Murchison South Gold Project Development Faces Conditional Option Exercise and Approval Risks

Funding and Operational Partnership Secured

Reach Resources Limited (ASX:RR1) has taken a major step toward advancing its Murchison South Gold Project by entering into a binding option agreement with Andel Resources Pty Ltd. The deal grants Andel an exclusive 180-day window to execute a right to mine and milling (RTMM) agreement covering tenement M59/769, known as Blue Heaven. Under the RTMM Agreement, Andel will fund all pre-mining, mining, haulage, and processing costs upfront, with repayment coming from gold revenues. This arrangement effectively removes the need for Reach to commit capital upfront, accelerating the project toward production.

The RTMM Agreement also establishes a 50/50 split of net project profits between Reach and Andel, calculated on an at-cost, open-book basis. This transparency gives Reach significant oversight while leveraging Andel's vertically integrated mining and processing capabilities, including the use of the Kirkalocka Mill operated by Andel’s subsidiary Gylden Resources. Located approximately 75 kilometres from the project site, the mill provides a nearby processing solution that complements the mining operation.

Strategic Equity Investment and Capital Injection

As part of the deal, Andel will pay Reach a non-refundable option fee of A$2 million to secure exclusivity and allow Reach to advance key project approvals. Additionally, Andel has committed to a $900,000 share placement at $0.009 per share, acquiring approximately 9.4% of Reach’s issued capital. This equity stake signals Andel’s confidence in the Murchison South asset and aligns their interests with Reach’s shareholders.

The proceeds from the option fee will be directed toward accelerating mining approvals and project development, while the placement funds will support general working capital and other projects within Reach’s portfolio. This capital injection complements Reach’s recent efforts to expand and upgrade the Blue Heaven resource, which now stands at around 80,000 ounces of gold at a 3.0 g/t grade, following a 30% resource increase reported last month. The resource upgrade and ongoing drilling results underpin the project's potential for near-term open pit mining and support the economics of the RTMM Agreement.

Terms and Conditions of the Agreement

The RTMM Agreement is set for an initial term of four years and nine months, with potential extensions by mutual consent. Its activation depends on Andel exercising the option after completing legal and technical due diligence, securing FIRB approval, and finalising ancillary agreements including a toll milling contract with Gylden Resources and a mining services agreement with SMS (WA) Holdings, another Andel subsidiary. The agreement also requires a baseline environmental audit and the establishment of security arrangements over the tenements and project bank accounts.

Mining plans and operations will be managed by Andel, with Reach retaining rights to nominate a site representative for oversight and participating in monthly progress meetings. Importantly, all costs will be charged on a direct cost recovery basis without corporate overhead or related-party mark-ups, subject to open-book disclosure and annual independent benchmarking. Tenement holding costs remain Reach’s responsibility but are recoverable under the agreement ahead of Andel’s cost recovery.

Implications for Reach’s Development Strategy

This partnership marks a significant shift in Reach’s approach to project development, effectively outsourcing capital-intensive mining and processing activities while retaining a substantial share of the profits. The flexibility to include additional tenements (M59/786 and M59/790) under the RTMM Agreement later or pursue alternative funding or divestment options preserves Reach’s strategic optionality.

CEO Jeremy Bower highlighted the benefits of the arrangement, noting that Andel’s integrated mining services and proximity of the Kirkalocka Mill create a streamlined path to production. The deal also leverages Andel’s mining services company SMS (WA) Holdings, which is expected to be contracted for mining operations, further consolidating the supply chain and cost efficiencies.

Reach’s recent resource upgrades and metallurgical test work, which demonstrated 95% gold recovery, provide a robust foundation for the project’s economics and support the viability of toll milling at Kirkalocka. These developments complement the funding arrangement, positioning Reach to accelerate towards gold doré production with minimal upfront capital risk.

While the option exercise remains subject to customary conditions and approvals, this deal represents a material advancement for Reach’s Murchison South project and could serve as a template for future capital-light development partnerships.