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REZ is a gold explorer with enormous growth potential
Mining
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Special Report: Small cap Resources and Energy Group (ASX:REZ) has several ‘irons in the fire’, from near-term gold production through to +million-ounce ‘blue sky’ exploration targets.
REZ’s main game is the East Menzies Gold Project located north of Kalgoorlie, which includes a mix of near-term redevelopment opportunities and large, juicy greenfields (unexplored) targets.
“There has been some reasonably contemporary mine development on the western side of the project package at the Goodenough underground mine in the 1980s, and the Granny Venn and Aunt Nelly mines in the 1990s and most recently Caesar in 2017.
“The original Granny Venn Project, was a successful mining exercise; the metallurgical character of the ore is exceptional and its gold recovery through a conventional CIL process route is well understood,” REZ geologist Mike Johnstone told Stockhead.
“On the eastern side of our tenement package there are scattered artisanal workings– but there hasn’t been much exploration at all.”
This is due to a veneer of regolith cover on the eastern side which has obscured any tell-tale signs of mineralisation below the surface.
The eastern side is what excites Johnstone the most.
“There’s an opportunity to find large mineral resources between 150,000oz to 500,000oz in this area. The geochemical anomalies which have been defined are of exceptional scale”, he says.
In September, an early stage drilling program uncovered at least 10 large scale targets on the eastern side.
This image highlights the emerging prospectivity of the central and eastern domains, where this air core drilling has identified multiple gold trends under ‘cover’ (dark pink):
“There is a very significant structure on the [far] eastern side called the Moriarty Shear Zone,” Johnstone says.
“On the east side we see very strong analogies with the [historic 1.4-million-ounce] Golden Cities deposits, about 70km south of Menzies. These are large targets with the potential to host commercial ore grade mineralisation.”
The central targets are collectively called Chronos, which is showing mineralization characterized by quartz veins within ultramafic schist, at or close to the contact with Felsic units. This has similarities to the previously mined Granny Venn and Auntie Nelly pits (+60k oz au) where mineralisation occurs in shallow-dipping cross fractures near the ultramafic-felsic contacts– just a lot bigger.
“The regolith anomalies are very similar to Granny Venn, except I can fit three or four Granny Venn pits into Chronos,” Johnstone continues.
“The scale is quite exceptional.”
REZ notes that a 40ppb (parts per billion) gold anomalism has historically been a strong indicator for economic gold grades within the corridor.
These new targets are not only large, but they are giving off strong ‘signatures’ compared to some of the previous mining operations in the area.
They also cover areas where previous reverse circulation (RC) work included spectacular results of 21m at 7.1 grams per tonne (g/t) from 36m, and 5m at 29.2g/t from 52m terminating at 13.8g/t.
REZ has now suspended its air-core drilling program early, and has elected to bring forward an RC drilling program to test the resource potential of the anomalous areas of bedrock mineralisation identified so far.
It will soon kick off deeper, more targeted RC drilling to dial in on what it hopes is a major gold discovery.
“When we received results from the air core program, we basically put the brakes on further air-core work for the time being and took a decision ‘we need to bring forward our RC program – these are large targets’ and warrant investigation now to fully understand the significance of them.
“We are hoping to start in early September. We have chalked out a program of RC work to drill test our best targets,” says Johnstone.
The west side: Near-term gold production
The western side of East Menzies — which includes a number of historic mining operations on granted mining leases — represents an opportunity for near-term cashflow.
“Right now, I am re-optimising the old Goodenough [mine] resource, and will be looking to upgrade Goodenough pretty soon,” Johnstone says.
“The Goodenough mine is located within a significant mineralised structure which has potential to yield a new mine development.
“We have a two-pronged approach — get some small-scale production up and running on the west side, to help fund our larger scale exploration programs to the east south and north.”
Mount Mackenzie: A lucrative gold and silver development
The small but advanced Mount Mackenzie gold and silver project in Central Queensland also represents an early stage cashflow opportunity for REZ.
In July, the company estimated that 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 now looking into the adoption of a crushing, grinding and bulk sulphide flotation process to produce a polymetallic concentrate.
“This could unlock many more ounces at Mount Mackenzie,” Johnstone says.
“Mount Mackenzie is a high sulphidation epithermal gold deposit. In terms of its genesis, age, and geological character it is virtually identical to the Mt Carlton [gold mine],” he continues.
“The thing that made Mt Carlton successful is that Evolution recognised and developed a process route which enabled preparation of a bulk sulphide concentrate from the primary resource.
“It simplifies their operations and it makes it one of the lowest cost producers in the country.”
Following a short campaign of drilling to increase confidence in the resource, REZ plans to get cracking on an advanced project development study.
“I would like to be in a position to engage someone to start putting together a BFS by the end of the year,” Johnstone says.
“If not, it will certainly be in the first quarter of 2021.”
The value proposition ‘is huge’
“REZ has a lot of high-quality irons in the fire,” explains Johnstone.
“At East Menzies alone I can see multiple targets projects within our ground.
“We also have granted mining tenements and existing resources within them, which would enable early start up without a prolonged approval process.
“The prospectivity of our projects are really starting to emerge as REZ implements a rational and staged program of investigations,” Johnston concludes.
