Classic looks cash flow in the eye with Kat Gap toll treatment deal
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Classic is on the brink of achieving cash flow from its Kat Gap project in Western Australia after executing a toll treating agreement with Barto Gold Mining.
Under the agreement, Barto will toll treat ore from the project at its Southern Cross Gold Operation centred around Marvel Loch, which is capable of processing up to 1 million tonnes per annum.
Kat Gap has current Inferred resources of 975,722t grading 2.96g/t gold, or 92,856oz of contained gold, and has long been a candidate for early production due to its shallow nature and oxide ore hosted entirely in granite that makes it easily distinguished from waste material.
This provides Classic Minerals (ASX:CLZ) with a processing solution while it waits for final approvals to use its Gekko processing plant, which has already returned encouraging results during testing of a bulk sample.
It also paves the way for the company to formalise a binding term sheet with multi-sector conglomerate Goldvalley Brown Stone for $10m in funding to extract and process Kat Gap ore in sequential parcels of 100,000t.
“The company is excited to move forward and is determined to keep costs down whilst not seeing ownership of the project diminished,” chairman John Lester said.
“We are working closely with Goldvalley and the toll processing deal with Barto moves us closer to production.”
Goldvalley managing director Yuzheng Xie added that the deal with Barto meant that the satisfaction of due diligence was the only remaining step left in its agreement with Classic.
“Classic has carefully developed a very worthy gold project and coupled with Goldvalley’s expertise in mining and marketing, Barto’s toll treatment experience, the project now has almost all the boxes ticked to bring it to fruition,” he added.
Classic and Goldvalley are working to finalise the mining and logistics required for the extraction of 50,000oz of gold from Kat Gap.
This is expected to result in the development of an optimal mining process which will ensure that costs are kept low and manageable.
Goldvalley will provide $10m in funding over a 12-month period and the orebody will be mined under this arrangement until a production cap of 500,000t with a minimum average grade of 2.85 grams per tonne (g/t) gold has been mined and processed.
Classic will repay the funding by sharing 30% of the net profits from gold production with its partner until the funding is repaid.
This article was developed in collaboration with Classic Minerals, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.