28/04/2009 - 13:56

Reed buys silver operation for over $2m

28/04/2009 - 13:56

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West Perth-based Reed Resources has obtained an exclusive option to acquire a silver project and processing plant near Kalgoorlie from a private company for more than $2 million.

West Perth-based Reed Resources has obtained an exclusive option to acquire a silver project and processing plant near Kalgoorlie from a private company for more than $2 million.

Reed has entered into a binding letter agreement with Polymetals Group Pty Ltd that gives Reed the exclusive option to acquire the Nimbus silver operation.

Under the terms of the agreement, Reed will pay a $50,000 option fee to Polymetals with the option exercisable on or before August 31 this year.

Should Reed decide to exercise the option, a further $2.25 million is payable to Polymetals.

 

 

The announcement is below:

 

Reed Resources Ltd (ASX: RDR) ("Reed") is pleased to advise it has entered into a binding letter agreement with Polymetals Group Pty Ltd ("PGPL") giving Reed an exclusive option to acquire the Nimbus Silver Project and Processing Plant, 15km southeast of Kalgoorlie. Reed and PGPL intend to enter into a more detailed option agreement shortly, on terms not different in substance from those outlined in the binding letter agreement.

Summary of Key Terms regarding Nimbus Project

- A$50K option fee payable to PGPL;

- Option exercisable by Reed on or before 31 August 2009; and

- A$2.25M cash payable by Reed on exercise of option.

An independent valuation in 2008 valued the plant and associated equipment at a replacement value (not installed) of A$7M. Reed is aware that such mills are extremely difficult to locate in the existing market and represents significant value to the Company.

Benefits of Acquisition

Acquisition of a processing plant will enable Reed to further develop its strategy of increasing its level of profitable gold production, from its share of the high-grade Sand Queen Production Joint Venture (Table 1) and in its own right through the exploitation of shallow gold resources (Figure 1; Table 2), in unweathered rock, amenable to low-cost open pit mining and processing through a Merrill-Crowe gold recovery circuit, currently owned by PGPL and installed at Nimbus.

The Comet Vale gold ores are highly amenable to gravity recovery followed by leaching, and the Nimbus plant, which includes a yet to be installed gravity circuit, will enable both open pit and underground ores to be processed at their optimal conditions.

The Nimbus Project comprises two granted mining leases (M26/490, M26/598). PGPL commenced mining in early 2004 and produced approximately 3M oz of silver from two open pits before ceasing mining operations in late 2006. The processing plant (Figures 2, 3 and 4) was placed on care and maintenance in late 2007. There is significant base metal exploration upside and in-situ high-grade silver mineralization beneath the current pit floors.

Highlights

Option secured over 250,000 tpa precious metal processing plant

Resource optimization and reserve calculations underway enable fast track evaluation of open pit operations (100% RDR)

Combined, shallow (<50m) measured and indicated resources at Comet Vale of 192,000 tonnes at 2.6 g/t Au for 16,200 ounces of gold

Potential removal of milling risk/production limits from current processing/oresale arrangements

Forward Work Program

Technical and environmental due diligence on the Nimbus Project and processing plant will be undertaken by Reed prior to exercising the option. Reed will complete an operational feasibility review to definitively establish the quantum and grade of Comet Vale open pit ore reserves and detail the scope and timetable of site operations to commence open pit mining and refurbishment of the mill. Pit optimisation and reserve calculations are being undertaken on the Sand Prince West and Princess Grace resources. Previous optimisation studies indicated that a large proportion of the resources could be economically mined.

 

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