LionGold Corporation’s LionGold Australia has signed an ore processing agreement with Australian-listed A1 Consolidated Gold which will see up to 450,000 tonnes of ore from the A1 Gold Mine processed at the nearby Ballarat gold plant, owned by LionGold subsidiary Castlemaine Goldfields, over a three year period. The agreement provides for up to 150,000 tonnes to be treated each year.

The agreement could nearly double current throughput at the 600,000 tonnes/year Ballarat plant, which is processing between 150,000 and 200,000 tonnes of ore annually. The arrangement may be extended upon agreement for a further three years through to December 2019.

In conjunction with the processing agreement, LionGold will subscribe to 34.5 million new A1 shares in two tranches, which together represent about 19.9% of A1’s enlarged share capital valued at Aus$4 million. The first tranche of 24.1 million new shares will give LionGold about 14.9% of the enlarged share capital and the right to appoint one director to the A1 board. The second tranche is subject to approval by A1’s shareholders and regulatory agencies.

The total transaction will be funded with cash from LionGold deposits. A1 will use proceeds from the placement to advance development of its A1 Gold Mine, which is expected to begin production within the next six months.

LionGold’s chief executive officer Nicholas Ng says, “The agreement with A1 Consolidated enables LionGold to ‘bolt-on’ additional production ounces and enhance capacity utilization at the Ballarat processing plant, thereby lowering overall unit production costs. The acquisition also represents an opportunity to consolidate gold mining operations in southeast Australia.”

In Australia, LionGold also holds a 13% investment stake in Unity Mining which is annually producing 50,000 ounces of gold in Tasmania, with a second gold project under development in New South Wales. The group also has an 18% holding in Citigold Corporation which owns the 11 million ounce Charters Towers gold mine.

LionGold has been aggressively building out its gold business from March 2012. The group has interest in seven gold companies with tenements in Australia, Ghana, Bolivia and Canada. In July, a takeover offer was made for TSX-listed Acadian Mining Corporation, in which LionGold currently holds 9%. On completion of the Acadian acquisition, the group will collectively hold 6.8 million ounces of gold resources, of which, nearly 1 million ounces are reserves.

In August, LionGold announced plans to raise more than Sin$200 million through the placement of new shares and warrants in support of its acquisition strategy.

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