The start of construction is imminent on Herald Resources US$133 million Indonesian zinc mine.

The project is regarded as one of the highest grade undeveloped zinc lead deposits in the world.

Only one approval is needed ahead of first capital works on the high grade Dairi zinc/lead project on the island of Sumatra . First metal production is currently scheduled for the third quarter of next year.

The project, which is 80%-owned by Herald, is expected to generate revenues of US$400-500 million a year based on current metal prices when production starts late next year.

Herald Resources executive director Michael Wright addressed the Paydirt Asia Pacific Downunder Conference in Perth last month and said the company had yet to finalise off-take agreements and was talking to a wide range of potential customers.

"Virtually every smelter in the world has come visiting and we are keeping options open at the moment to create some competitive tension before locking in any sales deals," Michael Wright said.

"The zinc price has taken off and we believe the price will remain strong for some years yet as the extended period of low zinc prices for 15 years has impacted the development pipeline and stockpiles are being eaten away.

"Most stockpiles will be gone by Christmas time and we can then expect to see some further upwards action on zinc prices.

"It is no surprise therefore that we are being chased aggressively as a supplier because of the shortage worldwide of both zinc metal and concentrate - and as this will also last some years, we are looking to maximise our options.

"There is for example, a potential billion dollar profit at present prices in just one of Dairi's ore bodies alone and that is on known reserves - there is a lot of upside yet in the project area."

The underground Dairi mine is expected to produce 300,000 tonnes of zinc concentrate, generating 185,000 tonnes of contained metal per annum.

First mining will be from the high grade Anjing Hitam deposit within Dairi.

It has minable reserves of 6.6 million tonnes @ 15% zinc and 9% lead for an initial mine life of seven years.

Herald has mandated Societe Generale Australian branch to provide US$62 million of senior finance facilities to develop the project, in addition to US$90 million equity already raised.

Additional exploration at the nearby Lae Jehe deposit includes intercepts of 13.8m @ 8.8% zinc and 4.8% lead. This deposit has combined Indicated and Inferred resources of 4.4 million tonnes grading 9.9% zinc and 5.5% lead.