PERTH (miningweekly.com) – ASX-listed Norton Gold Fields had six months in which to decide if it would participate in fellow-listed Phoenix Gold’s Castle Hill Stage 1 project, in Western Australia.

Phoenix said on Friday that it had presented Norton with studies for the development of the Mick Adams-Kiora and Wadi projects, which would form part of Castle Hill, as required under an option for a licence to mine and ore sales agreement.

The two companies and their respective subsidiaries entered into an agreement in 2012, under which Phoenix and its subsidiary would prepare separate feasibility studies for the two projects, using information supplied by Norton as to projected operating and capital costs for mining, hauling and processing ore.

Norton’s option to enter into a licence to mine or for an ore sales agreement for each project would expire within six months of the deliver of the feasibility studies.

The studies assumed an opencut mining operation, using Norton’s fleet of smaller truck and shovels, with ore trucked through existing haulage roads to Norton’s Paddington mill.

The projects were expected to deliver some 142 800 oz of gold and a total revenue of A$199.9-million.

Phoenix MD Jon Price said on Friday that the potential agreement with Norton could provide significant cash flow generation for Phoenix, with no up-front capital costs and little risk.

“If Norton proceeds, it will accelerate cash flow for Phoenix and still allow us to be developing several other mining projects in parallel.”

Price said that if Norton decided not to proceed with the project, Phoenix was happy to develop the project as part of its staged development plan.

Phoenix recently reported that the staged development of Castle Hill would see the establishment of a two-million-tonne-a-year processing plant, and a two-million-tonne-a-year heap leach plant to treat lower-grade ore.

Over an eight-year mine life, the project is expected to produce about one-million ounces of gold, with production estimated at around 129 550 oz/y.

The project was estimated to cost A$136-million and would deliver A$1.3-billion in revenue. Its net present value was estimated at A$153-million and it would have an internal rate of return of 30% over the mine life.