Reed Resources moves closer to resuming gold production at Meekatharra

Reed Resources (ASX: RDR) is on track to recommence gold production from its Meekatharra Gold Project by the December quarter 2012 and has also announced significant drilling results from its maiden drilling campaign at the project.

Key Bankable Feasibility Study (BFS) work packages for recommencement of production are ahead of schedule and a mine plan to produce 120,000 ounces per annum (pa) from 1.5 million tonnes (Mtpa) of open pit/underground ore nearing completion. Work has also commenced on the optimisation of a ’Paddys Flat Super-Pit‘.

The drilling campaign targeted resource extensions, brownfields exploration and ore recovery for metallurgical test work at various prospects within the project.

Drilling highlights include:

- 3 metres at 2.15g/t gold, 5.0g/t silver and 1.1% copper intersected at Chunderloo;
- 3 metres at 5.84g/t gold and 2 metres at 4.4g/t gold intersections outside Batavia reserve;
- 10 metres at 2.45g/t gold intersection extends strike length at Whangamata by 300 metres; and
- 1 metre at 142g/t gold intersected at new prospect, Sirdar.

Christopher Reed, managing director,  said, “the timeline to production recommencement is ahead of schedule and the company plans to pursue all avenues available to expedite recommencement of operations.”

“This is a great result from the first drilling campaign at our Meekatharra Gold Operation. Almost every area drilled represented some material increase to value of the ore in the ground by way of grade increase, tonnage increase, contained metal increase and the ability to now convert the inferred resources to indicated resources, and ultimately into mineable reserves.”

Meekatharra Gold project was acquired by Reed for less than $30 million and boasts an established 200 man camp, 3 million tonne per annum mill and other facilities which have a replacement cost of $100 million.

Mining Plan & Underground Schedule

The open pit mining plan is complete but will be modified as new ore resources convert to mineable reserves. The underground mining plan and mining schedule is in the final stages of design and will be announced in the coming weeks.

The company anticipates that ore will be sourced from both open pit and underground mining and that the operation will initially treat in excess of 1.5 million tonnes per annum for an annualised production target exceeding 120,000oz of gold.

Processing Plant

A detailed report has been completed by GR Engineering Services for refurbishment of the 3 Mtpa processing plant and resumption of operations at an initial rate of 1.5 Mtpa. Subject to finance and Board approval, the refurbishment will commence before the end of the calendar year.

The refurbishment will largely comprise replacement and repair of pumps, gearboxes, electrical and plumbing reticulation. The replacement value of the plant and associated infrastructure has been independently assessed at being in excess of $100M.

Accommodation Village

A detailed report has been completed on the requirements of the accommodation village to house a combined open pit and underground workforce.

Work required at the village comprises a new state of the art messing facility, new ensuite rooms and repairs on the existing infrastructure. Expressions of interest have been received and the tender document is being finalised for issue. It is anticipated that refurbishment will commence in October along with the placement order for long lead items.

Power

Negotiations are advanced with power providers on a build-own-operate basis (BOO), the Company’s power strategy is to buy power over-the-fence from providers using gas powered generating units. The final mill design which is due to be completed in October will provide an accurate estimate of power consumption to allow these negotiations to be concluded.

Financing

The company is in discussions with a number of potential financiers regarding the provision of a bridge financing facility to commence the mill and accommodation refurbishments ahead of the completion of the Bankable Feasibility Study in February 2012.


Paddys Flat Super-Pit optimisation

A study has commenced on the potential to combine all the resources along the porphyry and BIF lines at the Paddys Flat area, Meekatharra into a single ‘super pit’ mining operation embracing an area almost 5km in length and 1km in width. The concept of a ‘super pit’ was initiated by Dominion Mining in 1993 but was uneconomic at mid-1990’s gold prices.

The investigation will require remodelling resources at some of the Northern orebodies (eg, Democrat, Commodore, Ready Mix) and combining these with the latest resource models for the Southern deposits (eg, Prohibition, Mickey Doolan, Phar Lap).

The implications of having an optimised open pit shell embracing over 20 deposits in close proximity has the potential to significantly expand an open pit mining operation, provide feed to fully utilise the 3Mtpa milling capacity at Bluebird and extend the mine life for Reed Resources at Meekatharra.

With a market capitalisation around $104 million, the timeline to production recommencement ahead of schedule, and today's strong initial drill results, Reed's valuation looks even more undervalued in comparison to its peers.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/19059/reed-resources-moves-closer-to-resuming-gold-production-at-meekatharra-19059.html