Newmont Mining has signed a non-binding letter of intent to sell its Waihi gold mining operation in New Zealand to OceanaGold for $106m.

Under the sale, Newmont will retain a 1% net smelter royalty for gold ounces that are mined from one specific exploration tenement capped at 300,000oz of production.

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OceanaGold will acquire all of Waihi’s open pit and underground mining assets and liabilities, after a definitive acquisition agreement is executed and all conditions are fulfilled.

The acquisition will also include all social, environmental and employee obligations of Waihi.

Newmont Mining strategic development executive vice-president Randy Engel said: "Our agreement with OceanaGold for the sale of Waihi represents another step in Newmont’s strategy to further strengthen our balance sheet by selling select assets for cash at fair value.

"Our agreement with OceanaGold for the sale of Waihi represents another step in Newmont’s strategy to further strengthen our balance sheet."

"Waihi is a good strategic fit within OceanaGold’s existing portfolio in New Zealand, and their strong safety and sustainability standards position them well to further develop Waihi in the future."

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The parties have agreed to complete due diligence and target execution of an acquisition agreement in mid-May.

OceanaGold, which had cash of $59.6m and has drawn $77.8m from its revolving credit facility leaving $97.2m undrawn as at 31 March 2015, plans to fund the deal from cash and undrawn facilities.

Gold was initially discovered in Waihi, which is located about 150km southeast of Auckland in New Zealand, in 1878

The Martha open pit mine began operations in 1987 and was acquired by Newmont in 2002 during the merger with Normandy. In 2014 it produced about 132,000oz of gold in 2014.