The project, which has a historical underground production of up to 1.1-million ounces, was the largest single gold producer in the region until its closure in the mid-1990s.

Eldore said on Friday that the acquisition would see the company establish a key strategic landholding within a major gold-producing region, and would allow the company to ultimately join the ranks of the country’s gold producers.

The gold explorer said that the potential to restart mining operations, following the completion of due diligence, would be part of the company’s expanded scope to determine the size and scale of operations and exploration prospectivity.

Under the terms of the transaction, Eldore would pay the vendor of the project $2.4-million in cash and a further $2-million in Eldore shares. The shares would be payable in tranches, with the first $1-million worth of shares being paid upon settlement and the second tranche being settled on the first production of 20 kg of gold.

Eldore was currently working on a share placement to raise up to A$1.5-million for general working capital and to complete the due diligence process for the mine acquisition.

A shareholder's meeting would be called to consider the purchase of the Lonely mine, as well as the issue of shares to finance the purchase and the recommissioning programme.

By Special correspondent