TORONTO (miningweekly.com) – TSX-listed Klondex Mines on Wednesday announced that it had struck a toll milling agreement with French Gulch Nevada Mining to process gravity concentrates produced from the Washington mine at Klondex's Midas mill.

Under terms of the one-year accord that had already taken effect last week, gravity concentrates from the Washington mine, located in French Gulch, California, would be delivered to the Midas mill for processing.

The toll-milling agreement has been structured so that all dore produced from the concentrate would become the property of Klondex, and Klondex would pay French Gulch Nevada the value of the recovered gold, minus all toll mill charges.

The agreement could be renewed on a yearly basis.

“This is a mutually beneficial agreement for both parties. Processing third-party material makes excellent use of the excess capacity at the Midas mill. Toll milling provides the company with additional revenue, which will increase the cash flow from the operations,” Klondex VP for corporate development Mike Doolin said.

Klondex revealed that it was presently evaluating other toll-milling opportunities to determine which materials were best suited to being processed at the Midas mill.

Klondex is mainly engaged in developing and exploring its high-grade Fire Creek gold project, in north-central Nevada.

Earlier this year, Klondex closed the $83-million acquisition of the Midas mine from a Newmont subsidiary and immediately started drilling and blasting the underground stopes, revealing high-grade gold and silver veins in an area along strike from the existing workings.

The Midas deal not only secured a long-term milling solution for Klondex, but also lifted its long-range free cash flow and margins, adding a producing property to its asset portfolio with the potential for an increase in throughput, recoveries, synergies with the Fire Creek operation, and an improved mine life.