Skye Resources Inc.

Skye Resources Inc.

February 28, 2005 15:38 ET

Skye Resources Inc.: Feasibility Study to Commence Immediately 45,000 Meter Drill Program Commences


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: SKYE RESOURCES INC.

TSX VENTURE SYMBOL: SKR

FEBRUARY 28, 2005 - 15:38 ET

Skye Resources Inc.: Feasibility Study to Commence
Immediately 45,000 Meter Drill Program Commences

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Feb. 28, 2005) - Skye
Resources Inc. ("Skye") (TSX VENTURE:SKR) has received a preliminary
assessment (i.e., a scoping study based in part on inferred resources)
from Hatch Ltd. ("Hatch"), an independent engineering firm retained by
Skye. The preliminary assessment investigated ferronickel and
atmospheric leaching process options for Skye's Fenix nickel laterite
project in the Lake Izabal region of eastern Guatemala. Based on this
study, Skye is initiating a feasibility study for a ferronickel project
at Fenix involving the refurbishment and expansion of the existing plant
to produce 45 million pounds of nickel annually. Skye also plans to
continue to advance the studies required for a subsequent expansion of
this initial project which could double the 45 million pound production
capacity, utilizing Skye's proprietary atmospheric leaching process to
produce an intermediate nickel/cobalt product.

Summaries of the projected capital costs, operating costs and key
production parameters for the primary options selected for further study
are set out in the Tables attached to this press release.

The preliminary assessment includes a preliminary mine plan, based in
part on inferred resources. Early stage plant designs were prepared for
several options, and cost estimates were derived using data from other
similar projects, quotations from suppliers and historical factors for
bulk materials and indirect costs. The capital cost estimate includes
infrastructure, mine, process plant and ancillary facilities, but does
not include owner's costs or taxes, and is considered accurate to within
30%. The operating costs have been prepared on the basis of preliminary
estimates of power requirements, consumables and manpower, and estimated
unit costs, and are considered to be accurate to within 15%. All costs
are presented in first quarter 2005 US dollars.

The preliminary assessment indicates that a ferronickel project at
Fenix, producing 45 million pounds of nickel annually, could have
capital costs of approximately US$11.90 per annual pound and cash
production costs of approximately US$1.96 per pound. An atmospheric
leach project of equivalent scale could have capital costs of
approximately US$11.20 per annual pound and cash costs of approximately
US$1.78 per pound. The cash production costs are calculated as averages
over 20 years.

Skye has decided to pursue the ferronickel option because this utilizes
well established technology that has already been demonstrated on a
commercial scale for the Fenix nickel deposits, and would take full
advantage of the mothballed plant and existing infrastructure. It
expects that the feasibility study for the ferronickel option should be
completed in early 2006, and that, if this study is positive, the
engineering and construction of a ferronickel plant could take up to 36
months. Skye currently anticipates that it may be possible to refurbish
the existing facilities in a shorter time frame, potentially allowing
initial production at a nominal 25 million pound annual rate to begin
more quickly.

Skye is currently initiating the first phase of a 45,000 meter drill
program to ensure that it has the necessary data to support the
feasibility study. This program will seek to enlarge the saprolite
resource by testing the full depth of the laterite profile, and to
identify higher grade saprolite zones with the objective of allowing an
extension of the initial period during which higher grades can be
processed in the planned ferronickel plant. It will also aim to increase
the limonite resource, which has not yet been evaluated fully.

A pilot plant program to test Skye's atmospheric leach process is
currently being initiated, using a bulk sample from the Fenix deposits.
The pilot plant test work is being carried out by SGS Lakefield Research
Ltd., and is expected to continue for about 6 months. Skye expects that
during this period it will initiate a prefeasibility study of an
expansion of the initial 45 million pound per annum project using this
technology. This will allow the utilization of the limonitic resources.
These limonitic resources are not suitable for processing in the
ferronickel plant.

Ian Austin, Skye's CEO stated "This preliminary assessment demonstrates
that the application of improved smelter and power generation
technologies could make Fenix a competitive nickel producer. It also
demonstrates how Skye's proprietary technology could allow the project's
nickel resources to be fully utilized. The team at Skye is now focussed
on advancing the ferronickel project as rapidly as possible."

The preliminary assessment is preliminary in nature. The estimates of
measured indicated and inferred resources referenced in it are based on
resource estimates as reported in Technical Reports dated December 2,
2003 and September 23, 2004. The estimates are based in each case on the
assumptions and methods, and are subject to the limitations and
qualifications, described in such Technical Reports. The Technical
Reports can be found in the Company's filings at www.sedar.com. Inco
Limited, the former 70% owner of the facilities and mineral licenses
that are part of the Fenix project, takes no responsibility for nor
makes any representation or warranty of any kind relating to such
estimates.

As required under National Instrument 43-101, Standards of Disclosure
for Mineral Projects, the reader is cautioned that the preliminary
assessment refers to inferred mineral resources that are considered too
speculative geologically to have the economic considerations applied to
them that would enable them to be categorized as mineral reserves, and
there is no certainty that any of the scenarios in the preliminary
assessment will be realized. The reader is also directed to the
cautionary notices and disclaimers below and to the disclaimers and
discussion in the preliminary assessment and in the Tables accompanying
this news release.

The preliminary assessment and the disclosure contained in this news
release have been reviewed by Hatch's independent "qualified person", F.
Porretta, P. Eng. (a "qualified person" for the purpose of National
Instrument 43-101).

A copy of the text of the preliminary assessment will be filed within
the next 30 days on www.sedar.com.



Table 1: Summary of Selected Smelting Option

--------------------------------------------------------------------
Two-Kiln
Ferronickel
--------------------------------------------------------------------
Key Process Parameter
--------------------------------------------------------------------
Ore Throughput dry tonnes per year 1,258,200
--------------------------------------------------------------------
Nickel Grade (20 year average) 1.86%
--------------------------------------------------------------------
Nickel Produced tonnes per year in ferronickel 20,600
--------------------------------------------------------------------
millions lb/yr 45.4
--------------------------------------------------------------------
Furnace Power MW 80
--------------------------------------------------------------------

--------------------------------------------------------------------
Capital Cost Summary ($ US)
--------------------------------------------------------------------
Total Direct Costs 354,931,500
--------------------------------------------------------------------
Indirects 101,125,900
--------------------------------------------------------------------
Total Direct + Indirect 456,057,300
--------------------------------------------------------------------
Contingency 82,456,000
--------------------------------------------------------------------
Total Capital Cost (30% accuracy) 538,603,300
--------------------------------------------------------------------

--------------------------------------------------------------------
Operating Cost Summary ($US) MM$/yr $/lb Ni
--------------------------------------------------------------------
Total Operating Cost (15% accuracy) 89.0 1.96
--------------------------------------------------------------------
Note: capital costs prepared on the basis that smelting and leaching
options are executed independent, stand-alone projects. Owner's
costs and taxes are excluded.


Table 2: Summary of Selected Leaching Option

--------------------------------------------------------------------
Mixed Nickel/Cobalt
Hydroxide Product
--------------------------------------------------------------------
Key Process Parameter
--------------------------------------------------------------------
Ore Throughput dry tonnes per year 1,415,000
--------------------------------------------------------------------
Nikel Grade (20 year average) 1.67%
--------------------------------------------------------------------
Nickel Produced tonnes per year 20,500
--------------------------------------------------------------------
millions lb/yr 45.3
--------------------------------------------------------------------
Cobalt produced tonnes per year 870
--------------------------------------------------------------------
millions lb/yr 1.9
--------------------------------------------------------------------
Nickel in product (dry basis) 39%
--------------------------------------------------------------------

--------------------------------------------------------------------
Capital Cost Summary ($ US)
--------------------------------------------------------------------
Total Direct Costs 319,233,800
--------------------------------------------------------------------
Indirects 95,515,000
--------------------------------------------------------------------
Total Direct + Indirect 414,748,800
--------------------------------------------------------------------
Contingency 93,318,000
--------------------------------------------------------------------
Total Capital Cost (30% accuracy) 508,066,800
--------------------------------------------------------------------

--------------------------------------------------------------------
Operating Cost Summary ($ US) MM$/yr $/lb Ni
--------------------------------------------------------------------
Total Operating Cost (15% accuracy)
(before RC& Credits) 78.6 1.74
--------------------------------------------------------------------
Refining Charges (RC) (1) 31.0 0.68
--------------------------------------------------------------------
Cobalt Credit (2) (29.0) (0.63)
--------------------------------------------------------------------
Total Operating Cost (after RC & Co Credit) 80.6 1.78
--------------------------------------------------------------------
(1) Refining charges at $0.55/lb Ni plus 20 % of realized Co price
(2) Cobalt Credit at $15/lb Co recovered to intermediate product

Note: capital costs prepared on the basis that smelting and leaching
options are executed as independent, stand-alone projects. Owner's
costs and taxes are excluded.


Cautionary Notices

This news release may contain forward-looking statements including but
not limited to comments regarding the timing and content of upcoming
work programs, geological interpretations, capital and other costs and
credits, timing for and results of feasibility study and other programs,
receipt of property titles, potential mineral recovery processes, and
other related matters. Forward-looking statements address future events
and conditions and therefore involve inherent risks and uncertainties.
Actual results may differ materially from those currently anticipated in
such statements. The Fenix Project is at an early stage and all
estimates and projections are based on limited, and possibly incomplete,
data. More work is required before the mineralization and the Project's
economic aspects can be confidently modelled. Actual results may differ
materially from those currently anticipated in this release. No
representation or prediction is intended as to the results of future
work, nor can there be any promise that the estimates and projections
herein will be sustained in future work or that the Project will
otherwise prove to be economic. All subsequent written and oral forward
looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by this notice.

The preliminary assessment is preliminary in nature. Resource estimates
were not prepared by Hatch as part of the preliminary assessment.

The preliminary assessment is intended to be read as a whole and
sections should not be read or relied upon out of context. The
preliminary assessment contains the expression of the professional
opinions of Hatch, based upon information available at the time of
preparation. The quality of the information, conclusions and estimates
contained in the preliminary assessment are consistent with the
intentions of the preliminary assessment, as well as the circumstances
and constraints under which the preliminary assessment was prepared
which are also set out therein.

The preliminary assessment was prepared for Skye by Hatch; geology and
resource estimation were not performed as part of the study. The mining
sections of the study were prepared by Jan Sajer, P. Eng., a consultant
retained for this purpose by Skye and independent of Hatch. The
preliminary assessment is based, in part, upon information believed to
be reliable from data supplied by Skye, and other consultants engaged by
Skye, which Hatch has not verified as to accuracy and completeness.
Hatch has not made an analysis, verified or rendered an independent
judgment as to the validity of the information provided by such other
consultants. While it is believed that the information contained in the
preliminary assessment is reliable under the conditions and subject to
the limitations set forth therein, Hatch cannot guarantee the accuracy
thereof. Any reliance on the preliminary assessment by any third party
shall be entirely at their own risk. Hatch takes no responsibility and
accepts no liability whatsoever for any loss arising from any use of or
reliance on the preliminary assessment by parties other than Skye.

To the full extent permitted by law, Hatch disclaims responsibility for
any indirect or consequential loss arising from any use of the
preliminary assessment or the information contained in the preliminary
assessment. Readers are cautioned that the study is a preliminary
assessment only and that all estimates and projections contained therein
are based on limited and incomplete data. While the work, results,
estimates and projections in the preliminary assessment may be
considered to be generally indicative of the nature and quality of the
Fenix Project, they are not definitive. No representations or
predictions are intended as to the results of future work, nor can there
be any promises that the estimates and projections in the preliminary
assessment will be sustained in future work.

The preliminary assessment includes certain forward-looking statements
within the meaning of the US Private Securities Legislation Reform Act
of 1995. Other than statements of historical fact, all statements in the
preliminary assessment, including without limitation, statements
regarding future production potential, are forward-looking statements
that involve various known and unknown risks, uncertainties and other
factors. There can be no assurance that such statements will prove to be
accurate. Results and future events could differ materially from those
anticipated in such statements. Readers are cautioned not to place undue
reliance on these forward-looking statements that speak only as of the
date of the preliminary assessment.


-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Skye Resources Inc.
    Ian Austin
    Chief Executive Officer
    (604) 602-7534
    (604) 682-3941 (FAX)
    www.skyeresources.com
    The TSX Venture Exchange does not accept responsibility for the adequacy
    or accuracy of this release.