REZ gears up to drill early cashflow gold and silver opportunity

REZ is preparing to start drilling its Mount Mackenzie gold and silver project in Queensland — an early stage cash flow opportunity.

A six-hole, 1000m drilling program will begin this week at Resource & Energy Group’s (ASX:REZ) Mount Mackenzie gold and silver project.

This follows the recent re-opening of borders between NSW and Queensland and deployment of a field crew to manage and supervise the work.

Drilling services provider Proactive Drilling is set to mobilise to the site within the next few days.

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.

In July last year, the company estimated the open pit operation would produce about 67,000oz of gold and 392,000oz of silver over an initial five-year life.

Initial studies indicate that REZ could make $63m in free cash flow from a low-cost, sub-$15m mine development.

But there’s significant upside here. The primary ore zone at Mount Mackenzie has not been closed off by drilling and remains untested generally below 80m.

And 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 geologist Mike Johnstone said previously could “unlock many more ounces at Mount Mackenzie”.

The short drilling campaign will focus on the South West Slopes of the Mount Mackenzie resource area and has been designed to infill and further drill test gold mineralisation within the prospect.

REZ gears up to drill early cashflow gold and silver opportunity — South West Slopes drillhole location plan. Pic: Supplied.

Specifically, it will recover cored intervals through the entire ore body for comprehensive metallurgical testing, investigate primary mineralisation below the current drilled extents and infill current drilled intervals and upgrade the South West Slopes resource to indicated.

Mineral resources are categorised in order of increasing geological confidence from inferred to indicated to measured. Upgrading a resource to the indicated category means a company has sufficient information on geology and grade continuity to support mine planning.

Following drilling, REZ plans to get cracking on an advanced project development study.

The company is undertaking a metallurgical test-work program, with initial results to be released in April 2021, that will provide definitive economic and plant design information for downstream engineering and financial modelling.

This includes the development of a final process flowsheet and design criteria for the project to a level suitable for a feasibility study.

The feasibility study for the Mount Mackenzie project is already well advanced with a significant amount of mine planning, and scheduling carried out last year. REZ expects to have the study finalised by June 2021.

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.