Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Reed Resources: Meekatharra Gold Reserves jump 40% to 751,800 ounces, production in 2012

Reed Resources (ASX: RDR) has increased the Gold Reserves at its Meekatharra Gold Project in Western Australia by 40% to 750,800 ounces as the project draws closer to production.

A Bankable Feasibility Study is on schedule to be delivered in February.

The increase in reserves at Meekatharra was achieved through the continuing geological evaluation of assets, along with conversion of the recent increase in Resources at the Paddys Flat and Reedy deposits.

Optimisation of Resources at the Paddys Flat open pit deposit and the Reedy underground deposit found 185,300 Probable Reserve ounces at 1.42 grams per tonne (g/t) gold.

The optimisation of the Paddys Flat “super pit” will be finalised soon, evaluating the magnitude of the pit at various gold prices.

Open pit Reserves at Meekatharra increased 59% to 491,700 ounces of gold from 308,000 ounces gold.

Managing director Christopher Reed said: “The continued expansion of open pit Reserves confirm the potential of the Meekatharra Gold Project to be a significant long-life producer of gold.

“This fundamental step forward for the company not only expands our future production sources but places the company within sight of defining a million ounce reserve. The Bankable Feasibility Study is almost complete and we are advanced in our assessment for future expansions.”

Mineralisation was also identified below the Aladdin pit at Nannine and the Maid Marion prospect, 20 kilometres north of Meekatharra.

Optimisation of these resources has classified an additional 30,100 ounces of Probable Reserves at 1.63g/t gold.

The road to production

With a Bankable Feasibility Study nearing completion, the project schedule at Meekatharra is progressing well.

The village construction and refurbishment contract and mill refurbishment and upgrade contract are both ready to be awarded, and key personnel have been appointed to undertake onsite operational activities.

Mill refurbishment personnel are set to mobilise at the site in February to begin refurbishment planning and scheduling.

Gold production is targeted for the December quarter of 2012.

Reed is working with Noah’s Rule and Bligh Capital to finance the project.

Analysis


With a 3 million ounce resource base and 750,000 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 around $11 an ounce relative to its peer average of $90 an ounce, Reed looks significantly undervalued to its peers at its current valuation of $85 million and share price of $0.33.  As at September 2011, Reed had an Enterprise Value of $84 million (based on the then market capitilsation of $100 million) after $16.2 million in cash.