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Reed Resources hits 3m gold ounce resource at Meekatharra, undervalued to its peers

Reed Resources (ASX: RDR) has increased the JORC Resource from its flagship Meekatharra Gold Project to 3.27 million ounces, up from 2.8 million ounces previously, following an ongoing geological evaluation of its Meekatharra gold assets.

Managing director Christopher Reed said, “The increase in open pit reserves adds real value to an already substantial gold project.

“The resource increase alone would probably be a company‐making achievement for most junior gold companies, and it now makes Reed one of the few plus 3 million ounce gold resource companies in Western Australia.

“The increase in reserves is a direct result of optimising these resources, taking the total reserve base well over half a million ounces, which is a major milestone.”

Significantly, over 2 million ounces is in the higher confidence Indicated category.

Open pit reserves have increased by 18% to 308,800 ounces and total reserves now stand at 533, 700 ounces.

The optimisation of results from Reed’s winter drilling campaign identified 11,335 probable reserve ounces at 1.43 grams per tonne (g/t) of gold in the Whangamata open pit.

Gold mineralisation has also been identified in the floor of the Great Northern Highway pit, which has been re‐optimised classifying an additional 33,589 probable reserve ounces at 1.26g/t.

Importantly, the Great Northern Highway Pit is just 300 metres from the 3 million tonnes per annum Bluebird processing plant.



Project Progress

These new open pit reserves at the Meekatharra Gold Project strengthen Reed’s mining plan, which is progressing according to schedule.

The village refurbishment and construction contract is ready to be awarded and a mill refurbishment and upgrade study is nearing completion.

GR Engineering has been working on the processing options for the processing facility. A costed proposal and scoping study to refurbish and enhance the facility is expected this month.

Metallurgical test work at the 600,000 ounce Mickey Doolan pit is being finalised. This pit has the potential to extend the open pit mine life by three years if the metallurgy is favourable.

The Paddys Flat “Super Pit” resource is being finalised for optimisation. This will evaluate the magnitude of the pit at various gold prices.



Mining Strategy


Reed is planning a staged approach for the recommencement of mining to avoid delays to the project.

The initial recommencement (Stage 1) will comprise ore from open pits alone, with the expansion (Stage 2) taking production past the initial planned three year open pit mining.

The open pit mining plan based on existing reserves shows that a three year mine life can be maintained at an average feed rate of approximately 1.65 million tonnes per annum, blending soft oxide and fresh rock through the Bluebird Mill.

The second phase of the operational strategy is to ensure that the mine continues to operate at a sustainable for level for a minimum of six years, with options to expand Stage 1 production levels, and potentially involve multiple operations.

 

Analysis

With a 3 million ounce resource base and 500,000 ounces in Reserves, Reed has indeed achieved a milestone not matched by many gold companies in Western Australia.

On an EV/Resource ounce basis of $11 an ounce relative to its peer average of $90 an ounce, Reed looks significantly undervalued to its peers at its current valuation of $100 million and share price of $0.38.  It has an Enterprise Value of $84 million after $16.2 million in cash.