Skye provides Fenix project update

    TSX Symbol: SKR

    VANCOUVER, Aug. 29 /CNW/ - 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 The slide presentation discussed
during the call is available on Skye's website at
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.

    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
        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 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:

    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 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.

For further information:

For further information: Andrew Grant, Vice President, Public Relations,
Tel: (604) 602-9500,; Martti Kangas, Investor
Relations, The Equicom Group, Tel: (416) 815-0700 x 243,; David Feick, Investor Relations, The Equicom Group,
Tel: (403) 538-4787,

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