Veris Gold Corp. (TSX: VG) and Klondex Mines Ltd. (TSX: KDX) jointly announced on Tuesday that both parties have entered into a mutually beneficial toll milling agreement.

Terms of the agreement call for Veris Gold to take delivery of non-refractory gold ore that will be direct shipped from Klondex Mine’s Fire Creek Gold Mine beginning in Q3 2013.

The Fire Creek Gold mine, which is 100% owned by Klondex Mines and located in Lander County, Nevada in the Battle Mountain gold trend, contains a National Instrument (NI) 43-101 mineral resource estimate of 1.6 million ounces of gold in the indicated category as well as 460,000 ounces in the inferred category.

Veris Gold, which operates the Jerritt Canyon Mine and Mill in Elko County, Nevada, has agreed to take delivery of ore from Klondex in exchange for a toll milling fee of $148.50 per short ton. Klondex has also agreed to provide an upfront payment, which will be credited against future fees, to assist Veris in refurbishing the wet mill circuit at Jerritt Canyon.

"The Nevada team delivers another important milestone for Klondex; the group has a reputation of consistently delivering and this is another great example, said Klondex President and CEO Paul Huet. “2013 is a pivotal year for us as we continue to de-risk the Fire Creek asset. The excavation of the secondary egress, necessary to begin our bulk sampling, is now 20% complete and is on-track to be commissioned mid-June, 2013. Now, through this milling agreement with Veris Gold, we have a place to process mineralized material from Fire Creek.”

Veris Gold COO Randy Reichert added: “This second toll milling agreement adds to our third party ore processing revenue stream and provides an excellent additional source of ore as the Klondex team ramps up their mining operations into 2014. This agreement will further reduce our costs by making use of the excess capacity at the Jerritt Canyon Mill when we begin processing the Fire Creek ore in the third quarter of 2013. We look forward to working with yet another gold producing neighbour in Nevada.”

The mineral processing operations at Jerritt Canyon are unique in that it is one of only three mills in Nevada that can effectively process high refractory ores, such as those that will be shipped from the Fire Creek mine.

Refractory material represents un-oxidized ores hat are not amenable to conventional cyanide extraction techniques. The mills at Jerritt Canyon utilize a roasting circuit process that effectively treats refractory ores so that the precious metals can be recovered.

Shares of Veris Gold gained 3% during Tuesday’s session to close at $1.71 per share while Klondex Mines slipped -8.7% to close at $1.05 per share.

Veris Gold is traded on the TSX under the ticker symbol VG. Veris has 107 million shares outstanding and a market cap of $184 million.

Klondex Mines is also traded on the TSX under the ticker symbol KDX. Klondex has 55 million shares outstanding and a market cap of $58 million.

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