03/11/2015 - 13:23

Metals X, Southern Gold grow mine JV

03/11/2015 - 13:23

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Gold miner Metals X has reached commercial terms for the formation of a ‘big pit’ near Kalgoorlie by combining its recently acquired Georges Reward project with Southern Gold’s neighbouring Cannon mine.

Metals X, Southern Gold grow mine JV
Metals X chief executive Peter Cook.

Gold miner Metals X has reached commercial terms for the formation of a ‘big pit’ near Kalgoorlie by combining its recently acquired Georges Reward project with Southern Gold’s neighbouring Cannon mine.

Under the terms of the agreement, Metals X will cover all funding for the project’s development and will retain full ownership of Georges Reward, with profit generated from the larger open pit at Cannon to be equally shared between the two companies.

Metals X will mine Georges Reward as part of the combined open pit at its sole cost, retaining all profits.

It said production from Cannon would be 48,952 ounces over 18 months, while production from Georges Reward would be 14,762oz over 12 months.

Ore mined from Cannon and Georges Reward will be processed in batches at Metals X’s Jubilee process plant.

Southern Gold said the 'big pit' is expected to generate between $12 million and $15 million in cash flow in the next 12-18 months.

“Because of the longer cost recovery period, cash flow to Southern will be delayed by about six months, and in recognition of this Metals X has agreed to provide further financial accommodation by extending an additional $2 million in loan facilities to Southern,” Southern Gold said in a statement.

Metals X’s loan facilities to Southern Gold have been extended to $2.5 million.

Metals X has also agreed to guarantee a discounted sale price of $25/oz for the first 30,000oz from the mine.

Southern Gold managing director Simon Mitchell said the deal hit all the right notes for the company’s shareholders.

“Not only does the combined open pit unlock additional high margin, high grade gold ore it does so under an extension of our current agreement with Metals X, at zero cost to Southern Gold and with special accommodation by Metals X to assist with our working capital and risk management regime,” he said.

Metals X chief executive Peter Cook said the deal was a win-win.

Metals X is playing banker using its balance sheet and infrastructure to effect the best result,” he said.

“By sharing the mining and processing risk and operating at cost we can maximise the outcome for the mine and take our margin from its enhanced performance.

“We see the open pit as only the first phase as the project exhibits good metrics to consider underground mining in the future.”

Metals X shares were 3 per cent higher to $1.35 each at the close of trade.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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