ASX listed REZ is making headway in the advancement of an early cashflow gold and silver opportunity with a fresh round of drilling completed and some positive early indicators.

 Better known for its recent shallow, high-grade Gigante Grande gold find at its East Menzies project in the prolific goldfields of Western Australia, Resources & Energy Group (ASX:REZ) has another gem in the portfolio that is starting to bear fruit.

Although assays are still pending, REZ revealed this week drilling at its Mount Mackenzie project in Queensland had intersected two zones of primary mineralisation, each up to 150m wide.

Executive director Richard Poole said this was a better-than-expected result, with both zones measuring 20-25m thicker than the model.

“Drilling was aimed at testing the primary ore zone at Mount Mackenzie which has not been closed off by drilling and until recently was untested generally below 80m.”

  • Richard Poole

The campaign centred on the South West Slopes of the Mount Mackenzie resource area and was designed to infill and further drill test gold mineralisation within the prospect.

Mount Mackenzie already hosts an indicated and inferred resource of 3.42 million tonnes at 1.18 grams per tonne (g/t) gold and 9g/t silver for a contained resource of 129,000oz gold and 862,000oz silver.

Mid-last year, REZ completed a scoping study that indicated an open pit operation would produce about 67,000oz of gold and 392,000oz of silver over an initial five-year life.

A low-cost, sub-$15m mine development could deliver REZ about $63m in free cash flow.

Strong expansion potential

Thousands of ounces of gold currently sit outside the resource ‘shells’ because they can’t be efficiently recovered by conventional processing.

To solve this problem, REZ is investigating the potential adoption of a crushing, grinding and bulk sulphide flotation process to produce a polymetallic concentrate, which could potentially unlock many more ounces at Mount Mackenzie.

Core samples have been dispatched to ALS Townsville, which will carry out initial metallurgical testwork before JT Metallurgical Services prepares a combination of master and variability composites for evaluation.

“It’s during this program of work that we will thoroughly examine the effectiveness of gravity preconcentration, cyanide leaching and flotation to unlock primary additional ore that sits outside of the optimised pit shell.”

  • Richard Poole

Continues to beat expectations

REZ has a track record of beating its own targets. Just last week it returned better-than-expected results from grade control drilling at its Granny Venn mine, part of the East Menzies project.

High‐grade and extensive intervals of gold mineralisation were intersected below the pit floor.

Richard Poole said at the time the “exceptional” results, which were higher than modelled, showed the potential for a bigger resource and also opened up possible underground development opportunities.

Late last year Barclay Pearce initiated coverage on REZ and assigned it a 15c share price target that the investment firm predicts it will reach before the end of 2021.

Barclay Pearce is forecasting upside for investors.

“REZ is putting some significant cash into its tenements and delivering results through its resource expansion and progression towards opportunities for renewed mining operations,” investment analyst Ethan Perrett told Stockhead.

“In essence, we see a company that’s building its foundation into something exponential.

“As with any natural resources company it all comes down to achieving results and we think it’s fair to say that with the work they’re undertaking and the expertise they have on the job, REZ has got its foot on the throat to give itself every opportunity to exceed expectations.”

 This article was developed in collaboration with Resources & Energy Group, a Stockhead advertiser at the time of publishing.

 This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.