Dairi Zinc/Lead Project

The Dairi Project is located in the Dairi Regency in North Sumatra, Indonesia. Herald Resources Ltd, the manager of the Dairi Contract of Work since its inception in 1998, has completed a Feasibility Study based upon mining of the high grade Anjing Hitam deposit,
one of several resources already identified by Herald at the Dairi Project.

Herald believes that the Dairi Project represents the discovery of a major new zinc/lead province, which when in production will comprise the only operating zinc/lead mine of significance in Indonesia.

Project Interests

Herald Resources Ltd (Herald) 80%

Herald is listed on the Australian Stock Exchange with a market capitalisation of approximately A$520 (US$470). Herald shares also trade as ADR’s in the United States and on OTC markets in Germany.

Herald first listed on the ASX in 1948 and has successfully developed and managed a number of mining operations in Australia.

The key members of the Herald management team, led by Mr Terrence Allen, have been with the company for most of the last 20 years, and in that time have developed a new mine on average every 4 years.

PT Antam 20%

Antam is a publicly listed, partly Indonesian state-owned mining company with interests in a number of nickel, gold and bauxite operations in Indonesia.

Antam is dual listed on the Jakarta and Australian stock exchanges and has a market capitalisation of approximately US$38m.

In December 2004, Antam was selected as one of Asia’s Best Companies 2004 by two leading publications, Finance Asia and Euromoney.

Title / Legal

The project is held under a 7th Generation Contract of Work (CoW). The CoW system is a highly regarded form of title under which most mines in Indonesia operate (e.g. Freeport at Grasberg, Newmont at Batu Hijau, etc). As the name suggests, the CoW is a legally enforceable contract between the mining company and the Republic of Indonesia, and which sets out in detail the mining company’s rights and obligations, including income taxes (30%) and royalties (1-2%).

All CoW’s require the formation of a CoW-specific project company, with the project interests equal to the respective shareholdings in this company. The Dairi CoW company, was incorporated at the time of granting of the CoW, with Herald owning 80% of the shares (via an offshore subsidiary) and Antam 20%.

It is envisaged that this company would be the counterparty for most financial arrangements, offtake agreements and so on.

Resources & Reserves

The feasibility study is based solely on the Anjing Hitam sedex deposit. The total measured, indicated and inferred sedex resources presently identified within the Dairi Contract of Work are as follows:

Resources (Inclusive of Reserves)

April 2008
Project / Prospect Category Tonnes
(000’s) Grade
(% Zn) Grade
(% Pb)
Dairi (Herald 80%,
PT Antam 20%)
Anjing Hitam Measured 5,400 16.5 10.2
Indicated 2,300 14.7 8.7
Inferred 300 10.3 5.4
Sub-Total 8,000 15.8 9.6
Basecamp Measured
Inferred 800 7.2 4.3
Sub-Total 800 7.2 4.3
Lae Jehe Measured
Indicated 6,600 10.8 5.8
Inferred 2,500 9.1 5.1
Sub-Total 9,100 10.4 5.6
Total Measured 5,400 16.5 10.2
Indicated 8,900 11.8 6.5
Inferred 3,600 8.8 4.9
Total Dairi Resources Total 17,900 12.6 7.3
Total Estimated Contained Zinc 2.26 Mt
Lead 1.31 Mt


December 2007
Project / Prospect Category Tonnes
(000’s) Grade
(% Zn) Grade
(% Pb)
Dairi (Herald 80%,
PT Antam 20%)
Anjing Hitam Proved 5,000 15.0 9.1
Probable 1,500 12.5 7.3
Sub-Total 6,500 14.4 8.7
Total Estimated Contained Zinc 0.94 Mt
Lead 0.57 Mt

Mining Plan

The Anjing Hitam orebody is to be accessed by a main decline, and the mining scheme is governed by rock geotechnical conditions. It is proposed the thicker sections will be mined by open stoping with cemented paste tailings backfill, followed by cut and fill on the hanging wall.

The mining reserve is calculated at 6.5m/t at a diluted grade of 14.4% Zinc, 8.7% Lead and 10g/t Silver. This represents some 83% of the Anjing Hitam resources.

Of the 1.5m/t of resources not included in this mining inventory, it is expected that further significant tonnes may be extracted once mining commences and conditions are fully understood.

Alternative mining plans are being considered, with the value of the metal being a key factor in the decision making factor.

Metallurgical Testwork

Metallurgy, Process and Plant Design

Metallurgical testwork carried out in several separate programs has been successful in demonstrating satisfactory recovery levels, designated for zinc at 85% into a 55% zinc concentrate; and for lead, 75% into a 64% lead concentrate.

It should be noted that significantly higher lead grades have been obtained during the testwork programs.

The life of mine concentrate production has been calculated to be:

Zinc concentrate – 1,449,000 dry tonnes @ 55% Zinc
Lead concentrate – 664,000 dry tonnes @ 64% Lead

Concentrate Specifications

The Dairi Project will produce clean high grade lead and zinc concentrates. There is a small amount of silver in both concentrates, and no other major deleterious elements. It is noteworthy that the zinc concentrates contains less than 6% iron.

Also of interest is the sizing of the concentrates which could be classified as medium “coarseness”, which are in great demand by many regional smelters who are running the “finer” concentrates produced by other miners. This will be a major advantage in the marketing of the product.

Samples of the concentrates have been sent to several smelters for evaluation and in all cases the feedback has been positive.

A detailed specification of the lead and zinc concentrates is provided in the attachment to this summary.

Year 1 2 3 4 5 6 7 8
Milled 860 1,000 1,000 1,000 801 745 830 404
Concentrates 190 224 219 222 180 183 184 93
Concentrates 84 102 98 99 84 83 88 46

* Year 1 comprises first 5 quarters of operation

Transport and Logistics

Concentrates are to be trucked to the port of Kuala Tanjung, on the east coast of Sumatra, where the Company will construct its own concentrate store and load-out facilities alongside those of PT Inalum, the large aluminum smelting company.
This is a variation to the slurry pipe line to the west coast as envisaged in the feasibility study.

One of the major advantages of the Dairi Project, other than its size, high grade and acceptability of its product, is its proximity to a number of smelters located in Asia.

Shipping costs have been modeled for a range of destinations. An average rate of $17/tonne of concentrate has been used in the feasibility study.

Capital & Operating Costs

For latest operating and capital costs, please refer to announcement on 17 January 2008.

Dairi Concentrate Specifications

Lead Concentrate

Element or Radical Range Wt% Element of Radical Range ppm
Pb 63 – 70 Ag 40 – 45
Zn 5 – 7 As 30 – 50
Fe 4 – 6 Bi tr
S 18 – 19 Cd 250 – 300
Ca0 0.05 – 0.1 Co tr
Mg0 0.05 – 0.1 Cr 50
Al²03 0.1 Cu 50 – 70
Mn0 0.01 Hg 0.5
Si0² 0.1 – 0.5 Ni 10
T0EC 0.2 – 0.4 Sb 80 – 100
Cl 400-500 ppm F <20 ppm

Zinc Concentrate

Element or Radical Range Wt% Element Radical Range ppm
Zn 53 – 57 Ag 12 – 15
Pb 3 – 4 As 50 – 100
Fe 4 – 6.5 Bi tr
S 32 – 34 Cd 2000 – 2500
Ca0 0.05 – 0.1 Co tr
Mg0 0.05 – 0.1 Cr 50
Al²03 0.2 – 0.4 Cu 500 – 700
Mn0 0.03 – 0.05 Hg 3 – 5
Si0² 1.0 – 1.5 Ni 10 – 20
T0EC 0.1 – 0.3 Sb 10 – 30
Cl 400-500 ppm F <20 ppm

SIZING P 80 = 16 – 18 microns

Zinc is the fourth most widely used metal in the world. Its resistance to non-acidic atmosphere corrosion means that zinc is instrumental in prolonging the life of buildings, vehicles, ships and steel goods and structures of every kind. Accordingly, galvanising accounts for about half of all present day applications of metal, and this figure is increasing.

The uses of lead can be treated back to the earliest days of history. The Romans described it as the ‘basest of base metals’ due to the ease with which it could be beaten or melted. In recent times has come into its own with the evolution of applications as petrol additives, pigments, chemicals, crystal glass and batteries.

The largest market for lead is in battery production, consuming a large proportion of the lead produced in the western world.
look at this statement by the share holder memorandum ==
13 December 2007
Companies Announcement Office
Australian Stock Exchange Limited
20 Bridge Street
Via ASX Online
Please find attached a copy of a letter to shareholders regarding the recent takeover bid for
Herald Resources Ltd.
Yours faithfully
Executive Director
13 December 2007
Dear Fellow Shareholder
I would like to update you on the significant corporate developments with Herald Resources
Limited (“Herald”or the “Company”) that affect all shareholders.
On 12 December 2007, PT Bumi Resources Tbk (“PT Bumi”) announced its intention to
make an all-cash offer for all the shares in Herald that it does not already own at $2.25 per
share. Your directors wish to confirm that:
• the bid is HOSTILE and UNSOLICITED; and
• their advice that shareholders TAKE NO ACTION in relation to the bid until your Board
has an opportunity to fully consider the bid and make a formal recommendation.
Your directors wish to address certain matters regarding the Company’s progress to date
with our high grade zinc/lead Dairi Project in Sumatra, Indonesia and the announcement
made by PT Bumi.
Herald is a long established and well-regarded mining company with a strong record of
developing and operating mines.
The Dairi project, in which Herald has an 80% stake, is the most exciting in the Company’s
history. At the Anjing Hitam deposit, we have a high value reserve of 6.6 million tonnes
grading 15% zinc and 9% lead. It is planned to extract that reserve via a 1 million tonne per
annum operation with an initial mine life of 7 years. At full capacity this will give us annual
metal production of around 115,000 and 60,000 tonnes of zinc and lead respectively, a
serious producer in the base metals business.
Apart from those reserves, substantial other resources have also been delineated (e.g. Lae
Jehe 6.5MT @ 11% Zn, 6% ) which give us great confidence that the eventual mine life will
be well beyond the initial 7 year period.
In addition to that, the potential for further discoveries within our Contract of Work as we
continue to explore remains outstanding. Despite the success to date, we feel we have only
just “scratched the surface” of what is clearly a major new zinc/lead province.
In summary, Dairi is an outstanding project that has already delivered substantial
value for Herald shareholders. We expect further value to be added as we
progress towards the commencement of mining and full development of the Dairi
Your Company has made a number of announcements regarding the approvals
required to proceed to full development. The approvals process is now at an
advanced stage. To date we have been granted 2 out of 3 of the most important
approvals to proceed with the development, namely approvals from the
Environment and Mines departments, both of whom we have found very
The principal outstanding approval required is that of the Minister of Forestry to
issue a permit for underground mining and construction of treatment facilities, as
these functions lie within a forest area. The Company has been advised that a
Presidential Regulation is required in order for the Minister to issue the permit,
and that this regulation is now being drafted.
Your directors believe your Company has traded at a significant discount to its
intrinsic value while awaiting this forestry permit.
We have confidence in the integrity of the Indonesian Government’s approval
process and that Herald has at all times complied with all regulatory and other
requirements of the Indonesian authorities.
Accordingly your directors believe the offer by PT Bumi at this late stage of the
approval process to be opportunistic.
Your directors are concerned by PT Bumi’s statement in its announcement that
its “experience in the Indonesian mining sector and the requirements of the
Indonesian regulatory process make it uniquely positioned to advance the Dairi
zinc / lead development in an effective and timely fashion”.
Herald is not aware of any special circumstances which may uniquely position
PT Bumi in securing the forestry approval required to develop the Dairi Project or
in any way disadvantage you as owners of the Company relative to PT
Bumi. In this regard we note that our 20% joint venture partner in the Dairi
Project is PT Antam, which is one of Indonesia’s largest mining companies. PT
Antam is 65% owned by the Indonesian Government and is listed on the Jakarta
and Australian stock exchanges.
We are fortunate to have an exceptionally strong and experienced team of
people at Herald, both Australian and Indonesian nationals. Our ability to attract
good staff has positioned us extremely well to advance Dairi and our other
projects in Sumatra, both operationally and in terms of the approvals process.
We will keep you fully informed of all developments and will provide you with a
formal response and recommendation regarding the bid in due course.
Yours faithfully


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