Reach Resources has increased the Blue Heaven resource by 30% to 80,000 ounces while advancing a proposed profit-sharing mining arrangement with Andel Resources. The progress came alongside a sharply larger FY2026 loss and a balance sheet still dependent on future project execution.
- Blue Heaven resource rises to 80,000 ounces at 3.0 g/t gold
- FY2026 net loss widens to $4.44 million from $950,298
- Andel exercises option for Murchison South mining and milling deal
- $2 million option fee shifts to FY2027 revenue after conditions are met
- REEcycle stake tied to proposed US$400 million Nasdaq transaction
Blue Heaven Resource Reaches 80,000 Ounces
Reach Resources Ltd (ASX:RR1) has turned a 5,000-metre reverse-circulation drilling programme into a 30% increase in the Blue Heaven gold resource, lifting it to 844,000 tonnes at 3.0 grams per tonne for 80,000 ounces of gold. The updated estimate comprises 45,000 ounces in the Indicated category and 35,000 ounces Inferred.
The result is the clearest operational gain in the company’s FY2026 report. It follows earlier estimates of 61,300 ounces at Blue Heaven and 5,800 ounces at the separate Pansy deposit, although the latest drilling programme covered Blue Heaven only. The resource remains an estimate rather than a production result, and the next test is whether the deposit can support an economic mining operation.
Andel Option Moves Into Conditions Precedent
Andel Resources exercised its option on 18 August to enter the Right to Mine and Milling Agreement covering the Murchison South project’s Blue Heaven tenement. Under the arrangement, Andel is to fund pre-mining, mining, haulage and processing costs upfront, with ore proposed to be processed at the Kirkalocka Mill and net project profits shared equally on an at-cost, open-book basis.
That is a proposed funding and development pathway, not yet a completed mining operation. Reach said the parties were still working to satisfy or waive conditions precedent to fast-track mining as at the report date. The company’s earlier fully funded Murchison South arrangement was also framed around this staged process, with the agreement retaining flexibility around two additional tenements.
Loss Widens as Exploration Portfolio Is Reworked
Reach’s net loss widened to $4.44 million for FY2026 from $950,298 a year earlier. The result included a $3.39 million loss on disposal of tenements, while exploration and evaluation assets fell to $8.82 million from $10.85 million after tenements were sold or surrendered.
Cash tells a less severe story than the statutory loss. The company ended June with $4.53 million in cash and a further $2 million in term deposits, compared with $3.27 million in cash at the previous year-end. Operating activities generated $1.42 million, helped by receipt of the Andel option fee, while $2.32 million was spent on exploration and evaluation and $400,000 was received from the sale of tenements.
Funding and REEcycle Create Additional Leverage
Reach strengthened its capital position through a $3.15 million rights issue and shortfall, Andel’s $900,000 share subscription and the sale of non-core Gascoyne assets to Delta Lithium for $400,000 in cash and $400,000 of Delta shares. Andel’s subscription left it with 125.5 million Reach shares, or 9.48% of the company at 11 September.
A second, more speculative source of value sits outside the gold project. Reach holds about 4.9% of REEcycle Holdings, which has entered a business combination agreement with Nasdaq-listed Hall Chadwick Acquisition Corp at a stated equity value of US$400 million. The transaction remains subject to customary conditions, including shareholder approval and the effectiveness of an SEC registration statement, so its eventual value to Reach is not yet settled.
FY2027 Accounting Will Reflect Andel Exercise
The $2 million Andel option fee was recorded as a liability at 30 June because the option had not yet been exercised. Following the August exercise, Reach intends to recognise the amount as FY2027 revenue once its performance obligation is satisfied. That accounting change may improve the next year’s reported result, but it does not by itself establish gold production, project profitability or a completed mining timetable.
The more consequential milestones are therefore practical ones: satisfaction of the remaining conditions precedent, commencement of mining and processing, and evidence that the 50/50 arrangement can convert the Blue Heaven resource into cash flow. Until then, Reach has a larger resource and a better-defined development partner, but also a sharply loss-making year and a significant reliance on events still to be completed.
Bottom Line?
Reach enters FY2027 with a larger Blue Heaven resource and an exercised Andel option, but the investment case now turns on conditions precedent, mining commencement and whether the proposed profit share produces cash rather than another round of funding needs.
Questions in the middle?
- When will the Andel agreement’s remaining conditions precedent be satisfied, and when could mining actually begin?
- What project economics will emerge once Blue Heaven mining, haulage and Kirkalocka processing costs are established?
- Will the REEcycle business combination complete, and what value would Reach ultimately realise from its 4.9% holding?