Phoenix Gold has signed a two-year toll milling agreement with FMR Investments for ore treatment at the latter’s Greenfields ore treatment facility in Coolgardie, Western Australia.

Under the agreement, 600,000t to 800,000t will be treated annually at the processing plant on a quarterly campaign basis without blending of any third party ore.

Ore will be sourced from shallow smaller scale open cut mines in close proximity to the mill, while mining and haulage will be completed under contract at highly competitive rates, prior to start of the ore treatment in September 2014.

Payment for milling will be based on an open book cost plus structure and a $/t basis.

Phoenix Gold managing director Jon Price said the signing of a long term agreement is a great result for both parties and secures a milling pathway for ore mined under the base case development plan.

"Phoenix has treated ore at the Greenfields mill with great success on a number of occasions over the past few years and this next stage will be on a larger scale and longer term basis," Price added.

"With the successful completion of the Placement, we are executing on the development plan with grade control and mine extension drilling commenced."

The grade control and mine extension drilling is being executed by Drilling Australia to provide further geological confidence prior to mine development, and the results are expected to be released within the next month.

The agreement also has the potential for further extensions, and provides the company with opportunity to purchase the facility should FMR look to divest the mill during the term of the agreement.