PERTH (miningweekly.com) - Dual-listed gold miner Alacer Gold on Monday told shareholders it would sell off its 49% shareholding in the Frog’s Leg mine, in Western Australia, as it moved to maximise its portfolio value and contain capital spend.

“2013 will be a back-to-basics year for Alacer from an operational perspective, as we focus on gold production to maximise free cash flow,” said president and CEO David Quinlivan.

The company decided to sell off the Frog’s Leg project and an 18-month toll treatment agreement for a total transaction value of A$171-million, following a strategic review of its operations.

Quinlivan noted that the sale of the Frog’s Leg mine crystalised full value for Alacer’s noncontrolling, minority interest, and the cash realised would be used to repay debt and return capital to shareholders.

The Frog’s Leg interest would be sold to La Mancha Resources Australia, subject to customary negotiated terms and conditions. Pending the completion of the sale, La Mancha and Alacer have entered into a 12-month toll treatment agreement, under which toll milling services would be provided for ore produced from Frog’s Leg on substantially the same terms of the 18-month toll treatment agreement at the Jubilee processing facility.

Meanwhile, Alacer was also planning to introduce significant changes to the mine planning at its South Kalgoorlie operations, and improve the grade profile at its Higginsville project, which would also yield improved cash flow and value from the assets.

The miner said on Monday that gold production at South Kalgoorlie would focus on higher-margin ounces, with mining expected to start at the SBS28 area, where several higher-grade mines were expected to come into production.

The combination of the new, higher-grade mines planned for 2013, and the toll treatment agreement with La Mancha would ensure that the Jubilee plant had sufficient supply of ore to continue to operate efficiently, Alacer said.

The miner had also reduced the number of mining fleets at South Kalgoorlie in an effort to contain costs.

At Higginsville, the gold miner had identified a number of opportunities to increase cash margins and to optimise the asset, such as reducing the overall tonnage of ore mined and processed, focusing on higher-grade ore, rather than keeping the mill full with marginal openpit ore.

Alacer has also reduced the workforce at Higginsville, reviewed the mine plan and equipment requirements, postponed the development of the Corona exploration decline and ceased mining of lower-grade openpits.

“In Australia, improved cash flow will come from mining higher-grade zones, while we continue our extensive exploration programme in Australia’s richest gold belt,” Quinlivan said.

Meanwhile, in parallel with work being done in Australia, Alacer has identified a superior development approach for its Copler asset, in Turkey, which was expected to improve the project’s economic return, reduce capital intensity and reduce implementation risk.

“In Turkey, we are very excited at having identified a superior, staged project development approach that should yield far better project returns. The decision to take a staged approach to the development of Copler demonstrates our disciplined approach to project development and risk management,” Quinlivan added.

Alacer believed the best approach for the project was to construct a conventional carbon-in-leach treatment plant for the oxide ore. Based on the existing resource, the mill would have an expected mine life of some three years, which could be extended with further exploration success.

Following the completion of milling of the existing reserves, the oxide mill would reprocess around five additional years of heap-leach residue.

The company would also look to construct a flotation circuit to provide sulfide concentrates for sale or processing through a smaller-scale pressure oxidation facility, or an ultrafine grinding circuit.

Alacer said on Monday that, on completion of testwork and studies, a decision to proceed and start construction of the Copler plant was expected in the third quarter of this year, subject to the receipt of the necessary permits.

In addition to the oxide mill and flotation circuit, Alacer was also looking to construct a clay sizer and materials handling circuit, and begin a new agglomerator project during the second half of the year, which should result in increased margins for Copler’s heap leach operations.

Looking to 2013, Alacer would spend some A$122-million over the year on projects and operations, with the miner expected to increase production from the 328 098 oz produced in 2012, to between 330 000 oz and 365 000 oz.