Guatemala

[Tackler]

Skye Resources drills over 300 holes to date on Fenix

2005-08-15 14:03 ET - News Release

Mr. Ian Austin reports

SKYE CONTINUES TO MAKE RAPID PROGRESS AT FENIX

Skye Resources Inc. has provided an update on the progress of its Fenix nickel project in Guatemala.

Feasibility study

The feasibility study being led by Hatch Ltd. is considering the production of ferronickel using conventional technology. The plan is to refurbish the existing mothballed plant to produce 25 million pounds of nickel annually and then to expand the refurbished plant to produce 50 million pounds a year. The study, which was initiated in May, 2005, is currently scheduled for completion in the second quarter of 2006. Hatch has already completed the initial project definition studies and major bid packages for the process plant are in preparation for issue this month.

Skye is continuing to explore its options to obtain the power required to operate the ferronickel smelter, and the feasibility study is considering an on-site coal-fired power plant, as well as power purchased and delivered via the Guatemalan grid.

Drill program

The drill program commenced in late April and six drills are now on the property. To date, over 300 holes have been completed, totalling over 8,000 metres. The program, which is expected to total between 35,000 and 45,000 metres, is scheduled for completion in early 2006. The drill program is providing data which will be used by Snowden Engineering Ltd. to prepare the resource definition and mining section of the feasibility study. The company anticipates that revised resource estimates will be available in the first quarter of 2006.

Environmental and social impact assessment

The company is carrying out an extensive environmental and social impact assessment (ESIA). The ESIA is being overseen by Klohn Crippen Consultants Limited (with the support of Consultoria y Tecnologia Ambiental SA, a Guatemalan environmental consulting company). The assessment is being carried out to comply with the equator principles, which require that the project meet standards set both by the government of Guatemala and by the World Bank.

Permitting

Under Guatemalan law three key permits are required. The first is the conversion of the existing exploration licences into exploitation licences, which will allow mining again on the Fenix property. The second key permit will allow the resumption of activities at the smelter, which is located adjacent to the existing licences, and the third permit will be required for expansion of the existing facilities and the construction of any associated power plant.

The Guatemalan authorities have agreed that, upon the filing of the environmental studies required to support the applications for these permits, they will consider them in a thorough but timely manner. If the applications are approved, the necessary permits will be issued in a time frame, which would allow Skye to move forward quickly once the feasibility study is complete in the second quarter of 2006.

The Guatemalan government, through the appropriate ministries, will carry out consultations with the local communities concerning any potential environmental impacts and mitigating measures. The government of Guatemala has also said that it will honour its commitments under Convention 169 of the International Labour Organization (ILO 169) regarding consultations with indigenous peoples.

These consultations to be carried out by the government are in addition to the extensive consultation program that the company has already initiated.

Community relations

Since acquiring Fenix, Skye has also focused on understanding and responding to community issues and concerns. The company has created and is providing initial financing to a community association, which is focused on initiating sustainable community development in the entire region, which would be affected by the Fenix project.

Some of the initial projects have included:

-commissioning a regional strategic plan to be conducted in partnership with the local and regional governments;
-health and education initiatives, including the possible refurbishment of the hospital and school facilities, which were constructed as part of the original project;
-working with government agencies to resolve outstanding issues relating to property title in the region;
-donating excess land for subdivision to provide housing for local residents; and
-supporting reforestation, poultry production and fish farm projects.