Cleveland Mining has signed a toll treatment agreement with Orinoco Gold to process gold-bearing material from Orinoco’s Brazilian projects at its Premier gold mine.

An initial 500t parcel is planned to be processed in the first quarter 2014, which will allow both companies to assess the processes, outcomes and economics of the activity.

If the outcomes of the initial parcel are positive, the deal provides for additional parcels of about 4,000t per month on a ‘participation interest’ basis, where both the firms share the gold production.

Cleveland Mining managing director David Mendelawitz said that limited bulk sampling has shown that Orinoco’s Goiás projects have the potential to host significant gold grades, although their gold-bearing mineralisation is "nuggetty" and difficult to quantify without extensive bulk processing.

Mendelawitz noted that the Premier mine is located within trucking distance of Orinoco’s projects, giving Cleveland the potential for additional positive cash flow and access to another source of high-grade gold, without altering the Premier Mine Plan.

Mendelawitz said that Orinoco recently processed a 200kg bulk sample taken from Cascavel.

"The sample was reported to have a head grade of 16g/t with 95% of the contained gold recovered by gravity at a grind size of 1mm. We are looking forward to processing the first 500t parcel early next year," Mendelawitz concluded.

In October 2013, Cleveland Mining revised mine plans for the Metago and Pit 3 gold open pits at its Premier Joint Venture gold project.

Mine plans based on the two pits are expected to produce about 19,000oz of gold over 20 months through processing of 30,000t of ore per month, generating an estimated margin of A$12.6m.

The project’s processing capacity currently supports a base case of 15,00tpm and additional capital expenditure on refurbishing and installing second ball mill is expected to facilitate a step up to 30,000tpm.