*Here's a detailed analysis of Reach Resources' (ASX: RR1) Blue...

*Here's a detailed analysis of Reach Resources' (ASX: RR1) Blue Heaven Mineral Resource Estimate (MRE) announcement from 9 April 2025, focusing on economic viability and the long-term outlook.

Executive Summary

• Total Resource: 681,000 tonnes @ 2.8 g/t Au for 61,300 ounces of gold.

• High Grade Focus: 92% of ounces in fresh rock averaging 3.1 g/t Au.

• High Recoveries: Metallurgical test work shows 97% recovery.

• Optimised at AU$3,500/oz, while the current gold price is ~AU$5,000/oz.

• Located on a granted mining lease near infrastructure in WA.

• Low CAPEX scenario likely, as processing discussions suggest toll treatment or third-party milling.

Economic Viability

Key Economic Inputs:

• Gold Price Used in MRE: AU$3,500/oz (very conservative compared to spot AU$5,000/oz).

• Mining Costs: AU$4.50/t

• Processing Cost: AU$33.00/t

• Recovery Assumption: 95% (actual test = 97%)

• Dilution: 10%, Recovery: 95%

• Cut-off Grade: 0.5 g/t Au

Grade and Resource Quality:

• Head Grade (Average): 2.8 g/t Au overall; 3.1 g/t in fresh rock (dominant portion).

• Indicated Resource: 443 kt @ 2.6 g/t = 37,400 oz (65% of resource, good confidence).

• Inferred Resource: 238 kt @ 3.1 g/t = 23,900 oz (still solid).

• Oxide vs Fresh: Most gold is in fresh rock, which generally is costlier to mine than oxide but compensated by grade.

Revenue Estimates (at current gold price AU$5,000/oz):

• Gross in-situ value: 61,300 oz × AU$5,000 = AU$306.5 million

• Even with 80–85% recovery of payable metal (mining, milling, refining deductions), this leaves room for strong margins.

CAPEX/Infrastructure:

• The deposit is:

  • On a granted mining lease.

  • Near Great Northern Highway, fuel, and accommodation.

  • Potentially open-pittable from surface (low stripping ratio).

  • In WA’s active gold region, suggesting nearby toll treatment options exist.

Low CAPEX, fast-track development opportunity – if toll milling is secured, upfront costs could be minimized.

Long-Term Outlook

Exploration Upside:

• Pansy Pit MRE pending.

• 4 km of largely unexplored strike on the Primrose Fault.

• Mineralisation is open at depth and along strike.

Resource Confidence and Classification:

• 65% Indicated – good for early-stage economic studies.

• Estimation methodology is JORC 2012-compliant and thorough.

• Ordinary Kriging and strong QAQC procedures add reliability.

Metallurgy and Processing:

• High metallurgical recovery (97%).

• Gold is amenable to conventional leaching (CIL) – straightforward processing route.

Environmental & Permitting:

• No red flags identified; area has mining history.

• Being on a granted lease, development is de-risked in regulatory terms.

Risks to Consider

	Risk	Analysis
1	Small Resource Size	61koz is on the small end of the scale. Likely a short-life, low-tonnage, high-margin operation unless expanded.
2	Market Volatility	If gold drops significantly (e.g., to AU$2,000/oz), project margins shrink.
3	Need for Toll Milling	Processing deal is not yet finalised; securing a viable partner is critical.
4	Capex and Financing	While low CAPEX is assumed, financing terms (debt/equity) can impact project economics.

Final Verdict

Economically Viable?
Yes, based on:

• Strong grades.

• High recovery.

• Low-cost, open-pit potential.

• Favorable location & gold price.

Long-Term Outlook?
Positive but dependent on:

• Defining additional ounces (e.g., Pansy Pit and Primrose Fault).

• Securing processing solutions.

• Converting more inferred to indicated/measured.

• Gold price stability.

According to the announcement, Reach Resources Limited outlines several next steps to advance the Blue Heaven gold project following the positive Mineral Resource Estimate (MRE).

Next Steps – Company Intentions

1. Finalise the MRE for the Pansy Pit

   • A separate Mineral Resource Estimate is already underway for the nearby Pansy Pit, which lies along the same Primrose Fault system as Blue Heaven.

   • This could significantly increase the total resource base and enhance project scale and economics.

2. Conduct Diamond Drilling

   • Purpose:

     • Collect more metallurgical samples for test work.

     • Obtain further structural information about the deposit.

   • This would help upgrade more of the resource from Inferred to Indicated, improving confidence in mine planning and potential feasibility studies.

3. Engage with Mining Contractors and Processors

   • Processing discussions are ongoing with various groups.

   • This suggests potential for toll treatment agreements or offtake partnerships, minimizing CAPEX and fast-tracking development.

   • The company hints at a forthcoming processing update.

4. Explore Along Strike

   • There's over 4km of largely unexplored strike on the Primrose Fault.

   • The company is likely to undertake step-out drilling to test these extensions, potentially expanding the scale of the project.

5. Advance Toward Development

   • The CEO notes the project is:

     • On a granted mining lease

     • Next to key infrastructure

     • With high gold recoveries (97%)

   • This supports a near-term pathway to shallow, open-pit mining, subject to additional studies and approvals.

Summary: Company’s Strategic Focus

Area	Action
Resource Growth	Finalise Pansy MRE + drill strike extensions
Metallurgy & Geotech	Diamond drilling for test work
Development Readiness	Secure mining & processing partnerships
Fast-Tracking Production	Leverage granted lease and strong gold market

*gpt4o