Canada-based Klondex Mines, through its subsidiary Klondex Midas Operations, has signed a toll milling agreement with French Gulch Nevada Mining (FGNM) of Washington.
Under the deal effective from 17 April, Klondex will process FGNM's gravity concentrates at its Klondex Midas mill. The one year agreement has the optiop to be renewed annually.
As per the agreement, Klondex would become owner of all ore produced, however the company will pay FGNM for the value of recovered gold, excluding toll mill charges.
Klondex corporate development vice-president Mike Doolin said 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 cashflow from the operations," Doolin said.
Klondex is searching for further toll milling opportunities to confirm which materials can be processed at its Midas mill.
The latest deal follows Klondex's $83m acquisition of Midas mine earlier in the year from a subsidiary of Newmont Mining.
The acquisition of Midas mine, which was later found to contain high-grade gold and silver, enabled Klondex to increase its long-term free cashflow and margins.
Klondex's newly acquired mine and the Midas milling facility is located 100 miles north of Fire Creek gold project, where Klondex is carrying out a bulk sampling programme.