Resources & Energy Group anticipates increased cashflow from revised scoping study for Mount Mackenzie gold project

Resources & Energy Group (ASX: REZ) has revised a scoping study for the Mount Mackenzie gold and silver project in central Queensland to reflect a gold price of $2,600 per ounce.

The revision will increase free cashflow from the planned development to $54.6 million and operating cashflow to $67.6 million.

An analysis of Mount Mackenzie at a gold price of $2,000/oz was presented as part of a December scoping study, with pit optimisation and financial evaluation for a 300,000 tonne-per-annum leach-only operation indicating favourable project economics.

The study used a base case resource estimate of 1.05 million tonnes at 1.86 grams per tonne gold equivalent, containing approximately 63,000oz gold mined and 45,500oz milled.

Cash costs for production were estimated at $1,400/oz and $58/t, respectively.

The financial performance of the base case delivered an operating revenue of $91 million, operating costs of $61 million and an estimated free cashflow of approximately $30.5 million.

The study also identified opportunities for improving the project’s financial outcome by increasing the processing plant’s throughput capacity and re-optimising the mineral resource shells using a higher gold price.

“In order to more fully understand the impact a higher gold price and throughput capacity has on the financial performance of the project, the company is re-evaluating the project’s mineral resource estimate,” Resources & Energy Group stated in a project presentation.

“Pit optimisation using a gold price of $2,600/oz and a mining processing rate of 500,000tpa will also be carried out… It is expected this work will result in substantial increases to the mineral resource and a significant increase to the project cashflow,” it said.

Gold and silver zones

Located 150km from Rockhampton, the Mount Mackenzie project is focused on the mining and processing of three high-sulphidation epithermal gold and silver zones known as North Knoll, South West Slopes and Vein 355.

The mineralisation across the zones is present as gold (free gold and rare electrum) and sulphides (pyrite, chalcopyrite, tennantite, enargite, bornite, sphalerite and galena).

Mount Mackenzie’s current resource estimate sits within all three zones, which are located within a broader package of mineralisation approximately 750m long and up to 250m wide.

Indicated resources are located within North Knoll, while the inferred content is within the remaining zones.

The resource estimate for North Knoll and South West Slopes was prepared in 2015 and constrained by pit optimisation, using a $1,700/oz gold price.

Open cut development

Resources & Energy Group plans to commence operations at Mount Mackenzie based on leach-treating oxide, transitional and primary ore recovered from a shallow open cut development.

Subject to validation by further metallurgical investigations, there may also be the opportunity to transition the plant from leach-only to a crushing, grinding and bulk sulphide flotation process.

The preparation of a flotation concentrate would be similar to that which has been applied at the Mt Carlton gold project owned by Evolution Mining (ASX: EVN).

Mt Carlton is also a high-sulphidation epithermal gold and silver resource producing gold and silver concentrates, which are shipped to China for smelting and recovery of contained metal.

Resources & Energy Group said the adoption of a flotation process to produce a polymetallic concentrate has potential to unlock additional feed sources at Mount Mackenzie.

At midday, shares in Resources & Energy Group were trading 14.29% higher at $0.016.