BHP Billiton reaches for more Skye (July 03, 2006)

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

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. 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 nickel-laterite project in the Lake Izabal region of Guatemala. It is examining using conventional smelting technology at the proposed 50-million lb. per year ferro-nickel mine. Potential expansion by way of a nickel hydrometallurgical facility is also being reviewed and could boost metal output to about 100 million lbs. per year.

The junior, which now owns over 90% of the high-grade project, initially acquired a 70% interest 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 spending 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 29.3 million shares outstanding, the aspiring nickel miner posts a market capitalization of $246 million.