equity = 70 : 30, $980m Debt, $420m Equity � Debt project finance procured by Inco � Equity finance � KNP JV 60:40, Inco $252m, Heron $168m � Heron capped at 4.5% of equity, $19m $19m � Inco lends Heron $149m, repay cashflow

  15. Inco Farm-in -Timing Milestones � Step 1, confirm 120mt at 1.5% Ni � Diamond drilling, screening studies � Completion deadline July 2006 � Step 2, flow sheet selection � Batch metallurgy and mini-pilot, Sep 2007 � Step 3, resource and engineering � Resource drill out, plant design, Jan 2009 � Feasibility Study � Bankable, completion deadline July 2011

  16. Inco Farm-in - Step 1 & 2 Metallurgy Screen Upgrade Screened rejects Silica fragments 60% Reject grade 0.3% Ni Scrubbed slurry into pilot plant trommel screen deck Run-of-mine siliceous ore Consisting of yellow-brown limonite and coarse silica 0.8% Ni Screened slurry Limonite 40% Leach feed grade 1.5% Ni

  17. Inco Farm-in – Step 3 Resource Definition lots of Work for Inco Max Ni (%) 1.86% Ni (Avg) 1.61% Ni (Avg) 1.5 to 10,000 1 to 1.5 0.75 to 1 0.5 to 0.75 0.25 to 0.5 0 to 0.25 6658500 mN 1.45% Ni (Avg) 1.2% Ni (Avg) Cross Section East Mineralised Zone 1.57% Ni (Avg) West Mineralised Zone SIBERIA NORTH PROJECT 6657000 mN RECENT DRILLING MAX LEACH FEED GRADE NICKEL (%) 75 MICRON SCREENED 0 500 1000 Metres Weighted average leach feed grades Weighted average leach feed grades shown using a 1.0% Ni cutoff Shown using a 1.0% Ni cutoff

  18. KNP – Nickel Screen Upgrade 321000mE 321200mE 321400mE 321600mE 321800mE 400RL 6m @ 4m @ 0.67% Ni 8m @ 1.02% Ni 24m @ 0.96% Ni 4m @ 1.00% Ni 8m @ 12m @ 18m @ 1.13% Ni 2.21% Ni 0.57% Ni 0.75% Ni nontronite ore, no upgrade 24 metres at 1.00% GOOGARRIE HILL PROJECT Nickel grade without 24m @ Section 6678320N 1.00% Ni screening Nickel Head Grade Note x 4 vertical exaggeration

  19. KNP – Nickel Screen Upgrade 321000mE 321200mE 321400mE 321600mE 321800mE 400RL 6m @ 4m @ 0.67% Ni 8m @ 1.02% Ni 24m @ 0.95% Ni 0.96% Ni 2.09% Ni 4m @ 1.00% Ni 8m @ LFG 12m @ 1.65% Ni LFG 18m @ 1.13% Ni 1.72% Ni 2.21% Ni 0.57% Ni LFG 0.75% Ni 1.19% Ni LFG 1.22% Ni 1.05% Ni 1.68% Ni LFG LFG LFG LFG nontronite ore, no upgrade 24 metres at 1.72% Nickel Leach feed grade GOOGARRIE HILL PROJECT 24m @ 1.72% Ni after screening at Section 6678320N LFG 0.075mm, based on Nickel Screen Upgrade bottle roll testwork Note x 4 vertical exaggeration

  20. KNP – the Right Project � Among largest undeveloped Ni projects � Heron’s vast nickel footprint is unique � Focus on Goongarrie-Siberia siliceous ore � 455mt at 0.7% Ni and 0.05% Co � Screen beneficiation 1.5% Ni leach feed � Target 120mt leach feed, >4mtpa for 25 yrs � Limonite ore, premium metallurgy � Pressure Acid Leach (PAL) processing � PAL proven at Moa Bay and Cawse

  21. KNP – the Right Project � Heron’s substantial LEONORA tenement holdings Murrin Murrin underpin resource base � Mainly 100% owned and Goongarrie unencumbered Kalpini � Historically under- explored Bulong KALGOORLIE � Inco’s funding means this will change BHP BILLITON MINARA Ravensthorpe HERON ESPERANCE

  22. The Right Location � Infrastructure Murrin Murrin Refinery Leonora Laverton � Rail � Gas Goongarrie � Road Kalpini Kalgoorlie � Ports Bulong KALGOORLIE Esperance KWINANA ESPERANCE

  23. Milestone Driven Growth Execution of 160 formal agreement Inco JV, Placement 140 Market Cap M AUD BHPB on Register 120 100 80 Scoping study 60 and resources 40 20 0 01-Dec-03 01-Mar-04 01-Jun-04 01-Sep-04 01-Dec-04 01-Mar-05 01-Jun-05 01-Sep-05 01-Dec-05 Date What laterites can deliver

  24. Proposed Sulphide Nickel Project � Explore Heron’s ultramafic holding � Heron will control initial exploration � Proposed that Inco will: � Fund 100% of costs on defined projects � Keep KNP land holding in good standing

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