HERON RESOURCES LIMITED

KALGOORLIE NICKEL PROJECT

INFORMATION MEMORANDUM

May 2004

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 1 EXECUTIVE SUMMARY

1.1 Development Opportunity

The Kalgoorlie Nickel Project (KN Project) is a potentially world-class nickel laterite project located
within the Kalgoorlie Goldfields historical mining district of Western Australia. The resources are
concentrated at Goongarrie, Siberia, Bulong and Kalpini.
The Kalgoorlie Nickel Project inferred mineral resource is 890 million tonne at 0.7% Ni and 0.05% Co at a
0.5% Ni cut-off grade. Following screening of siliceous ore, the target resource potential is estimated to be
130 million tonne at 1.5% Ni and 0.1% Co, for 2 million tonne of contained nickel metal. The Project has
two components:
North Kalgoorlie Nickel Project (NKN Project), centred 70km NW of Kalgoorlie-Boulder, hosting
nickel laterite resources derived from a very extensive lateritised ultramafic unit termed the Walter
Williams Formation (WWF). The unit occurs over an area of 150x35km, and is up to 600m thick.
This is a vast volume of nickel-enriched protore to weather and thus develop economic laterite
deposits. The dominant ore styles are siliceous and goethitic.
Hampton Nickel Project (HN Project), centred 40km E of Kalgoorlie-Boulder, hosting nickel laterite
resources developed on lateral flow equivalents of the WWF, characterised by more linear and
discontinuous ultramafic flow units. The dominant ore style is nontronitic and saprolitic.
The Kalgoorlie Nickel Project aims to be a 40,000tpa nickel-in-intermediate product producer, using premium
metallurgical quality goethite and siliceous ore leached by conventional high Pressure Acid Leach (PAL)
technology, and nontronite and saprolite ore leached by Atmospheric Acid Leach (AAL) as a secondary
leaching and neutralisation stage.
The KN Project is the largest undeveloped high grade nickel laterite resource in Australia. The ore type has
significant metallurgical benefits when compared to operating Western Australian PAL projects, and
Australia provides a low sovereign risk development environment when compared to similar projects under
review internationally.

1.2 Project Advantages

Security of Tenure
The key KNP resource assets are located on 100% Heron-owned tenements, are unencumbered, and have
granted Mining Lease tenure.
Worlds Best Infrastructure
Infrastructure, political stability and access to an educated stable local resident work force are the key
parameters of the Kalgoorlie Nickel Project that favour its future development ahead of wet tropical projects
in high sovereign risk locations. When considering the high capex requirement for nickel laterite projects,
the Kalgoorlie Goldfields achieves international competitive advantage through its excellent infrastructure.
Grade Advantage
In nickel laterite, grade is critical, and is the dominant sensitivity in cash flows. The wet tropical laterites are
typically 1.3-1.6% Ni (Goro, Weda Bay). The KNP has an estimated screened grade of 1.5% Ni
(comparable ore types to Cawse and Ravensthorpe).
Bulk Mining and Consistent Leach Feed
The Kalgoorlie Nickel Project is a bulk tonnage operation, favouring low mining costs. Generally this is the
dominant competitive advantage of nickel laterite over nickel sulphide (and concomitant safety advantages).
Nickel laterite processing is a chemical engineering exercise, requiring a uniform ore feed (achievable for
goethite ore, but more difficult in saprolite and clay ores, due to variability of weathering and consequent
heterogenous ores).

1.3 Proposal for AIM Listing and a Strategic Partnership

Heron having completed resource acquisition, initial resource drill-out and preliminary metallurgical
testing, now seeks to list Herons nickel laterite on the London Stock Exchange AIM.
Additionally, a committed nickel industry partner is sought as a cornerstone investor, to help move
the Kalgoorlie Nickel Project to the next development level, and ultimately through to the completion
of a Bankable Feasibility Study (BFS).

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1.4 Corporate and Market Considerations
World Nickel Market
Nickel is a commodity deriving maximum benefit from Chinas economic growth. The nickel growth is related
to the building boom in China, and the resultant demand for stainless steel. World nickel demand is 1.2mtpa
of new metal, with a current projected growth rate of 4-5%pa or 50,000tpa.
The proposed scale of the Kalgoorlie Nickel Project at 40,000tpa nickel is one year of new nickel demand.
There is a world-wide shortage of traditional nickel sulphide refinery feedstock, being the conventional nickel
feedstock. Nickel laterite is a genuine long term source of nickel supply to meet expanding world demand.
There are now three successfully operating PAL plants:
Murrin Murrin (Minara) in the northern Kalgoorlie Goldfields of WA.
Cawse (OMG) in the central Kalgoorlie Goldfields.
Moa Bay (Sherritt) in Cuba.
There are two new PAL nickel oxide projects at BFS finalisation/completion:
Ravensthorpe (BHP Billiton) in the southern Kalgoorlie Goldfields of WA, 40,000tpa intermediate
product to the Yabulu Queensland refinery.
Goro (Inco) in New Caledonia, 60,000tpa intermediate product to Asian refineries.
Scale of Kalgoorlie Nickel Project
The Kalgoorlie Nickel Project is comparable in scale, resource style, metallurgical style and capex to a
greenfields Darling Range bauxite project, being a chemical engineering project with excellent
infrastructure, but lower grade compared to competitor projects in high sovereign risk-poor infrastructure
locations.
The critical issue for nickel laterite is resource quality, being a requirement ideally for dominantly goethite ore
styles and leach feed grades of 1.4% Ni (in Australia) to 1.6% Ni (wet tropics). The KNP leach feed target is
1.5% Ni.
The competitive advantage of the Western Australian nickel laterite industry (3 of 5 current or pending
projects are in WA) relates first to infrastructure, then to security of mineral tenure, and finally to the screen
upgrade potential of the Kalgoorlie Goldfields siliceous goethite ore.

Infrastructure
The key Goongarrie, Highway, Ghost Rocks and Bulong tenements are all located in proximity to rail,
bitumen roads, power lines and gas pipeline. Ore transportation has rail, road and slurry line options.

Strategy of 100% Tenement Ownership

As a small capitalised explorer, Heron has since 1997 systematically pegged or purchased most of the
available oxide laterite stratigraphy in the Kalgoorlie area, to secure 100% project ownership. Through this
strategy, some 80% of the prospective Kalgoorlie Nickel project area laterite stratigraphy is now controlled
by Heron.

Unencumbered Tenements
The key Goongarrie, Scotia Dam, Ghost Rocks and Kalpini tenements are unencumbered. A third party has
certain infrastructure rights on the Bulong tenements. The Siberia and Highway tenements have minority
party interests.

Granted Mining Leases

The key Goongarrie, Scotia Dam and Kalpini tenements are granted mining leases capable of supporting
mining operations. All additional and significant resources have mining lease applications in place.

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1.5 Sovereign Ranking, Location and Infrastructure
The Kalgoorlie Nickel Project is a high quality asset:
Highest Australian nickel laterite grades.
Ore zones have consistent chemistry.
Thickest Australian nickel laterite ore zones.
The KNP location is within one of the worlds premium mineral producing provinces:
Excellent regional infrastructure.
Political stable, with no sovereign risk.
Stable, skilled mining work force locally resident in Kalgoorlie.
Western Australia has the worlds best security of mine tenure. The WA Mining Act is able to support
25 year extended mine life projects, with an ability to safely maintain mineral title until a resource is
required as a feedstock.

Of particular importance, Western Australia appears to be developing a preferred mineral supplier status
with China:
Mature political system and established project development protocols.
Proximity to China including common time zone.
Common language (English is the second language of China, and is universally spoken).
The Kalgoorlie Goldfields arguably has the worlds best established nickel industry infrastructure:
Rail link with nickel refineries at Kwinana (at southwest railhead) and Murrin Murrin (at northeast
railhead).
Ports at Kwinana (600km SW of Kalgoorlie) and Esperance (400km S of Kalgoorlie).
Goldfields Gas Transmission pipeline transects the Kalgoorlie Nickel Project.

1.6 Geology and Ore Genesis

Nickel laterite only forms from weathering of olivine-rich rocks. The signature rock of the Kalgoorlie
Goldfields is an ultramafic rock termed komatiite, which is an olivine-rich lava flow of vast areal extent. It is
these komatiites, or the basal Walter Williams Formation flow unit, which provides most of the Kalgoorlie
Nickel Project nickel laterite resource base. The weathered WWF typically assays 0.5% Ni as a background,
and forms siliceous ore. In zones of more intense lateritic weathering, related to faulting and bedrock
alteration, ore grades exceeding 1% Ni are generated.
Ultramafic lithotype strongly influences the lateritic ore style:
North Kalgoorlie Nickel Project, the protore is the olivine adcumulate WWF ultramafic flow,
presumably emplaced in proximity to the lava flow vent or within a major flow feeder channel. The unit
is intensely magnetic with distinctive aeromagnetic signature. The adcumulate characteristically
weathers to siliceous laterite, which dependent upon the intensity of weathering processes (silica
leaching), develops high grade goethite ore within the upper laterite profile.
Hampton Nickel Project, the protore is an olivine meso to orthocumulate distal lateral flow equivalent
of the WWF, characterised by more linear and discontinuous ultramafic flow units as confirmed by
aeromagnetics. The dominant ore style is nontronitic, with a goethitic overprint in the upper laterite
profile. Where discrete lava channels occur, olivine adcumulate is present, forming discrete mesas of
siliceous ore.

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1.7 Resource Inventory
The Kalgoorlie Nickel Project is a world quality nickel laterite resource:
The WWF is a vast resource of sub-grade oxide siliceous ore, which may become economically viable
through in situ leaching of silica and magnesia in the laterite weathering profile (Goongarrie), or
through screening during ore preparation (Cawse).
The vast WWF resource base is dominantly held by Heron.
The Kalgoorlie Nickel Project non-diluted global resource is 890 million tonne at 0.7% Ni. The siliceous ore
styles will be the dominant leach feed resource, upgrading to say 130 million tonne at 1.5% Ni, for 2 million
tonne of contained nickel metal. The KNP contained nickel is comparable to:
Mount Keith with 2.6mt nickel (475mt at 0.55% Ni)
Kambalda with 1.4mt nickel (45mt at 3.2% Ni).
Within this global resource, a number of discrete JORC classified resources have been estimated which
include Inferred, Indicated and Measured components. Conversion to reserves is dependent on future
processing routes.
In general, a typical resource classification based on goethite ore variography is:
40x40m or closer is Measured Mineral Resource.
80x80m or closer is Indicated Mineral Resource.
400x80m or closer is Inferred Mineral Resource.
A large proportion of the global resource is based on drilling in excess of 160m line spacing supported by
geological mapping and geophysical interpretation. Experience has shown with infill drilling that the grade
and tonnes of the global resource estimate convert well at the Inferred and Indicated classifications.
All of Herons resource drilling is from vertical RC drill holes, with selective validation diamond drill twin
holes.

1.8 Mining
The biggest mining issue is the large size of the proposed pits. Herons individual pits at Goongarrie, Siberia
and Bulong could be up to 5km long. Additionally, at Goongarrie, the ore extends to depths of up to 160m.
The ore bodies are exceptionally soft rock types, such that long term ramps will ideally be located in hard
competent rocks adjoining the ore zones (at Goongarrie, hangingwall Siberia Formation basalt is proposed
for ramp construction).
The ore bodies typically have sharp 1-4m cut-offs between ore (1% Ni cut-off) and waste (less than 0.75%
Ni). Accordingly, pits tend to be exhausted in a single mining pass, rather than sub-grade remaining in the
base of pits, for recovery when metal prices are higher. The base of pit material, being magnesitic, is also
likely to be recovered for PAL neutralisation.
Mining conceptual plans thus utilise progressive strip mining waste back-fill, and screening skats back-fill to
exhausted pits

1.9 Metallurgy
The Kalgoorlie Nickel Project will aim to utilise proven flowsheets. Nickel laterite hydrometallurgical
technology is now off the shelf technology, successfully operating at Moa Bay in Cuba for the last 50 years.
The day-to-day plant performance of Cawse since 2001 and Murrin Murrin since 2002 is further confirmation
that the Kalgoorlie Goldfields PAL plants have overcome their commissioning issues, and are viable long
term sources of world nickel supply.
The March 2004 decision by BHP Billiton to commission the Ravensthorpe Nickel Operation provides a
strong endorsement for the Australian nickel laterite industry.
Quite unequivocally, front-end PAL technology is now a proven technology, with negligible technical risk.

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1.10 Project Risk Management
The critical issues for PAL nickel laterite operations include:
Production target is a critical mass of around 40,000tpa nickel in product (as for Murrin Murrin and
proposed Ravensthorpe).
Resource quality, being a requirement ideally for goethitic ore styles and Leach Feed Grades (LFG)
exceeding 1.4% Ni. Goethite ore (Cawse and Moa Bay) has low acid consumption and good
rheology.
High LFG, partly achieve through screening siliceous ore (as for Cawse and proposed Ravensthorpe).
As well as High Pressure Acid Leach, use of saprolite neutralisation and Atmospheric Acid Leaching
as part of flow sheet, as proposed for Ravensthorpe.
Ensure fully de-coupled flowsheet (avoid Bulong downtime issues).
Produce an intermediate product for sale to the highly competitive refining market.
Avoid over-capitalisation of processing plant, through off-site refining (as for proposed Ravensthorpe,
and Cawse since 2002).
Herons risk-minimisation strategies aim to avoid the problems of the first generation Kalgoorlie Goldfields
nickel laterite PAL plants.

1.11 Forward Program

Corporate
Heron has retained Argonaut Capital (Argonaut) as Corporate Adviser.
Resource Estimation
Heron has retained Snowden Mining Industry Consultants (Snowden) to prepare independent resource
estimates for the Kalgoorlie Nickel Project. Heron has acquired resources from various third parties all with
varying ore characterisation and resource estimation parameters. The Snowden study will aim to generate a
standardised resource estimation methodology.
Scoping Study
Heron has retained Sinclair Knight Merz (SKM) to prepare a Scoping Study for the Kalgoorlie Nickel
Project, including the following assessments:
Relative importance of various ore types, being goethite, siliceous, nontronite and saprolite ore, and
consequent impact on Block Flow Diagram (BFD).
Having settled on a BFD, optimise the location of the KNP processing plant. Options to consider
would include;
If a goethite HPAL BFD, then Goongarrie is the most likely plant site (Goongarrie-Siberia has
37% of currently estimated leach feed material). If a Goongarrie site is selected, then siliceous
ore at Siberia, Highway and Ghost Rocks would be coarse screened on site and pumped as
slurries to the Goongarrie plant.
If a nontronite/saprolite AAL BFD is preferred, then Hampton is the most likely plant site
(Hampton has 40% of currently estimated leach feed material).
Pre-feasibility Study
Heron has commenced the drilling phase of an in-house PFS. Following the planned AIM capital raising, the
PFS will include:
150,000m RC, Indicated Resource A$7.50m
5,000m of DDH A$1.00m
Calweld drill, 1,000m A$0.50m
Resource estimation A$0.25m
Metallurgy A$1.00m
Hydrology A$0.25m
Engineering A$1.00m
A$11.50m

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Figure 1 Kalgoorlie Nickel Project Locations and Areas of Resource Drilling

Quarterly Report
March 2004
 KALGOORLIE NICKEL PROJECT
GLOBAL RESOURCE

1,000,000,000 2.00

900,000,000 1.80

800,000,000 1.60
Tonnes
Ni Grade
700,000,000 1.40

Ni Grade (un-diluted)
Tonnage (undiluted)

600,000,000 1.20

500,000,000 1.00

400,000,000 0.80

300,000,000 0.60

200,000,000 0.40

100,000,000 0.20

0 0.00
0.50 0.60 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50
Ni Cut Off Grade