Mineral exploration and development company Sunridge Gold has signed a binding agreement with Eritrea National Mining (ENAMCO) over ENAMCO's participation in its Asmara project.
The Asmara project covers 600km² in central Eritrea, immediately to the north, south and west of the capital city of Asmara.
The binding term sheet follows on from the initial agreement first announced in August 2012.
In addition to ENAMCO's existing right to be issued a 10% interest that will be carried to production by the participating partners, the company has also exercised its right to acquire a maximum 30% participating interest in the project, under the terms of the deal.
ENAMCO will now pay Sunridge $18.33m in stages, prior to production for the purchase of the interest.
On the signing of the shareholder agreement, ENAMCO will pay Sunridge one third of all project development costs backdated to July 2012, which is estimated at about $4m.
ENAMCO will also contribute one third of on-going expenses on the project, including exploration and development.
Sunridge Gold president and CEO Michael Hopley said that over the last few years the company has passed many milestones with the development of the Asmara project, with the latest one being key.
"We are very pleased that we have reached an agreement with the Eritrean Government and look forward to working cooperatively with ENAMCO to rapidly move the Asmara project into production as soon as possible for the mutual benefit of Sunridge and the people of Eritrea," Hopley said.
The companies will jointly work towards completing a shareholder agreement, which is expected to take less than three months.
The agreement will oversee the corporate activities, management and funding of the Asmara Mining share company (AMSC), the holder of the Asmara Project.
In December 2013, the permitting process for the mining licence for the Asmara project was initiated, which is set to take nine to twelve months.