Primary Gold (ASX:PGO) expects to be producing at its Coolgardie project in the current quarter after releasing a positive feasibility study.

The study confirmed the viability of a low cost start-up gold mining operation based on mining three initial starter pits – MacPhersons, A-Cap and Tycho. Ore is expected to be treated at a nearby processing facility.

Cash flow is expected to come in at $16.9 million at a $1600 an ounce gold price with recovered gold of 65,000 ounces over an initial 28-month mine life.

Coolgardie has a low capital cost of around $850,000 of which $750,000 is expected to be deferred by up to three months after start of production.

The feasibility study was based on a maiden resource of 1.3 million tonnes at 1.7 grams per tonne gold for around 69,000 ounces of which 13,000 ounces and 45,000 ounces are in the measured and indicated categories respectively.

“The company has an outstanding land position at Coolgardie which is historically a major gold producing district in the heart of the Goldfields,” Primary managing director Garry Mills told investors.

“These landholdings continue to provide Primary with opportunities for growth. The study demonstrates a very attractive gold production project with a low entry hurdle on already existing mining leases.

“We have barely scratched the surface of the gold potential at Coolgardie – both underground and across the lease holding.”

“The three starter pits included in this study are surrounded by untested higher-grade gold targets at depth of 15 to 30 grams per tonne gold adjacent and below the current pits, which potentially gives a launch pad into underground mining.”

Primary bought Coolgardie in October last year from MacPhersons Resources which is focusing on its Nimbus project near Kalgoorlie.

The company is also progressing with its Mt Bundy gold project in Northern Territory where exploration has confirmed extensions to the nine-year life of mine from its recent scoping study.

Primary has $2.5 million in the bank.

Its shares were trading 2 per cent lower in afternoon trade at 5.2c.