PERTH (miningweekly.com) – ASX-listed Westgold Resources has struck a deal with Canadian firm RNC Minerals, which will process ore from the Beta Hunt mine at Westgold’s South Kalgoorlie Operations (SKO).

Under the terms of the agreement, RNC will have access to 50% of the 1.2-million-tonne-a-year Jubliee processing plant capacity at Westgold’s SKO, on a three-week-on, three-week-off basis, for a 12-month period from July.

RNC will pay Westgold toll processing fees on a fixed-plus-variable arrangement on commercial terms.

To secure access to the processing facility for its ore from the Beta Hunt mine, some 30 km south of SKO, RNC will issue Westgold some A$4-million in shares.

RNC also has a six-month option to buy SKO for A$80-million.

RNC will pay Westgold a 5% option fee in shares to secure the option and the Canadian firm can extend the option for a further six months by paying an additional 5% option fee in RNC shares.

Westgold is aiming to receive a mix of shares and cash, with the Australian miner hoping to become a 19.9% shareholder in RNC and retain upside exposure to the enlarged SKO.

“If completed, this is a great 1+1=3 transaction for our shareholders. It aggregates key assets in the Kalgoorlie region into one common owner, providing for lower overall costs and opportunities for both companies,” said Westgold MD Peter Cook.

“Should the option be exercised, the aggregate asset portfolio significantly expands SKO with the potential for significant long-term, low-cost gold production from RNC’s Beta Hunt mine.

“Our shareholders get both cash back and a retained interest in the project through this planned shareholding in RNC,” said Cook.

The option agreement is subject to RNC gaining Foreign Investment Review Board approval, as well as TSX approval for the issue of shares.

In the event of a takeover offer for Westgold being received, RNC will have 30 days to exercise the option.