RESOURCES ENERGY GROUP (ASX:REZ)

Resources and Energy Group Limited (ASX: REZ) is an ASX-listed mineral resources company with projects in Western Australia and Queensland. The company’s flagship project, East Menzies, is highly prospective for gold. REZ also has projects prospective for nickel, cobalt and copper.

East Menzies Hosts a Pipeline of Near-Term Gold Production Opportunities

The flagship East Menzies project in Western Australia hosts a pipeline of gold projects that are near production including the Maranoa and Goodenough prospects.

In the near term, REZ is expected to commence a vat leach trial campaign treating 5,000 tonnes of ore from Maranoa grading 4.6g/t Au. This trial program is projected to yield 821 ounces of gold worth A$2.7M in revenue at a conservative A$3,250/oz gold price. An additional 9 leach dams during the expanded program could generate a further A$23.2M in sales.

Gigante Grande – A Company-Defining Deposit

Despite the attractive cash-generative potential of the Maranoa and Goodenough gold prospects, the Gigante Grande prospect is at the core of REZ’s strategy to become a substantial gold producer. We believe that the prospect potentially hosts a multi-million-ounce gold deposit.

Upside Geared to Growth in Gold Production

With its self-funded, staged production strategy, REZ is positioned to transition from an explorer to a sustainable gold producer and cash flow generator. Key to this will be bringing the Gigante Grande prospect into development via a Carbon-In-Leach plant capable of treating 120ktpa.

While still an early-stage gold company, REZ’s current market cap appears to undervalue its defined gold resources and near-term gold production potential, let alone the blue-sky potential at Gigante Grande.

Canary Capital Research Report

Latest REZ News            Presentation

EAST MENZIES GOLD PROJECT

Project Overview

In Western Australia, the Company’s flagship is the East Menzies Project (EMP), situated 130km north of Kalgoorlie. The EMP represents a 108km² package of contiguous mining, exploration, and prospecting licenses, which are prospective for precious metals and nickel. The EMP encompasses seven operational areas, including the Maranoa prospect, Goodenough prospect, Gigante Grande Gold prospect, Granny Venn prospect, and the Springfield prospect.

Maranoa Prospect

The Maranoa prospect has a granted Mining License (M29/427) and is being investigated as part of the Company’s strategy to identify near-term and low-capital-cost mine development opportunities along the western side of the East Menzies Project area. The Maranoa prospect has an inferred mineral resource of 46kt @ 5.7g/t au for 8k oz Au. Notable drilling results from Maranoa include:

• 5m @ 7.95g/t Au from 3m, including 1m @ 32.1g/t Au from 6m
• 7m @ 3.20g/t Au from 19m, including 1m @ 9.15g/t Au from 19m
• 3m @ 5.06g/t Au from 22m, including 1m @ 14.65g/t Au from 22m

Goodenough Prospect

Similar to Maranoa, the Goodenough gold resource is being investigated for near-term mine development. The Goodnough deposit has previously been worked on as an underground resource, with historical production of approximately 21,532t @ 15.9g/t. Since acquiring Goodenough, the Company has reviewed historic work and mineralisation at the prospect. These studies have generated the following mineral resource estimate, which comprises 42.7k oz of gold at a cut-off grade of 1g/t Au, represented by:

• Total Indicated: 633.8kt @ 1.84g/t au for 37.5k oz au.
• Total Inferred: 81.9kt @ 1.99g/t au for 5.2k oz au.

REZ has also conducted drilling programs at the Goodenough prospect, which have produced the following significant results:

• 3m @2.27g/t au from 14m
• 2m @17.63g/t au from 37m
• 4m @ 9.10g/t au from 35m
• 1m @ 11.6g/t au from 21m
• 6m @ 1.89g/t au from 38m
• 3m @ 6.24g/t au from 9m

Gigante Grande

This previously unexplored (virgin) prospect lies on the eastern side of the East Menzies Project.  REZ first recognised the bulk mining potential of Gigante Grande following RC drilling operations at the prospect in September 2020. Since then, 10,000m of RC drilling has been conducted over 100 mostly shallow holes ranging from 30-130m in depth. Notable drilling results from Gigante Grande include:

• 20m @ 5.06g/t Au from 116m, including 1m @ 76.4g/t Au from 134m
• 27m @ 3.7g/t Au from 67m, including 14m @ 6.34g/t Au from 65m and 1m @ 32.33g/tAu from 67m
• 65m @ 1.72g/t Au from 71m
• 21m @ 1.4g/t Au from 31m
• 93m @ 1.47g/t Au from 28m
• 115m @ 1.33g/t Au from 18m

Because of pre-consolidation restrictions, drilling was mostly focused on a narrow central corridor, where 700m of gram-plus-level gold intercepts were made, with an average grade of 1.56g/t Au. The REZ technical team is currently applying 3D GIS and expects sufficient information now to resolve the deposit’s shape, inform the drill-out of this target, and use this new information to lead to a Maiden Resource Estimate. However, based on previous drilling activities, REZ approximates the Gigante Grande prospect to be a multi-million-ounce gold resource.

Springfield Prospect

Outside of its gold prospects, REZ has carried out nickel exploration at its Springfield prospect. On 28 November 2023, REZ announced that multi-element assays for three of the four RC holes completed at Springfield during late July 2023 had intersected shallow zones of mineralisation enriched in Nickel and Cobalt. One drill hole, SFRC022, provided a peak result of 29m @ 0.37% Ni and 0.030% Co from 71m down the hole, including 10 m @ 0.54% Ni and 0.033% Co from 77m.

NEAR-TERM GOLD PRODUCTION OPPORTUNITY

Optimisation Study

On 17 October 2023, REZ announced that optimisation studies at the Goodenough and Maranoa prospects confirmed the opportunity for a mining development exploiting shallow resources at the two gold projects. For the Goodenough gold prospect specifically, REZ engaged Mining Plus to conduct open pit optimisations using a contract mining and toll processing cost model. The key assumptions used in the optimisation are a gold price of ~A$2,511, mining and processing costs of A$83.80 per tonne, and a 95% gold recovery.

Two mining options were assessed under the optimisation study. The first option investigated a pit constrained to a maximum depth of 30m, while the second option looked at incrementally increasing pit depth to 42m. The latter case delivered significantly improved resource recovery and produced the best outcome of 179k tonnes of ore for 9.8k oz/au. Of this estimate, 169kt is in the higher-confidence Indicated category, and 10kt is Inferred. The table below shows the mining metrics of the two options.

Scoping Study

The company is planning to commence a scoping study, including mine design, production schedules, and waste dump design. REZ has also stated that some additional drilling will be necessary to confirm gold recoveries, assist with ore and waste material characterisation, and further inform the resource model.

VAT LEACH PROGRAM

Overview

REZ’s gold resource at Maranoa has been identified as the ideal shallow, higher-grade ore to support a vat leach gold production campaign at the East Menzies Project.

During Vat leaching, the gold ore is crushed and mixed with a cyanide solution, which dissolves the gold. The gold is then recovered from the solution by adsorption onto activated carbon or precipitation with zinc dust. Cyanide leaching is widely utilised in large-scale gold mining because of its efficiency and effectiveness in extracting gold from low-grade ores. Additionally, vat leaching can be done on-site hence eliminating transport costs. Overall, the vat leach method is a low-cost alternative to toll processing and is ideal for REZ’s East Menzies Project.

Trial Vat Leach Program

At Maranoa, the company plans to run a trial campaign to treat 5,000 tonnes of ore with a diluted grade of ~4.6g/t. The trial campaign is expected to produce 821 ounces of gold, which would generate revenue of A$2.7m at a conservative gold price of $3,250/oz. On 24 October 2023, REZ appointed Lamington Minerals Pty Ltd as the preferred contractor for the proposed vat leaching campaign at the East Menzies Gold Project. Lamington Minerals specialises in providing cost-effective logistics, management, processing and recovery options to the gold mining industry.

Expanded Vat Leach Program

After establishing the economics of the vat leaching process, REZ could develop a larger-scale vat leach campaign to treat additional shallow resources identified at the Maranoa (8,000 Oz) and Goodenough (43,000 Oz) gold deposits. The expanded program could consist of nine more vat-leaching dams, each capable of processing 5,000 tonnes of ore. At a gold price of A$3,250/oz, these 9 dams would generate an additional $23.2m in gross sales revenue.

CIL Plant

Whilst the vat leaching program is cost-effective for processing small to medium-sized parcels of gold ore, REZ plans to construct a Carbon in Leach (CIL) plant in the future. This plant will give REZ the capability to process up to 120kt of gold ore per annum. The CIL plant will primarily process ore from the Gigante Grande prospect. REZ plans to fund the A$10m construction cost of the CIL plant using cash generated from the expanded vat leaching program.

MOUNT MACKENZIE GOLD AND SILVER PROJECT

Overview

The Mount Mackenzie mine site is located 150 km northwest of Rockhampton, Queensland. The granted tenements encompass four areas that have been subject to several successful exploration campaigns targeting shallow-depth gold mineralisation. REZ owns two parcels of land within the granted mining development licence (MDL2008). Currently, drilling results indicate a total JORC resource (2012) of 129,000 ounces of gold and 862,000 ounces of silver. These resources have been calculated for a small portion of the granted mining development licence.

Sale of the Mount Mackenzie Project

During 2023, the REZ board evaluated the Mackenzie Gold and Silver Project and determined that the company would obtain the greatest value from its interests in the project by either entering a joint venture or selling the project outright. In late 2023, REZ executed binding heads of agreement to sell the tenements and land associated with its Mackenzie Gold and Silver Project to Aureus Mining. The purchase amount of $750,000 was originally due on 8 December 2023.

Following the recent capital raises in April and August 2024, the REZ Board reassessed the advantages of retaining the Mount Mackenzie prospect. The assessment determined that, given the company’s current financial standing, it is now capable of holding the Mount Mackenzie tenement package and will continue to pursue its full value.

PREVIOUS MINING OPERATIONS

In the company’s FY2021/22 Granny Venn mining campaign, 8,700 Oz of gold was produced from 130,000 tonnes of ore grading around 2.4g/t, which was trucked to the Lakewood Mill and Gwalia mills for processing (ASX Release 29th June 2022). The campaign generated ~A$23m in revenue and A$7.5m in gross profit. REZ utilised the cash generated from the Granny Venn campaign to fund drilling programs at the Maranoa and Goodenough prospects.

RISKS

Underperformance of the Vat Leaching Program

There is a risk that REZ’s VAT leaching program fails to yield its expected gold production and revenue targets. This could be due to a higher-than-expected sulphide content or clay in the ore that could make it more difficult to leach the gold out of the ore. This could increase the amount of time required to leach the gold from the ore in addition to increasing the costs of labour. However, REZ has performed extensive lab testing to verify that its gold ore at Maranoa and Goodenough has a low sulphide content and a negligible clay composition in the gold ore. These lab results significantly mitigate the risk of the vat leaching program underperforming. Additionally, when REZ has conservatively estimated that it will take 4 months to fully leach the ore versus 3 months, that would be reasonable based on cyanide bottle roll tests and other lab results.

Decline in Gold Price

REZ’s intrinsic equity value could be significantly affected if the gold price achieved from the trial vat leaching program falls below the anticipated A$3,250 per ounce. A lower gold price would hinder REZ’s ability to finance the planned expansion of the vat leaching program, which is critical for fully exploiting the gold deposits at Maranoa and Goodenough. 

KEY PEOPLE

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  Gavin Rezos

  Executive Chairman

   

   

  Gavin has Australian and international investment banking experience and is a former investment banking Director of HSBC Group. Gavin has held chief executive officer positions and executive directorships of companies in the technology sector in Australia, the United Kingdom, the US and Singapore. He is a principal of Viaticus Capital and Chairman of Vulcan Energy Resources Limited. Gavin was previously a Non-Executive Director of Iluka Resources (ASX:ILU) from 2006 to 2016 and the former Chairman of Alexium (ASX:AJX).

• 

  Daniel Moore

  CEO

   

   

  Daniel has extensive experience working with emerging companies in natural resources. He has been involved with Resource & Energy Group’s East Menzies Goldfields since 2013, when it was first listed on the ASX. Daniel is currently a Director of Marquee Resources (ASX: MQR) and a founder of Koch Metals and Centenario Lithium. Previously he held Non-Executive Director roles at iCollege (ASX: ICT), Coronado Resources, now Race Oncology (ASX: RAC), and Stratum Metals, now Locality Planning Energy (ASX: LPE).

• 

  Richard Poole

  Non-Executive Director

   

   

  Richard commenced his career as a lawyer specialising in mergers and acquisitions. He left law in 1990 to build a research and development operation with operations in Japan, USA and Australia and added a manufacturing company in China in 1994. He built the R&D company from its early stages to a publicly listed vehicle raising the necessary capital up to his departure in 1999. Since 1999 he has continued his involvement in fundraising and the development of companies. He is a principal of Arthur Phillip Pty Limited, a corporate advisory firm providing investment services.

• 

  Warren Kember

  CFO and Company Secretary

   

   

  Warren has significant experience in executive finance having served as Chief Financial Officer for a number of ASX listed companies in the construction, mining and technology sectors. More recently, Warren was the Chief Financial Officer and, ultimately, the Chief Executive Officer of Australian Power & Gas Limited, a high growth, ASX listed energy retailer. Warren was also the Chief Executive Officer of a number of renewable energy companies. As the Chief Financial Officer and Company Secretary of REZ, he is responsible for directing all financial, legal and risk management.