PERTH (miningweekly.com) – The share price of ASX-listed junior Southern Gold jumped by 14% on Tuesday on news that the company planned to be in production by 2015, after settling a finance and development agreement with fellow-listed Metals X over the Cannon gold resource, in Western Australia.

The agreement would see Metals X provide funding and manage the mining, haulage and ore treatment services at Cannon, through its own nearby Jubilee mill.

The mining and haulage would be charged on an at-cost, open-book basis for the duration of openpit mining or underground mining, with the parties agreeing to a flat rate for ore processing, subject to consumer price index.

Southern Gold MD Nanette Anderson said that the completion of a binding agreement with Metals X was a major turning point for the company, enabling Southern Gold to team up with an experienced and well-funded partner to unlock the value of its Cannon gold resource.

“We have worked closely and cooperatively with the Metals X team since announcing the original term sheet in August. Everything is now in place and we have signed off on an agreement, which puts us firmly on track to join the ranks of junior gold miners early next year.”

A current feasibility study for the Cannon project estimated that some 20 000 oz of gold would be produced in the Phase 1 openpit operation, from a total mining inventory of 68 000 oz.

Cash flows from the Phase 1 operation would be used to underpin Southern Gold’s growth and would establish a foundation for the Phase 2 underground development.

The revenues generated from the project would first be used to reimburse Metals X for the project costs, while the surplus funds would be shared on a 50:50 basis.

Meanwhile, Metals X also provided Southern Gold with a secured loan of A$500 000 to enable the company to complete preparations for mining. The loan would have an 8% interest a year, and would be repaid from mining profits.

Southern Gold recently announced a share purchase plan (SPP) under which it hoped to raise about A$1.04-million, issuing some 115-million shares at a price of 0.9c each.

The SPP would close on November 21.

Southern Cross shares were trading at a high of 0.9c a share on Tuesday, up from the previous day’s closing price of 0.7c a share. By late afternoon, Southern Cross shares fetched 0.8c apiece.