Skye Resources Inc.
TSX : SKR

Skye Resources Inc.

August 29, 2007 16:44 ET

Skye Provides Fenix Project Update

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 29, 2007) - Skye Resources Inc. ("Skye") announces that Hatch, Ltd. has now completed basic engineering for Skye's Fenix ferro-nickel project in Guatemala, and has provided revised capital and operating cost estimates. A Technical Report will be filed shortly providing updated information to the feasibility study results previously announced on September 25th, 2006. The basic engineering work is based on firm price quotations for major equipment, a two-phased development strategy, the use of purchased power during the early years of operation and updated costs of coal and pet-coke.

Based on a discount rate of 10% and assuming the completion of both phases, the ferro-nickel project's Internal Rate of Return (IRR) is estimated at 14.3% and its Net Present Value (NPV) at US$275 million at a long term nickel price of US$6.50 per lb. The IRR is estimated at 19.8% and its NPV at US$667 million at a long term nickel price of US$8.00 per lb. A US$1.00 per lb. increase in the nickel price during the first five years of operation will be expected to increase the NPV by US$94 million.

"The phased development strategy allows us to maximize production in the early years to take advantage of high nickel prices, while significantly reducing our immediate financing requirements," said Ian Austin, President and CEO of Skye. "We remain on target to bring this high-grade, world-class nickel project into production by late 2009."

The Technical Report contemplates a two-phase project, whereby the mine and ferro-nickel smelter will be constructed in phase 1, and operations will initially rely on purchased power until a new solid-fuel power plant is constructed in phase 2. Based on the engineering work completed since the feasibility study, the new power supply configuration, all-road transportation, and firm price quotes received for equipment, Hatch has now developed a revised estimate of the phase 1 capital cost, which is US$640 million (based on July 2007 dollars). This total includes direct costs of US$355 million, indirect costs of US$157 million, a contingency of US$65 million and owner's costs of US$63 million. The intended accuracy of the phase 1 estimate is -5%, +12%.

Phase 2 of the project assumes that a new solid-fuel power plant will be in service by the end of the fifth year of production, and has an estimated capital cost of US$344 million. The phase 2 capital cost estimate is based on the feasibility study estimate, escalated to account for increases in equipment, labour and materials costs. The intended accuracy of the phase 2 estimate is -10%, +20%.

Cash operating costs are estimated to average US$2.66 per lb over the 30-year project life. During the first five years of production (while power is being purchased) they are estimated to be US$3.47 per lb. Thereafter, assuming the construction of a solid-fuel power plant, cash operating costs are estimated to be US$2.34 per lb for years 6 through 20. (Cash operating costs exclude royalties which are estimated to average US$0.49 per lb over the life of the project.).

Skye intends to enter into a Power Purchase Agreement (PPA) for the initial five years of production, with an option to extend the PPA for an additional five years. While the deferral of the solid fuel power plant will increase operating costs in the early years of production, it will reduce the immediate financing requirement. Skye will also be able to accelerate the ramp-up of production which will result in an increase in production in the first three years by 13 million pounds of nickel compared to the feasibility study. By deferring the power plant and connecting to the Guatemalan power grid, Skye will have the option to build the plant with future cash flows or enter into new PPAs in the future based on third party construction of a solid fuel power plant.

The Fenix project now has all major permits. Basic engineering for phase 1 of the project is complete, and site preparation is continuing, including the refurbishment of the construction camp, reconstruction of the administration building and the reactivation of the sewage treatment plant. Negotiations with Hatch to provide Engineering, Procurement and Construction Management ("EPCM") services are well advanced and it is expected that a formal contract will be signed by the end of the third quarter. Firm price vendor bids have been received for a total of US$82 million in expenditures which represents 50% of the equipment purchases. Long lead orders for critical path items are expected to be completed before year end.

During the next several months, detailed engineering will proceed in anticipation of initiating full scale construction activities on-site during the first quarter of 2008. Skye is continuing to progress its financing arrangements for the project, with the objective of having the project fully funded in early 2008. Preparations for financing the project in the capital markets are well advanced, and the Company is continuing discussions with potential partners.

Conference Call

Skye will host a conference call to discuss the Fenix project update on Thursday, August 30, 2007 at 9:00 a.m. E.D.T. (6:00 a.m. P.D.T.) To access the conference call by telephone, dial +1 416-644-3416 or 1-800-732-0232 or participate via webcast at www.newswire.ca. The slide presentation discussed during the call is available on Skye's website at www.skyeresources.com. Please connect approximately 15 minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until Thursday, September 6, 2007 at midnight. To access the archived conference call, dial +1 416-640-1917 or 1-877-289-8525 and enter the reservation number 21245337 followed by the number sign.

About Skye

Skye is an international mining company focused on becoming a new mid-tier nickel producer. Skye acquired the rights to its Guatemalan lateritic nickel project (the Fenix project) in December 2004 and in October 2006 completed a feasibility study for a ferro-nickel project at Fenix using proven conventional smelting technology. In June 2007 Skye received its environmental permits for the project, and expects to initiate construction during the first quarter of 2008 with initial production in late 2009. www.skyeresources.com

Cautionary Notices:

This release contains certain forward-looking statements that involve risks and uncertainties, such as statements of Skye's plans, objectives, strategies, expectations and intentions. The words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions, as they relate to Skye, or its management, are intended to identify such forward-looking statements. Many factors could cause Skye's actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. The forward-looking statements included in this presentation represent Skye's views as of the date of this presentation. While Skye anticipates that subsequent events and developments may cause its views to change, it specifically disclaims any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon as representing its views as of any date subsequent to the date of this presentation. All subsequent written and oral forward-looking statements attributable to Skye or persons acting on its behalf are expressly qualified in their entirety by this notice.

Qualified Persons and Data Verification

The independent Qualified Persons (QP) (for the purpose of National Instrument 43-101, Standards of Disclosure for Mineral Projects) are:



(a) for the ferronickel project (Feasibility Study): (i) Andrew F. Ross
FAusIMM (CP) and P. Geo. (mineral resource estimates), of Snowden
Mining Industry Consultants Pty. Ltd., Perth, WA, and Dick Matthews
MAusIMM. (mining reserve estimates, mine plan, mine capital and
operating costs), of Snowden Mining Industry Consultants Inc. of
Vancouver, BC; (ii) Mark Sucharda, P. Eng., of Hatch Ltd. of
Mississauga, ON (process and infrastructure engineering and cost
estimation); (iii) Dr. J. Paul Golightly, P. Geo., of Golightly
Geosciences Ltd. of Sudbury, ON (property description and location,
accessibility, history, geological setting, deposit types,
mineralization, exploration, drilling, sampling method and sample
preparation, analyses and security, data verification); (iv)
S. Gonsalves, P.Eng., President of Trow International Ltd.
(geotechnical assessment); and (v) Brian Krysa P. Eng., of Hatch Ltd.
of Mississauga, ON (mineral processing and metallurgical testing);

(b) for the portion of the mineral resource estimates that is based on
the technical report dated July 4, 2006 filed at www.sedar.com
August 17, 2006 entitled "Mineral Resource Estimate, Fenix Project,
Izabal, Guatemala, July 4, 2006", Andrew F. Ross FAusIMM (CP) and P.
Geo. and Dr. J. Paul Golightly, P. Geo., of Golightly Geosciences
Ltd. of Sudbury, ON; and

(c) for the portion of the mineral resource estimates (re-classification
of historic mineral resource estimates) that is based on the
technical report dated August 5, 2005 filed at www.sedar.com on
August 9, 2005 entitled "Fenix Nickel Project: Nickel Laterite
Deposits of the Lake Izabal Region, Guatemala", Dr. J. Paul
Golightly, P. Geo., of Golightly Geosciences Ltd. of Sudbury, ON.


Dr. Paul Golightly, P. Geo., of Golightly Geosciences Ltd. of Sudbury, ON is the independent QP, as defined under NI 43-101, responsible for the quality control and verification of the drill hole data used by Snowden Mining Industry Consultants Inc. in the resource estimates. Details of the procedures for logging, sampling, density determinations, assaying and quality control measures are given on Skye's website: www.skyeresources.com.

The estimates, projections and conclusions summarized in this release, are subject to important qualifications, assumptions and exclusions, all of which will be set out in a Technical Report, which will be filed at www.sedar.com. To fully understand the summary information contained in this release, the Technical Report should be read in its entirety.

All $ amounts are in 2007 US Dollars. IRR & NPV calculations are calculated on a real after tax basis to CGN for its 100% ownership interest (and therefore before Canadian taxes, if any) assuming all-equity financing.

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