Australia’s Capricorn Metals (CMM) has agreed to acquire the Mt Gibson Gold Project in Western Australia from Crimson Metals, a unit of Avenger Projects.

Capricorn will pay $29.2m (A$39.6m) in total consideration for the Mt Gibson tenements located approximately 280km north-east of Perth in the Murchison, Mid-West region.

This includes $18.8m (A$25.6m) in cash and $10.2m (A$14m) in the form of 7.65 million fully paid ordinary shares in the company, representing 2.1% of its capital.

The company will finance the cash portion by a $14.7m (A$20m) drawdown on the Macquarie Bank debt facility along with current cash reserves.

Capricorn will also grant a 1% net smelter royalty (NSR) on all minerals produced from the project area, including gold production of more than 90,000 ounces.

The firm said that the acquisition, which is expected to increase the firm’s total resources to 4.2-million ounces, forms part of its strategy to grow into an Australia-focused multi-mine gold company.

In a press statement, Capricorn said: “At an acquisition cost of less than $20 per resource ounce plus a 1% NSR royalty (for gold production in excess of 90,000 ounces) the transaction represents a strong value creation opportunity for Capricorn.”

The Mt Gibson mine, which is currently on care and maintenance, produced more than 868,000 ounces of gold between 1986 and 1999.

Capricorn executive chairperson Mark Clark said: “The project has a proven gold endowment, is located in the world-class mining jurisdiction of Western Australia and has been subject to very limited modern exploration.

“There is every reason to be optimistic about the opportunity with last gold production over 30 years ago from very shallow open pits when the gold price was around A$450/oz.”

Capricorn intends to carry out an extensive drilling programme to infill and significantly extend the shallow drilling depths at the mine to allow an update to the current 2.1-million-ounce resource estimate.

It will also begin technical and environmental studies to develop a reserve estimate and feasibility study in ‘due course’.