PERTH (miningweekly.com) – ASX-listed Southern Gold is hoping to fast-track the development of the Cannon gold mine, in Western Australia, in 2019 after striking a deal with fellow-listed Northern Star Resources.

Northern Star in March this year acquired the South Kalgoorlie operations from Westgold Resources, which included a five-year right to mine with Southern Gold, which was designed to enable underground development at Cannon.

However, Northern Star has now taken the decision not to exercise its right-to-mine, and has agreed to a restructure of the Southern Gold agreement.

The new arrangement would see the termination of all legal agreements between the two companies, with Northern Star transferring the mining lease for the Georges Reward deposit, immediately to the north of Cannon, to Southern Gold.

In return, Southern Gold will assume Northern Star’s half of the rehabilitation liability for the openpit, which is currently estimated by a third party consultant to be some A$77 500, and excludes the cost of rehabilitating the haul road, which is to remain in use.

“The execution of this agreement with Northern Star is an important development. It enables Southern Gold to move forward with the asset where there is considerable value to be unlocked by a small underground mining operation,” said Southern Gold MD Simon Mitchell.

“Cannon is a very well defined orebody at excellent grade and represents a very good development opportunity. With the addition of the mining lease to the north it also enables Southern Gold to have unfettered access, simplified and better optimised development scenarios and potential upside in the longer term, should the Cannon orebody continue to plunge to the north.”

Mitchell said that Southern Gold could now drill the structure without restriction, and given the quality of the deposit mined during the openpit phase, the company was looking forward to optimising value for shareholders in the near term.