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Millennium Minerals signs JV to access Northwest Resources' Camel Creek gold deposits

Millennium Minerals (ASX: MOY) has signed a non-binding heads of agreement for a 50:50 joint venture with Northwest Resources (ASX:NWR), under which Northwest’s Camel Creek Trend gold deposits will be mined and processed by Millennium.

Both companies are developing gold projects in the Nullagine Goldfield, in the eastern Pilbara region of Western Australia. Under the agreement, gold production and joint venture operating costs will be shared 50:50.

On signing the formal joint venture agreement, Millennium will pay Northwest $1.25 million, comprising $250,000 cash and $1 million in Millennium shares, issued at a price equal to the 30 day volume weighted average price of Millennium shares.

Northwest will not be required to contribute any upfront capital.

Subject to the signing of the formal joint venture agreement, Millennium will contribute up to $400,000 towards the planned drilling program, with Northwest to meet program costs above this level.

Maiden reserve estimates for the initial joint venture deposits are expected in the June quarter of 2012, while joint venture mining is anticipated to commence in early 2015.

Millennium will manage the joint venture, and all ore mined as part of the joint venture will pass through Millennium’s 1.5 million tonne per annum Golden Eagle treatment plant, which is currently under construction.

Joint venture ore sourced from the Northwest deposits, located about 6 kilometres from the Golden Eagle plant, will be blended with ore from Millennium’s Golden Eagle deposit.

The Golden Eagle deposit is a significant part of the 1.25 million gold ounce Nullagine project, hosting around 70% of the gold resource, or 750,000 gold ounces.

Millennium and Northwest will obtain independent technical advice as to robust accounting and reconciliation methodologies to accurately allocate gold production between Millennium and the joint venture.

Golden Eagle is expected to start production in the September quarter of 2012, producing 80,000 ounces of gold per year over an initial 7.5 year mine life.

Northwest’s Camel Creek Trend open pit deposits are a natural fit with Millennium’s project, sharing the same geology and mineralisation style as Millennium’s satellite deposits located along the Camel Creek Trend.

Millennium CEO Brian Rear said: “This is an exciting time for Millennium with construction of the Nullagine Gold Project on budget and on schedule. The joint venture with Northwest will bolster our Ore Reserve inventory through the addition of shallow, moderate grade oxide feed. This milestone is the first in a series of deals contemplated as part of our medium term regional consolidation strategy”.

The joint venture will allow Northwest to transform from an advanced explorer into an emerging gold producer, leaving the company free to focus on developing its core Blue Spec Shear high grade gold antimony deposits.

The significance of Golden Eagle

Golden Eagle already hosts the majority (around 70%) of the gold resource or around 750,000 gold ounces, attributable to Nullagine, and earlier in the year Millennium through a strategic joint venture boosted the company's footprint around the deposit.
If new exploration confirms an extension to this mineralised corridor within the new tenements, then Millennium has the potential to significantly increase the company's gold inventory.

The project design

Millennium has indicated that a 14 month construction period is required for the 1.5 million tonne per annum Golden Eagle processing plant, 145 person accommodation village and associated infrastructure at an estimated capital cost of $73 million - before contingencies.

Being supported by the current very strong gold price, the planned mine life is 7.5 years to produce 505,000 gold ounces.

Under the current mine plan, peak gold production in the early years will be annually around 80,000 ounces.

Millennium has also provided for expansion in the process plant design and studies are in progress to assess the early achievement of increasing gold output from commencement of commercial production.