Heron’s Woodlawn Zinc-Copper Project Faces Production Delays

- March 12th, 2019

In an update on its Woodlawn zinc-copper project, Heron Resources reported that ore processing will be delayed to 2019’s second quarter.

In an update on its Woodlawn zinc-copper project, Heron Resources (ASX:HRR) reported that ore processing will be delayed to 2019’s second quarter.

Earlier this month, Heron announced the start of process plant wet commissioning, which left feeding ore through the plant as the final step of the project’s commissioning. In Tuesday’s (March 12) update, the company stated that contractor Sedgman had advised of the delay at the beginning of March, and that the asset would see first concentrates ready for shipment by May.

Woodlawn had been previously docketed to begin production in 2019’s first quarter.

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“Heron has been very committed to delivering on dates at every milestone of the Woodlawn project development. As announced on March 4 2019, feeding ore through the plant is the only remaining step in commissioning the project and once completed Heron will transition to becoming Australia’s newest producer of base metal concentrates,” Heron Managing Director Wayne Taylor said in a statement.

“We are naturally disappointed by this delay to our development timeline and remain committed to reaching our production milestone with our on-site team continuing to prepare for this.”

Despite the production delay, the rest of the update surrounding Woodlawn brimmed with positivity. The company stated hydraulic mining commissioning had made great progress, that the overall process plant was 98 percent complete and that process plant commissioning was 63 percent complete as of the end of February.

While Heron and CIMIC Group (ASX:CIM,OTC Pink:LGTHF) subsidiary Sedgman have been collaborating on putting Woodlawn together, the relationship between the two has been rocky over the last several weeks. In February, Heron disputed a AU$49.9-million claim from the contractor for additional costs related to Woodlawn’s construction.

Heron claimed that the extra fees overshot an agreed guaranteed maximum price of AU$109 million for the engineering, procurement and construction contract Sedgman holds at Woodlawn. A few weeks later, the contract superintendent rejected Sedgman’s claim against Heron with the exception of a few agreed contract works that totalled just over AU$223,000.

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Though the battle had been seemingly won by Heron, the war waged on into March when the company reported Sedgman claimed additional costs of AU$53 million in its monthly progress claim. The heightened amount included the aforementioned AU$49.9-million claim, with Heron contesting its overall validity.

“The current claim includes a forecast to complete estimate of AU$25 million for a project that was reported by Sedgman to Heron being as 98 percent complete at the end of January 2019. The claim for $25M forecast extra costs is an extraordinary sum given the stage of project development Sedgman is reporting,” a statement from Heron read.

The contract superintendent will once again review Sedgman’s claim within 10 business days of the announcement, released March 4.

As of March 11, zinc was trading at US$2,773 per tonne on the London Metal Exchange, while copper was trading at US$6,432 per tonne.

In spite of the delay, Heron’s share price grew 4.84 percent on the ASX on Tuesday, March 12, ending the day of trading at AU$0.65 per stock.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.

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