Evolution Mining has signed an agreement to sell the Pajingo gold mine and surrounding exploration tenements in North Queensland, Australia, to Minjar Gold for up to A$52m ($40m).

The total proceeds comprise a A$42m ($32m) upfront cash payment and a 1% net smelter return (NSR) royalty of up to A$10m ($7.69m) for gold production of more than 130,000oz.

Minjar Gold has met all the requirements in relation to Chinese approvals and FIRB approval with regards to the deal.

The sale of Pajingo is consistent with Evolution’s strategy to improve the quality of its asset portfolio over time.

"Pajingo has made a very important contribution to our business over the last six years."

Evolution Mining executive chairman Jake Klein said: “Pajingo has made a very important contribution to our business over the last six years.

“Evolution has grown significantly in the past 18 months and it now makes strategic sense for the asset to be operated by an emerging gold producer that can provide the right level of focus on further extending the mine’s operating life.”

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The sale is expected to close on 1 September this year.

Evolution has revised its FY17 gold production guidance to 745,000oz–800,000oz from the existing 800,00oz–860,000oz, following the sale.

Underground mining at Pajingo is based on modified avoca and longhole open stoping methods with ore hauled to surface through decline.

Open-pit mining will take place by conventional drill and blast, load and haul methodology.