Merritt, British Columbia – In a significant development for the Canadian mining sector, Nicola Mining Inc. (TSXV: NIM) has officially begun processing gold and silver millfeed from Blue Lagoon Resources Inc.'s (CSE: BLLG) Dome Mountain Gold Project. This pivotal moment, which saw the commencement of millfeed transport on December 1, 2025, marks the operationalization of a strategic, long-term partnership designed to bring Blue Lagoon's high-grade material to market and bolster Nicola Mining's position as a premier processing facility in British Columbia. The move is expected to have immediate positive implications for both companies, transitioning Blue Lagoon towards production and securing a consistent revenue stream for Nicola's Merritt Mill.

A Decade of Collaboration: Unpacking the Mining and Milling Partnership

The recent commencement of processing is the culmination of years of strategic collaboration and financial maneuvering between Nicola Mining and Blue Lagoon Resources. The foundation of this partnership was laid with an "Original Agreement" on March 31, 2017, a Milling and Smelting Profit Share Agreement. This was subsequently extended and amended on May 17, 2023, and most recently, on September 29, 2025, the companies formalized an "amended and restated Mining and Milling Partnership agreement," extending their commitment to a robust 10-year term.

Under the terms of this comprehensive agreement, Nicola Mining's 100% owned Merritt Mill, strategically located near Merritt, British Columbia, will process the gold and silver millfeed. This facility is uniquely positioned as the only mill in British Columbia permitted to accept third-party gold and silver millfeed from across the province, making it a critical asset for regional miners. The 10-year extension provides Blue Lagoon's Dome Mountain project with guaranteed priority access to Nicola's mill capacity, a crucial advantage that ensures consistent processing even amidst other client demands. Blue Lagoon aims to process an initial 55,000 tonnes (55 Kt) per year, targeting a recovery of 15,000 ounces of gold annually.

Beyond the processing services, the partnership is further cemented by Nicola Mining's strategic equity stake, holding approximately 6% of Blue Lagoon Resources. This alignment of interests underscores Nicola's confidence in Blue Lagoon's potential. Adding another layer of support, on June 23, 2025, Nicola Mining extended a $2 million unsecured line of credit to Blue Lagoon. This facility, with competitive interest rates tied to the 3-month SOFR, provides Blue Lagoon with essential financial flexibility for its production ramp-up. Importantly, until the loan is repaid, Nicola Mining holds a short-term security interest over Blue Lagoon's gold and silver production, safeguarding its investment. The transport of high-grade material from Dome Mountain to the Merritt Mill began precisely on December 1, 2025, with first gold sales anticipated by Q4 2025, signaling a rapid transition to revenue generation for Blue Lagoon.

Market Movers: Winners and Losers in the Millfeed Deal

The commencement of processing at Nicola Mining's (TSXV: NIM) Merritt Mill for Blue Lagoon Resources' (CSE: BLLG) Dome Mountain Gold Project positions both companies as significant beneficiaries, with potential ripple effects across the junior mining landscape in British Columbia. For Blue Lagoon Resources, this agreement is a transformative step, effectively bridging the gap between exploration and production. The guaranteed, long-term processing solution at a permitted facility removes a major hurdle for the Dome Mountain project, allowing Blue Lagoon to transition from a development-stage company into a producing entity. The secure processing pathway, coupled with the $2 million line of credit from Nicola, provides crucial financial stability and operational flexibility, enabling Blue Lagoon to fund its initial production without immediate shareholder dilution. This newfound cash flow is also earmarked for reinvestment into near-mine and regional exploration starting in the first half of 2026, setting the stage for potential resource expansion and sustained growth.

Nicola Mining, on the other hand, solidifies its unique and strategic position within the British Columbia mining infrastructure. As the only permitted facility in the province capable of accepting third-party gold and silver millfeed, the Merritt Mill is a critical asset. The 10-year processing agreement with Blue Lagoon ensures a substantial and consistent source of material, leading to increased mill utilization and predictable revenue streams for Nicola. This strengthens their core business of custom milling and enhances their appeal to other junior miners in the region seeking reliable processing solutions. Furthermore, Nicola's equity stake in Blue Lagoon means that they stand to benefit directly from Blue Lagoon's production success, creating a symbiotic relationship where both companies' fortunes are intertwined. The security interest over Blue Lagoon's production also provides a robust safeguard for the credit facility extended, mitigating financial risk for Nicola.

While primarily a win-win for the direct participants, the broader market implications could see other junior exploration companies in British Columbia, particularly those with advanced gold and silver projects, viewing Nicola Mining's Merritt Mill as an even more attractive processing partner. This could potentially increase competition for mill time, though Nicola's expanded capacity and strategic partnerships may mitigate this. Companies operating in the vicinity of the Merritt Mill or those developing projects with similar ore characteristics might find their project economics improved by the proven viability of third-party processing at Nicola's facility. Conversely, any companies that might have been developing competing processing solutions in the region could face increased pressure from Nicola's entrenched and now further strengthened market position.

Broader Significance: A Blueprint for Junior Miner Success

This strategic partnership between Nicola Mining (TSXV: NIM) and Blue Lagoon Resources (CSE: BLLG) transcends a mere processing agreement; it represents a significant model for the junior mining sector, particularly in resource-rich but infrastructure-constrained regions like British Columbia. The long-term, integrated approach, combining processing services with financial backing and equity investment, addresses several common challenges faced by junior miners. It mitigates the substantial capital expenditure and regulatory hurdles associated with building a new mill, allowing Blue Lagoon to focus its resources on exploration and mining operations. This collaborative model could set a precedent, encouraging similar partnerships between established infrastructure providers and promising exploration companies, thereby accelerating project development across the industry.

The event also highlights broader industry trends towards efficient resource utilization and strategic alliances. With increasing environmental scrutiny and permitting complexities, leveraging existing, permitted infrastructure like Nicola's Merritt Mill becomes paramount. This approach reduces the overall environmental footprint compared to developing multiple smaller, standalone processing plants. The guaranteed priority access for Blue Lagoon's millfeed underscores a growing trend of "toll milling" where processing facilities act as service providers, allowing smaller companies to bring their projects online faster and more cost-effectively. This could lead to a more dynamic and interconnected mining ecosystem in British Columbia, fostering regional economic development and job creation.

Potential ripple effects could extend to other mining services providers, including logistics, equipment suppliers, and environmental consultants, as increased activity at both the Dome Mountain project and the Merritt Mill generates demand. Competitors in the custom milling space, if any emerge in BC, would face a formidable challenge from Nicola's established presence and unique permitting status. Historically, similar strategic alliances have proven critical for the growth of junior mining companies, providing the necessary operational and financial lifelines to transition from exploration to sustained production. This partnership echoes past successes where integrated supply chains and shared infrastructure have unlocked value for multiple stakeholders, reducing individual company risk while maximizing regional resource potential.

The Road Ahead: Opportunities and Challenges on the Horizon

The commencement of processing at Nicola Mining's (TSXV: NIM) Merritt Mill for Blue Lagoon Resources (CSE: BLLG) ushers in a new phase for both companies, presenting a blend of short-term operational goals and long-term strategic opportunities. In the short term, the immediate focus for Blue Lagoon will be on optimizing the transport of millfeed and ensuring consistent, high-grade material delivery to the Merritt Mill. The target of 15,000 ounces of gold annually and first gold sales by Q4 2025 will be critical milestones to validate the project's economics and build investor confidence. For Nicola Mining, the challenge lies in efficiently integrating Blue Lagoon's material into its processing schedule while maintaining operational excellence and potentially accommodating other third-party clients. Successful initial campaigns will be crucial for both companies to demonstrate the viability and profitability of their partnership.

Looking further out, the 10-year agreement provides a stable foundation for Blue Lagoon to execute its growth strategy. The internal cash flow generated from production, earmarked for reinvestment into near-mine and regional exploration starting in the first half of 2026, signals a clear intent to expand its resource base and extend the mine life of Dome Mountain. This could lead to increased production volumes and potentially a longer-term demand for Nicola's processing services. For Nicola, the long-term commitment from Blue Lagoon de-risks a significant portion of its mill capacity, allowing it to strategically plan for future upgrades or expansions. Market opportunities may emerge for both companies as they establish a track record of successful production and processing, potentially attracting further investment or partnerships.

However, potential challenges remain. Fluctuations in gold and silver prices could impact profitability for both companies, necessitating careful cost management and hedging strategies. Operational risks inherent in mining and milling, such as unforeseen geological complexities, equipment downtime, or regulatory changes, will require diligent management. Blue Lagoon's ability to consistently deliver high-grade material and expand its resource base will be key to the sustained success of the partnership. Similarly, Nicola Mining's capacity to maintain its unique permitting status and processing efficiency will be vital. Potential scenarios range from a highly successful, mutually beneficial long-term operation that serves as a blueprint for the industry, to more moderate outcomes influenced by market dynamics or operational hurdles. Investors will be closely watching for consistent production reports, exploration successes from Blue Lagoon, and any further strategic moves by Nicola to leverage its unique milling capabilities.

Wrap-Up: A New Chapter for British Columbia's Mining Sector

The commencement of gold and silver millfeed processing by Nicola Mining (TSXV: NIM) for Blue Lagoon Resources (CSE: BLLG) marks a pivotal moment, not just for the two companies involved, but for the broader junior mining landscape in British Columbia. The key takeaway is the successful operationalization of a long-term, integrated partnership that provides Blue Lagoon with a critical processing solution and secures a consistent revenue stream for Nicola's uniquely permitted Merritt Mill. This strategic alliance, cemented by a 10-year agreement, equity investment, and a credit facility, exemplifies a collaborative model that could significantly de-risk and accelerate project development for other junior miners in the region.

Moving forward, the market will be keenly observing Blue Lagoon's transition to a producing entity, particularly its ability to meet its targeted gold production of 15,000 ounces annually and achieve first gold sales by Q4 2025. The internal reinvestment of cash flow into exploration will be crucial for demonstrating sustainable growth and expanding the Dome Mountain project's resource base. For Nicola Mining, the focus will be on maximizing mill utilization, maintaining operational efficiency, and potentially exploring further strategic partnerships to leverage its unique processing capabilities. The success of this partnership will not only bolster the individual companies but also reinforce British Columbia's reputation as a favorable jurisdiction for mineral resource development, showcasing how innovative collaborations can overcome infrastructure challenges.

The lasting impact of this event could be the establishment of a more robust and interconnected mining ecosystem in British Columbia, where shared infrastructure and strategic alliances become a more common pathway for junior companies to achieve production. Investors should closely monitor production reports from Blue Lagoon, exploration updates, and any further announcements regarding mill throughput and efficiency from Nicola Mining in the coming months. This partnership represents a compelling case study in resource sector collaboration, and its unfolding success or challenges will offer valuable insights into the future of junior mining.

This content is intended for informational purposes only and is not financial advice