Heron Resources (ASX:HRR) has announced the results of a scoping study on its 100% owned Kalgoorlie Nickel project in Australia. The initial capital expenditures for a 22 million pounds per year production rate is A$356M and the production cost (on a C1 basis) will be almost A$4/lbs. Even though the reduced capital expenditures (A$2.5B lower than the previous study which was conducted in 2010), we remain very cautious on Heron’s attempts to bring the Kalgoorlie nickel project into production.

At the current nickel price of A$8/lbs, the payback period will be approximately 5 years which is relatively long considering the used nickel price isn’t exactly extremely conservative. The progress is encouraging, but let’s first see what the feasibility study brings before getting excited.

> Click here to read the press release

Disclosure: The author holds no position in Heron Resources. Please see our disclaimer for current positions.

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