We describe a new cellular automaton model which allows us to simulate separation of phases. The model is an extension of existing cellular automata for the Ising model, such as Q2R. It conserves particle number and presents the qualitative features of spinodal decomposition. The dynamics is deterministic and does not require random number generators. The spins exchange energy with small local reservoirs or "demons." The rate of relaxation to equilibrium is investigated, and the results are compared to the Lifshitz Slyozov theory.