Kalgoorlie Mining Company (ASX: KMC) has taken a major step towards gold production by executing a non-binding term sheet with an Australian subsidiary of Barrick Gold Corporation (NYSE: ABX).
The agreement is for the proposed sale of ore from the Bullant Gold mine to Barrick’s Kanowna Belle processing facility, where ore was treated previously when Barrick operated the mine.
Bullant ore is currently being mined and transported to surface in preparation for crushing and grading.
Kalgoorlie Mining has said that there are ore producing slots that the company can access in the short term, providing the very real possibility Kalgoorlie Mining will produce gold within the next three months through the agreement.
This will provide short term cash flows for Kalgoorlie Mining, with the company aiming to produce up to 15,000 ounces of gold through the agreement over the next year.
Production costs will be below US$1000 per ounce, providing a substantial margin as spot gold sits well above US$1500 an ounce.
The agreement will help Kalgoorlie Mining to maintain a positive cash flow, as the company continues an ongoing surface and underground exploration program at Bullant, in preparation for when gold production will begin at the company's own facilities.
To highlight the potential of the Bullant mine, there was underground production between 2002 and December 2009 of; 1.95 million tonnes at 5.1g/t for 322,700 ounces of gold.
Production in 2009 was; 144,750 tonnes at 5.9g/t gold for 27,400 ounces of gold.