Research firm Green Leader Equity Research compiled a report on Reed Resources (ASX:RDR) which "is preparing to resume gold production at the Meekatharra project."
"The project area is responsible for 4 Mozs of past gold production from over 50 mines. Meekatharra has infrastructure, plant and equipment in place supporting treatment capacity of up to 3 million tonnes of ore per annum.
Investment Data
ASX Code: RDR
Share price: $$0.53
Issued Capital FPO shares: 261M
Unlisted options: 20M
Market capitalisation (fully diluted): A$150M
Reed is compiling an initial four-five year mine plan for Meekatharra from 420,000 ozs in reserves and 2.5 Mozs in resources left by previous operators. The Meekatharra bankable feasibility study is due for completion in February 2012. Green Leader estimates Meekatharra can produce +100,000 ounces at a cash cost of about A$800/oz from 2013.
Reed owns 70% of the Mt Marion lithium project, under construction south of Kalgoorlie.
Mt Marion is due for commissioning in December 2011. Forecast annual production (100%) is 195,000 tonnes of spodumene concentrate grading +6% Li2O. Spodumene concentrate is a primary feedstock for Chinese lithium battery manufacture. Mass production in China of lithium batteries for cars and bikes is a recent and ongoing phenomenon that is driving unprecedented demand for spodumene.
Resources at Mt Marion suggest a ten year project life with potential for further extension.
Reed completed a feasibility study on the 100% owned Barrambie vanadium project in 2009. Vanadium demand is growing quickly and the bulk of vanadium supplies are met by a few, increasingly inefficient sources. Barrambie is a high grade vanadium deposit. An equity partner is sought to take Barrambie forward.
Also in Western Australia Reed owns developed gold assets at Comet Vale and Nimbus, and diverse exploration prospects at Mt Finnerty.
Post the completion of the recent share placement, Reed will have circa A$15 million in cash and no debt upon final settlement for Meekatharra in June 2011. The capital cost of Mt Marion’s construction is being financed by Reed’s partner. Reed is forecast to need additional funds of up to A$40 million in FY2012 for development and working capital.
Summary
Reed has three main assets; Meekatharra gold, Mt Marion lithium and Barrambie vanadium. Each project differs widely from the others; in terms of commodity rationale, capital demands, and management input, so it is difficult at present to characterise Reed in terms of exposure to a single situation.
The commodity mix in Reed’s portfolio gives an interesting net effect. Gold has risen to a point that should enable Meekatharra’s successful development, and further rises would open up a field of opportunities. Lithium is ostensibly in the very early stages of an exponential growth phase.
Mt Marion’s JV arrangement, timing, and alignment with China’s lithium aspirations, form a platform from which Reed plans to capitalise as the lithium market develops. Vanadium also has a persuasive investment case, albeit a longer term one. Continued industry interest in Reed’s 100% owned Barrambie is expected.
Only informal forward estimates are available for Mt Marion and Meekatharra. Reed is securing managers and contractors for Meekatharra’s development at a time of high industry demand. In recognition of these risks Reed has so far acquired and advanced its interests without incurring debt. Further capital will be required in 2012.
The relative importance of Meekatharra within Reed’s portfolio will probably increase over the next few years as more capital and management time is devoted to it. Meekatharra arguably has both the resources depth and exploration prospects to justify investment in Reed alone."