PERTH (miningweekly.com) – ASX-listed Excelsior Gold has shaved up to A$12.5-million from the development of its greater Kalgoorlie North project, in Western Australia, after signing a new ore treatment agreement with gold producer Norton Gold Fields.

The new agreement replaced a capital contribution and ore treatment agreement signed in October 2014, as well as the Bradoc South ore treatment agreement signed in February.

It removed Excelsior’s share of the capital required to upgrade Norton’s Paddington mill and replaced it with a fixed dollar-per-tonne processing fee over the duration of the new agreement. The company would also not be required to pay a 2% net smelter return held by Norton over ore mined from the Bardoc South tenements.

The new agreement also aligned the terms and ore delivery schedules of the former agreements by removing the treatment deadline for ore sourced from the Bardoc South area, providing Excelsior with flexibility to optimise its processing schedule.

“The conversion of the upfront capital requirements into a fixed dollar-per-tonne charge drastically reduces our funding requirements in the early stages of development at the Kalgoorlie North gold project,” said Excelsior MD David Hamlyn.

“We are also no longer required to pay the net smelter royalty held by Norton, which provides additional incentive for further exploration and resource development in the southern portion of the project.”

Hamlyn said the conclusion of the new agreement was in line with the company’s goal of optimising project value while reducing the potential dilution to current shareholders.

Under the new ore treatment agreement, Norton would process an initial allocation of up to 2.9-million tonnes of ore at a minimum rate of 500 000 t/y over a five-year-and-ten-month period.

Excelsior had also been granted five yearly options, each to extend the processing agreement by an additional 12 months, providing that a potential 5.4-million tonnes of Excelsior ore could be processed at the Paddington mill, over a ten-year-and-ten-month period.

Mining at Kalgoorlie North was initially proposed at five of the most advanced gold resources within the project’s 22 resource areas.