BHP Billiton reaches for more Skye (June 22, 2006)

Vancouver – Mining giant BHP Billiton (BHP-N) must like what it sees in aspiring nickel producer Skye Resources (SKR-T), having recently purchased 2 million additional shares in the junior company.

The equity acquisition, conducted through the TSX market, brings the senior’s holding in Skye to 4.85 million shares or about 16.5% of its issued and outstanding capital. Additionally, Inco (N-T, N-N) holds a reported 12.3% interest in the junior.

Skye is currently in the midst of a feasibility study on its Fenix laterite nickel project in the Lake Izabal region of Guatemala. It is examining using conventional smelting technology at the proposed 50 million lbs. per year ferro-nickel mine. Potential future expansion by way of a nickel hydrometallurgical facility could boost metal output to the 100 million lbs. per year level.

The junior, now owning over 90% of the high-grade nickel laterite project, initially acquired a 70% ownership from Inco in 2004. Inco previously developed the deposit, mining and processing about 800,000 tonnes of material from 1977 to 1980. The major also built a smelter at the operation, which ceased production due to high oil prices coupled with a weak nickel market. Most of the past infrastructure is reported in good condition for refurbishment and reuse. Skye has been boosting its project interest through development expenditures that has diluted its partner, the government of Guatemala.

Shares of Skye rallied as high as $9.25, up 32%, before settling to close at $8.41 on volume of almost 4.2 million following news of BHP Billiton’s equity purchase. With its 29.3 million shares outstanding, the aspiring nickel miner posts a market capitalization of $246 million.