Progress towards resumption of mining at Meekatharra Gold Project ahead of schedule as Resources and Reserves increased and other key activities about to commence
HIGHLIGHTS
- Resource increase at three deposits within Project:
- Prohibition Resource INCREASED by 2.8MT for an additional 158,000oz
- Surprise and Jess identify additional new Resources of 40,000oz
- Reedys first open pit Reserve since 1997 of 36,600oz has been completed on Jack Ryan, Rand and Callisto Pits at a gold price of A$1300/oz.
- Mickey Doolan and Prohibition pit optimisations commence.
- Resource-Reserve and exploration drilling planned to commence in July.
- Project progressing ahead of schedule.
Australian diversified resources company Reed Resources Ltd (ASX: RDR) (the “Company” or “Reed Resources”) continues to yield positive results from its evaluation of the recently acquired Meekatharra Gold Project (“the Project”) in Western Australia, with significant Resource increases at three deposits within the Project, pit optimisation completed at three deposits and progress towards resumption of mining activities occurring ahead of schedule.
Through diligent validation, reworking and remodelling of the existing known orebodies, Reed Resources is pleased to announce significant increases in both Resources and Reserves at the Meekatharra mining centre, and release the first Reserve Statement at Reedys since mining ceased in 1997. This comes after only 4 months of reviewing the assets.
Managing Director Christopher Reed said, “The Resource and Reserve review is progressing exceptionally well with the geological team now in place and an underground planning engineer due to start in a month. A key aspect in de-risking this project is being able to incorporate multiple sources from multiple locations, which is something we have primarily focussed on.
“The increase to the Resource at the Prohibition deposit represents the second milestone (after the Resource increase at the Bluebird deposit) to potentially create another base-load feed for when operations recommence at the Meekatharra Gold Project. In addition, the delineation of the first open pit Reserve since mining ceased at the Reedys deposit in 1997 is very important.
“Once the optimisation of the Prohibition deposit is complete we will be undertaking intense evaluation work at the Mickey Doolan deposit, which hosts over 600,000oz in Resources.”
Prohibition Resource Increase
A Resource model incorporating the Prohibition and Golden Bar Banded Iron Formation (BIF) - hosted lode has been completed by Snowden Mining Industry Consultants Pty Ltd (see Table 2 of the ASX announcement). The 2011 Mineral Resource for the Prohibition deposit was estimated using a geological interpretation provided by Reed Resources internal geological team. Gold grades were estimated by ordinary block kriging using appropriate top-cuts. The Mineral Resource has been reported and classified using the guidelines of the 2004 JORC Code and has been depleted for all historic mining.
Mineral Resources above 350mRL (approximately 15m beneath the base of the existing Prohibition Pit) were reported using a 0.5g/t lower cut-off, and Resources beneath this (more amenable to underground mining) were reported at 2.0g/t lower cut-off (see Figure 1 of the ASX announcement).
Prohibition is the largest ore system in the Paddys Flat system that is immediately available for mining (see Appendix A - Figure 9 of the ASX announcement). The mineralisation is hosted in a BIF and extends from the current Prohibition Pit through to the Golden Bar Pit. The “BIF-Line” of mineralisation has been remodelled and for the first time, a Resource model has been created that covers mineralisation from Prohibition to Golden Bar, a total strike length of approximately 2 km, allowing the mineralisation to be evaluated as one ore body (see Figure 2 of the ASX announcement).
Minecomp Pty Ltd has commenced an open pit optimisation on the Resource model. The deeper Resources are likely to be accessed through underground infrastructure and will be re-evaluated in the coming months. This will incorporate the five mineralised systems Prohibition, Vivian, Consols, Mudlode and Fatts which all lie within 250m of the Prohibition deposit (see Figure 3 of the ASX announcement).
This holistic approach, which has always been the principal strategy of Reed Resources, has yielded a significant increase to the Resource base. Table 1 and Table 2 below compare the current estimate to the previously reported Resources in this area. Golden Bar was an internal Resource estimate undertaken in 2003 by St Barabara Mines, whilst the Prohibition area was undertaken by ResEval in 2007. The increase in tonnage in the 2011 Mineral Resource for Prohibition, compared to the 2007 Mineral Resource, is largely due to additional mineralisation modelled between Prohibition and Golden Bar, along with the lower cut-off grade used above 350mRL to reflect mineralisation potentially amenable to open pit mining.
The increase to the Resource represents over 100% increase in the tonnage and a 53% increase in the contained metal. The change in the grade is mainly due to the incorporation of near surface Resources that are more amenable to be mined through open pit methods and reported at a lower cut-off.
Jack Ryan and Callisto Reserves
Reserve optimisations have been completed by Minecomp for Jack Ryan, Rand and Callisto open pits (see Table 3 of the ASX announcement) at the Reedys area (see Appendix A- Figure 10 of the ASX announcement). This represents the first Reserve statement at Reedys in 14 years. The Reserves were based upon the Resource model estimated by Snowden earlier this year and using mining parameters and costs supplied by a mining contractor and peer based equivalents.
The planned open pit for Jack Ryan (see Figure 4 of the ASX announcement) will consume the cutback previously commenced by Metana Minerals. This pit has inferred Resources at grades amenable for further exploitation sitting underneath the current pit shell. This will be followed up with drilling in due course.
Randis largely an underground target for Reserve optimisation, however, a cutback on the northern part of the existing workings will provide a small amount of material. This cutback is likely to be pivotal for any future underground workings and portal access due to the current pit being inaccessible without significant rehabilitation due to wall failures that have occurred in the last 15-18 years.
The Callisto Pit optimisation extent (see Figure 5 of the ASX announcement) is bounded predominantly by the classification limits of the Indicated Resource category. Further exploration drilling in due course may expand this Reserve and increase the pit shell.
A combined and multi-source approach at Reedys represents a solid, low-risk opportunity. The Reserves defined represent 3-4 months of mill feed which, without further expansion will provide an immediate back up mining source and production relief should problems be encountered at one of the base-load production sources.
Further exploration work at Reedys and the surrounding pits (Thompsons Bore, Turn of the Tide and Culculli) is in progress.
Surprise, Jess and Surprise West Resources Upgrade
A Resource model incorporating the southern section of Surprise, along with Jess and Surprise West has been completed by Snowden (see Figure 6 and Table 4 of the ASX announcement). The 2011 Mineral Resource for the main Surprise deposit was estimated for material south of 20,020mN only (south of the existing Surprise pit). Gold grades were estimated by ordinary block kriging using appropriate top-cuts. The Mineral Resource for Surprise has been reported and classified using the guidelines of the 2004 JORC Code and has been depleted for all historic mining.
The 2011 Surprise Resource represents material that can conceptually be sourced from open pit mining proximal to the Bluebird processing plant. This is additional to the already existing Reserve of 13,000oz (see Table 5 of the ASX announcement).
The new Resource is a southern extension to the existing Resource. Of particular interest are the Jess and Surprise West orebodies that lie proximal to Surprise and remain open both along strike and at depth. These will be optimised in the coming weeks.
RESOURCE RESERVE SUMMARY UPDATE
The Resource to Reserve conversion and production pyramid is progressing ahead of schedule (refer to Figure 7 and Figure 8 of the ASX announcement), with only a few Resource estimates and optimisations remaining to be completed, including the new Prohibition Reserve estimate by Minecomp.
Work at Reedys (external to the 5 main pits) has so far been a high level assessment. A review of the remaining tenement holding in this area has commenced with a view to looking at the current data and testing anomalies that exist. Expansion and re-optimising the other satellite pits will commence, along with a detailed review of the Resource underneath the South Emu Pit targeted for underground operations.
DRILLING UPDATE
Drilling has been planned into many areas of the tenement holding. The approvals are pending.
The drilling targets are varied from near grass-roots exploration drilling, Resource-Reserve definition drilling and metallurgical test work drilling into the Macquarie and Mickey Doolan orebodies. This is anticipated to commence in the June quarter, pending availability of drilling contractors.
The Chunderloo copper-gold deposit will also be targeted in this round of drilling activity with a view to extensions of the immediate ore body and testing the large copper-gold anomalies along the Granite contact.
The market will be advised when this commences.
PROJECT UPDATE
The Bankable Feasibility Study is progressing well. An electrical engineering study of the processing plant and power facility has been completed, along with a condition report of the accommodation village and office (see Figure 8 of the ASX announcement).
A risk assessment of the project has been completed with the engineering company SCOPE Australia, and negotiations with interested parties for several key contracts have commenced. These contracts include the load and haul open pit contract, the mill refurbishment contract and the catering contract. A preliminary scoping study of the power supply and generation options has also been completed.
Geotechnical, environmental, hydrological and metallurgical work is advanced and key reports have either been finalised or are being finalised to allow the mine planning process to commence with confidence.
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