Novo Resources, alongside one of its Australian subsidiaries, has signed a binding memorandum of agreement (MOA) with Pioneer Resources over the latter’s wholly-owned Kangan gold project in the Pilbara region of Western Australia (WA).

Under the terms of the agreement, Novo will acquire, through farm-in arrangements, a 70% interest in precious metal rights on four exploration tenements in the Egina region.

“Acquisition of the core tenements at Egina consolidates Novo’s position in this potentially very important gold district.”

The exploration tenements comprise the Kangan gold project and the area is expected to be prospective for conglomerate-related gold mineralisation.

As part of the MOA, Novo is required to make a payment of A$200,000 ($143,401) in cash and issue 100,000 common shares to Pioneer.

The company will also subscribe to A$1m ($0.71m) in Pioneer ordinary shares at a price of A$0.02 ($0.01) a share through a private placement.

Furthermore, Novo will provide $0.5m ($0.35m) towards exploration expenditure within two years in exchange for a 70% earned interest. At this stage, the company may elect to form a joint venture (JV) with Pioneer.

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Once the JV is formed, Novo will be required to fund all expenditure until a ‘decision to mine’ is made on the project.

Completion of the transaction is subject to certain conditions, including approval of TSX Venture Exchange.

Simultaneously, Novo agreed to purchase all of the issued and outstanding shares of Farno-McMahon, an exploration company which holds a 100% interest in four key tenements in the Egina region of WA, including two mining leases.

The company already paid A$150,000 ($107,551) to Farno following the execution of an initial agreement.

Additionally, Novo will make a further payment of A$2.35m ($1.68m) and issue common shares worth A$5.5m ($3.94m) to the shareholders of Farno.

The additional payment and issuance of shares are subject to fulfilment of certain outstanding conditions, including completion of satisfactory due diligence and receipt of TSX Venture Exchange approval.

Novo Resources president and chairman Quinton Hennigh said: “In our view, not only is there potential for the discovery of gold-bearing conglomerates, there is also very good potential for significant surface gold deposits occurring in modern lag gravels.

“Acquisition of the core tenements at Egina consolidates Novo’s position in this potentially very important gold district.”