Red Hill Minerals (ASX:RHI) entered into a heads of agreement with Arrow Minerals (ASX:AMD) for the proposed divestment of the Pannawonica project in Western Australia, according to a Tuesday filing with the Australian bourse.

Under the terms of the deal, Arrow Minerals will have an exclusive 12-month option to acquire the entirety of the project tenement package, with a AU$150,000 upfront option fee to be satisfied by the issue of shares in Arrow Minerals and AU$1 million payable in cash or shares on exercise of the option, the filing said.

The deal also includes the grant of an uncapped 1.5% gross revenue royalty (GRR) on future iron ore sales from the project and a further 0.25% GRR over iron ore produced from certain deposits outside the project tenements but within the area of influence, per the filing.