Key Points:
- Preliminary Economic Assessment on
track to release findings within the 1st Half 2015,
with excellent progress being made across all technical
disciplines
- Drilling results support new Mineral
Resources with further discovery potential
- Updated Mineral Resource model being
prepared in accordance with JORC and CIM standards
- Metallurgical testwork on
underground and blended underground/tailings samples is
demonstrating improvements in metal recoveries compared to
historical production
- Mine planning and rock mechanics
work have identified mining methods adapted to localised
conditions
- Zinc market fundamentals remain
strong – supply deficit underpinning price escalation
Heron Resources Limited (“Heron” or the “Company”) is pleased to
provide an update on the progress being made with the Woodlawn
Underground Project Preliminary Economic Assessment (“PEA” – refer
to page 8 for definition). This PEA or detailed scoping study
commenced during 3rd Quarter 2014 and, once completed, will
represent the first complete study since mine closure in 1998
targeting the economics of re-establishing underground operations
at Woodlawn. The Company is very pleased with progress to date and
acknowledges the effort being made by Heron employees, consultants
and contractors assisting in the compilation of this important
study.
The PEA remains on track and the Company is targeting to release
its findings within the first-half of 2015.
PEA Objectives
As noted above, the principle objective of the PEA is to
demonstrate the viability of recommencing operations at Woodlawn.
Whilst this study has a focus on the high grade underground
mineralisation, the development plan for the Woodlawn Project will
involve the combined development of underground mining and the
tailings retreatment project at the Woodlawn site. The
metallurgical testwork currently ongoing reflects this
approach.
The tailings retreatment project has previously been studied to
a higher level of detail (Feasibility Study and Front End
Engineering Design Study) than the underground project. The PEA
thus forms the first step in raising the level of review on the
underground project to allow for an integrated study to be
completed.
Drilling Program
The current (Phase 1) drilling program has been designed to
provide the inputs for a revised Mineral Resource estimate, a key
component of the PEA study. Approximately 1,150m of RC drilling has
been completed. This tested a number of the shallow up-dip
positions of known lenses, after which the program moved to
predominantly diamond drilling. Approximately 6,300m of diamond
core drilling has now been completed in 16 holes.
The drilling program to date has returned 20 massive sulphide
intercepts which represents an outstanding ‘success’ hit rate with
results that have included high grade intercepts such as WNDD0007
(12.3m at 20.0% Zn, 2.1% Cu, 6.1% Pb, 0.8g/t Au and 53g/t Ag from
414m). In addition, during the last two years, two new lenses have
been identified, with the potential for a third being investigated.
These results demonstrate the very real potential to continue to
make new discoveries within the Woodlawn system.
The focus of the diamond drilling has primarily been on Kate
Lens where seven of the nine holes drilled to-date intersected
massive sulphide mineralisation (see Figures 1, 2 & 3 below).
Overall, the boundaries currently interpreted from drilling the
Kate Lens have met expectations and are expected to provide a
significant addition to the overall Mineral Resource tonnage. Kate
Lens is viewed as a likely source for early, high-grade, tonnage
for the planned underground operation. Importantly, the lens still
remains open in a number of directions.
Lenses within the Woodlawn system have a tendency to pinch and
swell along-strike and down-plunge, and can appear in a slightly
different plane in either orientation. This characteristic provides
for a number of additional targets that are still open for testing
in Kate and other lenses.
Other areas tested in the current program include the up-dip
positions of the A, E, G and I lenses. Significant mineralisation
was recently intercepted in the E and G lenses that are expected to
add shallow, high-grade tonnages. Modelling of the DHEM data from
two holes into the I Lens up-dip position indicates that
mineralisation occurs nearby and that a modest zone of
mineralisation is likely to lie between the two holes.
As this initial phase of drilling nears completion, a number of
“step-out” targets are being drilled which include the new Lisa
Lens and testing a target to the south of the previous mining
operation. At this stage, the results from these holes will not be
included in the revised Mineral Resource estimate, however it is
expected these results may demonstrate further potential upside to
the Woodlawn mineral inventory.
DHEM Surveys
The majority of the holes drilled in the current program have
been surveyed with DHEM probes which provide an indication of the
potential occurrence of conductive massive sulphides adjacent to
the drill hole (‘off-hole’). Recent technological progress has
provided a marked improvement in the measured response to
sphalerite (zinc sulphide mineral), which has historically been a
limitation with DHEM techniques.
During the Phase 1 drill program, the recorded and modelled
response from the DHEM surveys has, in many cases, successfully
guided follow-up drilling, and continues to be an important
component of drill-targeting. As an example, the massive sulphide
intercepts in drill hole WNDD0012 (4.75m of massive sulphides,
assays pending), WNDD0013 (6.0m of massive sulphides, assays
pending) and WNDD0014 (2.0m of massive sulphides, assays pending)
were the result of off-hole conductors modelled from WNRC0010.
Similarly, the Kate Lens conductors modelled in WNDD0002 and
WNDD0003 provided an excellent platform for targeting the further
holes into the Kate Lens.
Two conductors have now also been modelled from drill hole
WNDD0009, providing down-plunge indicators for the G Lens, and
indicating the Kate Lens is open in the up-dip position. These are
robust targets for future drilling. Given this success, DHEM will
continue to be a key contributor to the future exploration programs
at Woodlawn.
Data Management
As part of the PEA, Heron has adopted a rigorous data management
system to ensure the reliability of the data being used both for
the PEA and future requirements for the project feasibility study.
All recent and historic data has been entered into an industry
standard database platform, and industry standard QAQC procedures
are being followed. This provides a solid foundation for the
Mineral Resource estimation, and is designed to comply with future
independent audits.
Mineral Resource Estimation
Heron’s preparatory work on the Mineral Resource estimation has
focused on developing a better understanding of the geology and ore
controls of the deposit through systematically digitising the
extensive historic underground geological maps, and generating a 3D
model of the geology and structures. This rigorous approach has led
to an improved understanding of certain geological structures which
focus, or constrain, the mineralization within the mine sequence.
This analysis is providing excellent insight into the prediction of
potential new mineralised locations and lenses (eg, Lisa Lens) and
identifying the key plunge directions for other lenses (eg, the
down-dip projection of G Lens).
The revised Mineral Resource estimate is progressing well and
will provide the PEA with a solid foundation from which to
determine other technical input parameters. While it is expected
that part of the current Mineral Resource will be decreased due to
the more rigorous overlay of the revised mining engineering
parameters, this will, in-part, be offset by gains made in new
areas from the Phase 1 drilling, such as the Kate and I Lenses, and
a number of the other lenses. In addition, the overall technical
quality of the Mineral Resource estimation will be improved. The
establishment of the PEA mining inventory is expected to be
established from both within the bounds of the existing Mineral
Resource and from the additions generated through the current Phase
1 drilling program.
Figure 1: Plan overview of the Woodlawn Lenses showing
pit and existing underground decline.
To view the image, please click on the following
link:http://www.fscwire.com/sites/default/files/NR/662/5517_heron1.jpg
Figure 2 (top): Cross section through the Woodlawn
underground lenses looking north.
To view the image, please click on the following
link:http://www.fscwire.com/sites/default/files/NR/662/5517_heron2.jpg
Figure 3 (bottom): Long-section looking east for the Kate
Lens showing recent drilling and modelled DHEM plate.
Metallurgical Testwork
Testwork is ongoing at Australian Minmet Metallurgical
Laboratories (“AMML”) on both fresh ore from the current Phase 1
drilling and on a 50:50 blend combination of drill core and
tailings from Tailings Dam South. This work demonstrates that
readily saleable copper, lead and zinc concentrates can be produced
at high metal recoveries in a conventional sequential flotation
circuit.
By applying improvements to process technologies, the Company
has achieved excellent results from floating the combined
underground mineralisation and former tailings, even exceeding the
historical recoveries achieved during the original flotation of
fresh Woodlawn underground ore alone. These excellent results bode
well for the PEA outcome and confirm the viability of the planned
co-treatment of the underground and tailings mineralisation through
the same process plant.
Process and Plant Engineering
GR Engineering Services is undertaking the process and plant
engineering work which builds upon their 2012 Front End Engineering
Design (“FEED”) Study for the tailings retreatment plant, as well
as taking into account the metallurgical test results for the
underground and underground/tailings samples. The work aims to
simplify the earlier flowsheet, and allows for increasing
concentrate production by adding components required for processing
the high-grade material from underground.
A revised flowsheet taking into account the improved process
technologies has now been approved, and the engineering study work
is proceeding on a plant design capable of processing variable
blends of underground ore and tailings at a total feed rate of 1.5
million tonnes per annum.
Rock Mechanics / Geotechnical Engineering
Beck Engineering, an Australian east coast based specialist
consultancy, has been engaged to assist with the rock mechanics
input to the proposed underground operation. As a component of
their work, the extensive historical records have been reviewed to
better understand the ground conditions previously encountered, and
past ground control practices deployed. In addition to this
historical knowledge base, inspection and geotechnical logging of
Kate Lens diamond drill core has led Beck to note that for this
exciting new lens, the “hanging wall appears to be more competent
than in the major lenses”. This increased competency, along with
the use of competent backfill, are important input parameters for
the selection of an appropriate mining method that provides for
maximum recovery and high productivity.
The new operation contemplated by the PEA has presented the
Company with the opportunity to consider the implementation of a
number of changes that will greatly improve the future management
of the ground conditions. These include:
- Full time geotechnical resources on
site to provide day-to-day technical support to mine
operations;
- Whole of mine environment structural
modelling to improve the predictive capacity for mine
planning;
- Adoption of alternative extraction
techniques that will minimise the creation of isolated sill pillars
(areas of ore loss, which was the case with the previously employed
overhand cut-and-fill mining method); and critically
- Implementation of cemented paste fill
as a competent support medium that will enable significantly higher
resource recovery whilst providing local and regional ground
support to the mine excavations.
Proposed Boxcut, Portal & Decline
A component of the current drilling program includes the
drilling of specific geotechnical holes along the proposed decline
route. The first geotechnical drill hole encountered low-competency
black shale and mudstone units, which led Beck Engineering to
recommend a revised decline route and a redesigned geotechnical
drill program. Three geotechnical holes have now been completed
with adequate ground conditions encountered in these holes at the
designed decline depths.
Mining Studies and Costs
SRK and Beck Engineering, with input from Heron (including past
Woodlawn employees), have been working on examining a number of
different mining methods that could be applied to both existing
resources in and around the former workings, as well as the new
resource areas defined by the recent drilling programs. Future
mining at Woodlawn will utilise several different mining techniques
determined by localised factors, such as mineralised width, length
and height, proximity to other workings, new resource areas, and
assessment of the likely ground conditions. Due to the high-grade
nature of the mineralisation, a target for the mine planning work
is to maximise metal recovery. The application of competent cement
paste fill will be integral to achieving this. SRK has estimated a
set of preliminary production rates and costs for these mining
methods that will be incorporated into the proposed mining
inventory, production schedule and financial assessment of the
PEA.
Backfill Studies
Outotec has commenced paste fill and rheology work on a 134kg
large sample collected from the South Tailings Dam and ground to 30
microns at AMML’s laboratory in Gosford. Initial testwork indicates
that approximately 48% of the material will be of a size suitable
for paste fill. This is a very positive development, and rheology
test work on the sample is due to be conducted shortly.
Following the completion of flotation test work by AMML on the
core samples from underground, the resulting tailings will be
forwarded to Outotec for further paste fill and rheology test
work.
Project Development – Permitting / Licensing
Whilst permitting and licensing aspects do not influence the
completion of the PEA, they are being advanced in parallel with the
study, to prepare the site for commencement of on-ground
development activity, aiming to avoid the extended delays often
encountered after decisions to proceed are taken.
The Woodlawn Project received NSW State Government approval for
development on 4 July 2013. As a condition of that approval, a
number of aspect management plans are required prior to the
commencement of construction. The management plans required by the
Department of Planning are in hand and final drafts will be
completed by the end of January 2015 for distribution to the
designated government agencies. It is anticipated these plans will
be lodged with the Department before the end of March 2015. Heron
has received notification from the Division of Resources &
Energy (DRE) that SML20, the mining lease that covers the Woodlawn
site, is to be renewed for a further 15 year period. Final renewal
documents are expected from the DRE within the next few weeks.
Commodity Market, Prices and Exchange Rate
A number of key commercial aspects will influence the financial
performance of the Woodlawn Underground Project with a particular
focus on the revenue received from the commodities produced. Zinc
is the most important product for the Woodlawn Project and the
issues of commodity market supply and demand balance, commodity
pricing trends, and the impact of exchange rate movements are all
trending towards an improvement in the Woodlawn project
economics.
Zinc market supply and demand
balance – The latest reported statistics from the
International Lead Zinc Study Group indicate for the period of
January 2014 to November 2014, zinc metal production was in a
supply deficit in the order of 255kt. This follows a reported
deficit of 97kt for the full 2013 year.
As a separate measure of the market supply/demand fundamentals,
the reported stock levels of zinc metal at both the London Metal
Exchange (LME) and the Shanghai Metal Exchange (SHFE) dropped
significantly in 2014 with LME stocks dropping by 242kt and SHFE by
155kt. Combined, these internationally recognised exchanges dropped
inventories by approximately 397kt. Year to date in 2015, these
reported stocks have dropped a further 55kt.
The lack of new supply additions along with significant mine
closures has led forecasters to point to a market that will be in a
long term supply deficit.
Zinc price – The zinc price for
2013 averaged US$1909/t or US$0.87/lb, for 2014, and with improving
market fundamentals, this averaged US$2164/t or US$0.98/lb. The
tightening of the zinc market, as projected by market forecasters,
continues to provide a basis for medium term and long term
commodity price strength. Macquarie Research have recently (January
2015) revised their long term zinc prices up by 39% to US$2,600/t
($2014).
Exchange rate impacts – The project
cost base is primarily exposed to the Australian dollar and the
commodity/product pricing to the US dollar. The Australian dollar
to US dollar exchange rate becomes an important issue for the
project financial margins. The AUD:USD exchange rate at the end of
2013 was 0.893 and at the end of 2014 it was 0.820. This provides
improved AUD revenue for a consistent USD commodity price.
Forecasters are generally projecting a stable to further weakening
in the Australian dollar against the US dollar over the medium term
which may further improve the project economics.
Woodlawn Project Development Plan
Following completion of the PEA, it is anticipated that a
Feasibility Study (FS) will be undertaken. The FS is expected to
take up to 12 months, encompassing the combined development of both
the underground and tailings projects. Following a positive outcome
from the FS and project funding, first production of zinc
concentrates at Woodlawn is estimated to be early in 2018.
About Heron Resources Limited:
Heron is engaged in the exploration and development of base and
precious metal deposits in Australia. Heron’s projects include the
high grade Woodlawn Zinc-Copper Project located 250km southwest of
Sydney, New South Wales, and the Kalgoorlie Nickel Project located
north of Kalgoorlie, Western Australia. In addition the Company
holds a number of other high quality exploration properties located
in the Lachlan Fold Belt, New South Wales.
For further information, please visit
www.heronresources.com.au or contact:
Australia:Mr Wayne Taylor, Managing Director and Chief
Executive Officer:Tel: +61 8 9215 4444Email:
heron@heronresources.com.au
Canada:Tel: +1 905 727 8688 (Toronto)
Compliance Statement (JORC 2012 and NI43-101)
The technical information in this news release relating to the
exploration results at the Woodlawn Project is based on information
compiled by Mr David von Perger, who is a Member of the Australian
Institute of Mining and Metallurgy (Chartered Professional –
Geology). Mr von Perger is a full time employee of Heron Resources
Limited and has sufficient experience, which is relevant to the
style of mineralisation and type of deposit under consideration and
to the activity which he is undertaking to qualify as a Competent
Person as defined in the 2012 edition of the “Australasian Code for
Reporting of Exploration Results and “qualified person” as this
term is defined in Canadian National Instrument 43-101 (“NI
43-101”). Mr von Perger has reviewed this press release and
consents to the inclusion in this news release of the information
in the form and context in which it appears.
Preliminary Economic Assessment (PEA)
The Canadian Securities Administrators (“CSA”)
published Staff Notice 43-307 Mining Technical Reports –
Preliminary Economic Assessments, clarifying the definition of
“preliminary economic assessment” (“PEA”) in National Instrument
43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”).
NI 43-101 defines a PEA as “a study, other than a pre-feasibility
study or feasibility study, which includes an economic analysis of
the potential viability of mineral resources”. The terms
pre-feasibility study (“PFS”) and feasibility study (“FS”) have the
meanings ascribed by the CIM Definition Standards for Mineral
Resources and Mineral Reserves.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
This news release contains forward-looking statements and
forward-looking information within the meaning of applicable
Canadian securities laws, which are based on expectations,
estimates and projections as of the date of this news release. This
forward-looking information includes, or may be based upon, without
limitation, estimates, forecasts and statements as to management’s
expectations with respect to, among other things, the timing and
amount of funding required to execute the Company’s exploration,
development and business plans, capital and exploration
expenditures, the effect on the Company of any changes to existing
legislation or policy, government regulation of mining operations,
the length of time required to obtain permits, certifications and
approvals, the success of exploration, development and mining
activities, the geology of the Company’s properties, environmental
risks, the availability of labour, the focus of the Company in the
future, demand and market outlook for precious metals and the
prices thereof, progress in development of mineral properties, the
Company’s ability to raise funding privately or on a public market
in the future, the Company’s future growth, results of operations,
performance, and business prospects and opportunities. Wherever
possible, words such as “anticipate”, “believe”, “expect”,
“intend”, “may” and similar expressions have been used to identify
such forward-looking information. Forward-looking information is
based on the opinions and estimates of management at the date the
information is given, and on information available to management at
such time. Forward-looking information involves significant risks,
uncertainties, assumptions and other factors that could cause
actual results, performance or achievements to differ materially
from the results discussed or implied in the forward-looking
information. These factors, including, but not limited to,
fluctuations in currency markets, fluctuations in commodity prices,
the ability of the Company to access sufficient capital on
favourable terms or at all, changes in national and local
government legislation, taxation, controls, regulations, political
or economic developments in Canada, Australia or other countries in
which the Company does business or may carry on business in the
future, operational or technical difficulties in connection with
exploration or development activities, employee relations, the
speculative nature of mineral exploration and development,
obtaining necessary licenses and permits, diminishing quantities
and grades of mineral reserves, contests over title to properties,
especially title to undeveloped properties, the inherent risks
involved in the exploration and development of mineral properties,
the uncertainties involved in interpreting drill results and other
geological data, environmental hazards, industrial accidents,
unusual or unexpected formations, pressures, cave-ins and flooding,
limitations of insurance coverage and the possibility of project
cost overruns or unanticipated costs and expenses, and should be
considered carefully. Many of these uncertainties and contingencies
can affect the Company’s actual results and could cause actual
results to differ materially from those expressed or implied in any
forward-looking statements made by, or on behalf of, the Company.
Prospective investors should not place undue reliance on any
forward-looking information. Although the forward-looking
information contained in this news release is based upon what
management believes, or believed at the time, to be reasonable
assumptions, the Company cannot assure prospective purchasers that
actual results will be consistent with such forward-looking
information, as there may be other factors that cause results not
to be as anticipated, estimated or intended, and neither the
Company nor any other person assumes responsibility for the
accuracy and completeness of any such forward-looking information.
The Company does not undertake, and assumes no obligation, to
update or revise any such forward-looking statements or
forward-looking information contained herein to reflect new events
or circumstances, except as may be required by law.
No stock exchange, regulation services provider, securities
commission or other regulatory authority has approved or
disapproved the information contained in this news release.
Australia:Heron Resources LimitedMr Wayne Taylor, +61 8
9215 4444Managing Director and Chief Executive OfficerEmail:
heron@heronresources.com.auorCanada:+1 905 727 8688
(Toronto)