PERTH (miningweekly.com) – Project partners Southern Gold and Metals X on Wednesday revealed that about 50 000 oz of gold would be recovered from the enlarged Cannon operation, in Western Australia, with C1 operating costs estimated at A$981/oz.

The two ASX-listed companies in November agreed to expand the Cannon gold mine, after having reached an agreement on the commercial and legal terms for the openpit development.

The original Stage 1 openpit operation incorporated only the Cannon deposit, and had an expected nine-month mine life, over which it would recover about 13 500 oz of gold.

With the addition of the Georges Reward deposit, the openpit’s mine life had been extended to several years, with the mine now expected to deliver 479 120 t of ore, to recover 50 000 oz of gold.

Assuming a gold price of A$1 500/oz, Southern Gold’s 31.8% profit share interest could result in some A$116-million in revenue to the company, Southern Gold told shareholders on Wednesday.

With a number of key performance factors providing potential upside, including additional ounces of gold captured within the pit shell and higher overall metallurgical recoveries, the profit share could potentially increase to between A$12-million and A$15-million.

“These newly announced financial outcomes on the expanded openpit are a fantastic outcome for Southern Gold,” said MD Simon Mitchell.

“The integrated larger Cannon openpit operation with Metals X’s Georges Reward deposit results in compelling economics for both parties, in particular getting the C1 operating cost below A$1 000/oz.”

Mitchell said that with the projected cash flow to Southern Gold of more than 30c per share in the next 12 to 15 months, current share price levels represented a stark contrast to this underlying value.

The original 50% profit share arrangement would remain in place for the larger Cannon openpit mine, with Metals X providing the entire project funding and expertise to execute the larger development.

Metals X would retain ownership of the Georges Reward deposit and exploit this as part of the combined openpit, at its cost.