Northwest Nonferrous International Investment Company, which holds a 41.34% stake in Meridian, has inked a non-binding Heads of Agreement with Meridian for the sale of the Lennard Shelf project as well as the Galmoy processing plant which is being relocated from Ireland to the minesite.

News of the potential acquisition caused shares in Meridian to jump 4.5c to an intraday high of 15.5c before closing the session at 13.5c, up 2.5c, with 2.2 million shares changing hands by the final bell.

Meridian managing director Jeremy Read said the proposed sale of Lennard Shelf to Northwest would provide its shareholders with a significant return on the $27.3 million it made in the project since it was purchased in November 2009.

“The proposed sale of the Lennard Shelf project to Northwest will allow Meridian to capture significant value for the Lennard Shelf project and place the company in a strong position to follow through on our longer term strategy of building a mid-tier mining company,” Read said.

“With a likely cash balance of approximately $68 million post the sale of the Lennard Shelf project, Meridian will be in a position to look at larger, longer term projects and potentially projects already in production, which we have not been in a position to do before.”

Read said Meridian currently has one project undergoing due diligence and several projects under review.

Conditions to the sale include Northwest’s due diligence being satisfactory, Meridian obtaining shareholders’ approval and Northwest gaining Foreign Investment Review Board and Chinese government approvals.

The sale is also conditional on Meridian receiving an independent expert report on the sale which confirms the sale as being both fair and reasonable to its shareholders.

Due diligence by Northwest must be completed to its satisfaction before a sale agreement is signed. The other conditions must be satisfied by August 31 or the sale will be terminated.

Northwest will pay $7 million to progress the Lennard Shelf project while the transaction progresses and approvals are being sought.

The funds will go towards drilling at the Gap Creek and Kapok West prospects and the completion of the relocation of the Galmoy plant from Ireland to Australia.

If the sale doesn’t proceed, Meridian will repay the $7 million within 12 months of the sale terminating.

In February, Meridian announced it had struck a non-binding deal to acquire an advanced gold deposit and a number of exploration plays in Russia from a UK-listed company for $US40 million ($A39.5 million).

The non-binding heads of agreement is for Meridian to acquire a 75% stake in the non-alluvial assets of Russian gold company ZAO ZRK Omchak from UK-listed Petropavlovsk, Russia’s third largest gold producer.

Omchak’s assets include the Verkhne-Aliinskoe (Aliya) gold deposit in Eastern Russia which has an identified exploration target range of 3-3.3 million tonnes grading 6.5-10 grams per tonne for a contained 700,000oz to 1.1Moz, and remains open along strike and at depth.

Yesterday, Meridian announced it had extended the exclusivity period for due diligence on the acquisition from May 11 to July 11 this year.

The two month extension was necessary to allow the company to complete its due diligence on Omchak and its assets, Meridian said.