Sherlock Bay story continues

Primer on my investment outlook

Amazing stuff this... I had written this company off but held on to their Conv Notes as it offered a high yield..

AUSTRALASIAN Resources plans to step up the evaluation of its long-held, low-grade Sherlock Bay nickel project in Western Australia following successful heap leach test work.

Australasian Resources managing director Darren Hedley

The Sherlock Bay nickel project near Karratha, Western Australia

Australasian, which prior to last year's move into magnetite shared its name with the Sherlock Bay project, said continued column recovery tests of ore from Sherlock Bay had returned recoveries of 85-95%.

Australasian managing director Darren Hedley told MiningNews.net the company was close to finalising an independent project team to focus on advancing the asset.

Hedley said the latest test work, coupled with the soaring nickel price and the financing secured as part of the company's diversification into magnetite, made now the perfect time to step up the valuation of Sherlock Bay.

Resources at Sherlock Bay currently stand at 25.4 million tonnes grading 0.4% nickel for 101,000 contained tonnes of nickel metal.

Earlier initiatives to advance the project were stifled by issues over the project's metallurgy.

The project had been earmarked to move into production in June 2004, but the company surprised the market shortly before that date when an internal review found Sherlock Bay needed significant additional work before development could begin.

The Sherlock Bay project began taking a back seat to uranium and iron ore assets in late 2005 as Australasian – then under its former moniker of Sherlock Bay Nickel – struck a partnership with Clive Palmer's private group Mineralogy.

That partnership has since seen Palmer vend the 547Mt Balmoral South magnetite project into Australasian, with Palmer now the dominant shareholder on Australasian's register.

On Monday, Australasian ended a four-month trading halt when it finalised funding agreements with Chinese steel giant Shougang for the development of Balmoral South.

Shougang entities will finance 100% of the project funding (estimated at $US2.1 billion or $A2.5 billion) through an interest-free project loan, and will also subscribe to up to $A108 million in Australasian shares and options.

Hedley said Australasian had been advancing the Sherlock Bay project continuously while the magnetite strategy evolved.

"There's no doubt we've been working hard on the iron ore, but work has always continued on Sherlock Bay and it never stopped," he said.

"It's a project that can have very low operating costs. It's sulphide, not laterite, and leaching of sulphides can be very cheap.

"The heap leach recoveries have gone up, the nickel price has gone up, so it's all come together very nicely."

Shares in Australasian – which almost doubled from $1.15 to $2.20 when it was readmitted this week – climbed 10c to $1.63 in early afternoon trade.