Zinc price flying, page-51

Eight years is generally viewed as the minimum requirement for mine life. HRR can explore to expand the resource and replace reserves while mining underground.

In a low interest rate environment and with commodity prices rising, debt is attractive. Unfortunately, the company is under-capitalized and lenders will not be able to underwrite a large enough facility to fund the debt portion of CapEx... so unless the share price appreciates considerably, the priority should be preserving cash to minimize equity dilution.

The sensible move is to secure an off-take agreement with smelters and commodity trading firms. My understanding is that conversations are ongoing. They should not have much trouble, as smelters are hungry for feed... look at the very low tc/rc fees.

The problem here is that milling and recoveries are difficult to project. Woodlawn, from what I hear, was a headache in its past life because of poor mill performance. Heron intends to improve mill performance at Woodlawn by using ultra-fine grading similar to the process at Caribou mill. The problem is, the Caribou mill (using a technique first developed over 20 years ago) is still falling short of expectations.

The other issue is that $144.2 CapEx seems to exclude sustaining capital. "Pay as you go", if you will. A risky proposition if recoveries are uncertain. You see this being played out time and again, companies under capitalized at start up and shareholders equity destroyed as a consequence.

While there are some questions and challenges, they are not insurmountable. Heron Resources is uniquely positioned to take advantage of the robust conditions in the zinc market and, if they get it right, will provide very good leverage to rising prices. I am a shareholder and plan to add once funding is in place and again once commercial production rates are achieved.

*Disclaimer: Much of what I've written above was relayed to me by an engineer who had a prominent role in putting McArthur River into production.