Ark Mines has signed an agreement with ABM Resources to become the operator of the Old Pirate gold mine in Tanami, Northern Territory, Australia.

The arrangement will see ABM receive a sum of A$2.2m ($1.7m) following the completion of a fully executed deal.

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Ark Mines has also agreed to offer ABM a 2.5% net smelter return (NSR) for gold produced from the project area, which will be applicable on all gold sales exceeding the first A$5m ($3.8m).

"Ark has provided the most attractive terms for ABM and it has the experience in the scale of mining required to make the project a success."

Ark is also required to make a non-refundable deposit of A$50,000 ($38,878) within seven business days under the deal.

The company intends to reach a ten-year operator agreement in support of the development.

In addition, the deal includes an exclusive option that will allow Ark to negotiate an agreement for the nearby Buccaneer deposit within 60 business days.

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Both the Old Pirate and Buccaneer projects are situated within lease ML29822, with Buccaneer located to the north of Old Pirate.

ABM Resources managing director Matt Briggs said: “After a competitive and lengthy process, Ark has provided the most attractive terms for ABM and it has the experience in the scale of mining required to make the project a success.

“The Old Pirate Project requires intense geological and mining study to be successful.

“ABM is aggressively exploring its portfolio of large-scale gold targets in the Tanami Region and when the potential of the targets currently being drilled is compared to the small scale of Old Pirate, the high holding costs are no longer justified without an imminent intention to mine.

“A fully executed deal adds A$2.2m ($1.7m) to the A$7.7m ($5.98m) cash available to aggressively test these targets, and ABM retains exposure to future project upside and cash flows through a 2.5% net smelter royalty.”

The Old Pirate deposit contains indicated and inferred resource estimates of 760,000t at 4.7 grams per tonne (g/t) of gold.