REZ Faces Cash Crunch as East Menzies Trial Vat Leach Nears First Gold Pour

Restarting Gold Production at East Menzies

Resources & Energy Group Limited (ASX: REZ) has marked a significant operational milestone with the recommencement of trial gold mining at its flagship East Menzies Gold Project in Western Australia. The company has secured regulatory approval from the Department of Mines, Industry Regulation and Safety (DMIRS) to initiate a vat leach and bulk sampling program, focusing initially on the Maranoa deposit.

This trial phase involves processing 5,000 tonnes of hard rock material through newly constructed vat leach facilities, with Vat 1 completed and operational as of December 2024. The first carbon strip, a critical step in gold extraction, is scheduled for February 1, 2025, setting the stage for the project’s first gold pour in the near term.

Strategic Importance of the Maranoa Deposit

The Maranoa deposit is central to REZ’s early production strategy at East Menzies. With an inferred mineral resource estimate of approximately 8,000 ounces of gold at a diluted grade of 4.6 grams per tonne, the deposit offers a valuable testbed for the vat leach process. Outcomes from this trial will inform scalability and operational optimisation, potentially unlocking further resources within the consolidated tenement package.

Following the initial vat leach campaign, REZ has submitted a second mining application to DMIRS to continue and expand vat leach operations. This reflects the company’s confidence in the process and its commitment to ramping up production capacity across the East Menzies site.

Building on Past Success and Market Conditions

The renewed mining activity builds on the success of REZ’s previous campaign at the Granny Venn deposit, which yielded 8,700 ounces of gold and generated $23 million in revenue despite subdued gold prices at the time. The current environment of record-high gold prices, combined with the low-cost vat leach method, positions REZ to capitalise on improved margins and operational efficiencies.

Post quarter-end, carbon from the trial vat leach program was transported to Kalgoorlie for gold extraction, a key step in validating the trial’s commercial viability. The company expects to generate positive cash flow from this phase starting in February 2025, which will be reinvested into exploration and development of high-grade deposits within the East Menzies tenements.

Financial Position and Future Outlook

Despite the operational progress, REZ’s cash reserves remain modest, with $222,000 reported at the end of December 2024, down from $802,000 the previous quarter. Operating and investing cash outflows continue, but management anticipates that cash flow from the vat leach trial will improve the financial position in the coming months.

The Board is actively considering further capital raisings or standby loan facilities to support ongoing operations, contingent on the success and timing of cash flows from the Maranoa vat leach program. This cautious approach underscores the importance of the trial’s outcomes for REZ’s near-term financial sustainability.

Expanding the East Menzies Footprint

Looking ahead, REZ plans to extend mining operations beyond Maranoa to other promising deposits within the East Menzies tenement package, including Goodenough and Granny Venn. The company is also exploring upgrades to processing infrastructure, such as installing a carbon-in-leach (CIL) plant onsite, to enhance recovery rates and production scale.

With a robust pipeline of exploration targets and a strategic focus on cost-effective extraction methods, REZ aims to deliver sustained value to shareholders while navigating the challenges of a tight cash position and the complexities of scaling operations.