Australia-based copper and gold producer PanAust has agreed to acquire an 80% stake in the Frieda River copper project in Papua New Guinea for $125m from a subsidiary of Glencore Xstrata.

Under the deal, PanAust has agreed to pay Glencore $75m in two stages initially, and up to $50m more, based on a 2% net smelter return royalty once the development is completed.

The deal is subject to a condition precedent relating to all applicable regulatory approvals including under the approval given by the Ministry of Commerce, People’s Republic of China relating to Glencore International’s merger with Xstrata and the Investment Promotion Authority of Papua New Guinea.

The Frieda River project, which is a joint venture between XFRL and Highlands Pacific, is located on the border of the Sandaun and East Sepik provinces in Papua New Guinea.

PanAust has also agreed to acquire a 7.5% stake in Highlands Pacific, the minority partner in Frieda River, for $4.7m.

Upon completion of the transaction, PanAust will own 80% of Frieda River and Highlands Pacific will own the remaining 20%.

The Papua New Guinea Government has a right to acquire a 30% stake in the project.

PanAust said the most recent feasibility study by the joint venture had considered the development of a large scale project.

The study identified the need for large infrastructure development and complex material handling solutions.

As part of its due diligence work, PanAust completed a scoping study based on a smaller 24 million tonne per annum conventional open pit and flotation operation producing a coppergold concentrate for export to custom smelters.

Image: Location of Frieda River project. Photo: Courtesy of PanAust.

Energy group link