20/03/2013 - 13:55

Reed offloads gold project for $6m

20/03/2013 - 13:55


Save articles for future reference.
Reed offloads gold project for $6m

Reed Resources has struck a deal with Crest Minerals over the Comet Vale gold project near Kalgoorlie, which is anticipated to be brought back online next year.

Both parties have executed a memorandum of understanding (MOU) that will see Reed subsidiary Sand Queen Gold Mines sold to South Australian-based Crest for $6 million cash.

Sand Queen holds the Comet Vale project, which was placed on care and maintenance in 2010 after Reed was unable to negotiate a long-term milling contract.

Under the MOU, Crest will pay Reed $6 million cash including a $100,000 non-refundable deposit, and Crest will also gain the 1 per cent net zinc smelter royalty for the Nimbus silver-zinc project.

Reed offloaded Nimbus to McPhersons Resources in 2011. The royalty transaction is subject to MacPhersons not exercising its pre-emptive right.

The deal is conditional on the completion of due diligence, necessary regulatory and shareholder approvals and Crest completing a $13 million capital raising, all by the end of June this year.

“With the company fully focused on its now producing Meekatharra Gold Operation, it is the appropriate time to sell Comet Vale,” Reed managing director Luke Tonkin said.

Crest said it intends to carry out additional exploration at Comet Vale at surrounding areas, and has a view to restart operations in July 2014 at the earliest.

Under Reed, Comet Vale produced 26,000 ounces of gold between June 2006 and June 2010.

“We are of the firm view that the recent history of high-grade production (80,000 tonnes at 10 grams per tonne gold) and the existing underground and surface infrastructure, should ensure the restart is low-risk with a low capital cost,” Crest managing director Angus Middleton said.

Comet Vale currently has a resource inventory of 186,000 tonnes at 10.8 grams per tonne gold.

Shares in Reed closed unchanged at 11c while shares in Crest closed 1.5c lower at 13.5c. 


Subscription Options