PERTH (miningweekly.com) – Explorer Southern Gold has signed an agreement with a subsidiary of fellow ASX-listed Aruma Resources to earn up to a 90% interest in the most prospective part of the Glandore project, in Western Australia.

Under the terms of the agreement, Southern Gold would make an initial cash payment of A$100 000 within ten business days. The company could then earn up to a 90% stake in the project area by spending A$1.2-million on exploration, over three tranches in the next three years.

The first tranche exploration would see Southern Gold spend A$300 000 during the first year, to earn an initial 50% interest.

The second tranche spend of A$400 000 in the second year, would earn the company an additional 25% interest, while the final tranche would see Southern Gold spend A$500 000 on exploration during the third year of the farm-in, to earn an additional 15% interest.

Once Southern Gold has obtained a 90% shareholding, Aruma Exploration could elect to retain its 10% interest in the project, sell its interest, or convert its interest into a 1.25% net smelter royalty.

The earn-in area covers 14 mining tenements comprising the most prospective part of the Glandore project, and covers an area of 28.7 km² adjacent to Southern Gold’s Bulong gold project.

Three priority targets with near surface drill intersections have been previously identified, and Southern Gold believed that given the proximity of the Cannon gold mine, it was anticipated that gold resources defined at Glandore would have the potential for economic extraction.

“This important transaction provides Southern Gold with an advanced set of projects with very valuable and extensive drilling information and the potential to advance to a Joint Ore Reserves Committee resource status relatively quickly,” said Southern Gold MD Simon Mitchell.

“Given the amount and quality of drilling information available, we see a unique opportunity to define openpit resources and, because of the proximity to our Cannon gold mine and other district infrastructure, the opportunity to move another project into production.”