Pantoro Gold (ASX:PNR) said it has entered into a partnership agreement with Mega Resources and Bain Global Resources for the high-grade Rama Open Pit in Western Australia, according to a Thursday Australian bourse filing.

The agreement includes an exclusive option for Pantoro Gold to mine and develop the high-grade underground mine beneath the open pit through a profit-sharing agreement, the company added.

The company said it will advance up to AU$20 million to fund mining of the Rama Open Pit stage two, secured by a first-ranking interest over project tenure, with all loaned amounts earning interest at 5% per year and funds to be used solely to discharge existing debt and develop the second stage of the open pit.

Advanced funds will be recouped from revenue generated from gold delivered by Mega at AU$1,000 per ounce, with all funds to be repaid within eight months of commencement, while Pantoro Gold will pay Mega between 70% and 80% of the value of reconciled gold produced, depending on ore grade, the filing added.

Mega expects to deliver about 115,000 tonnes at 4.7 grams per tonne (g/t) gold with a minimum delivery obligation of 17,700 ounces, per the filing.

Pantoro Gold holds an exclusive 12-month option to provide a work program for a potential underground operation following completion of the Rama Open Pit.