The asset will be picked up from Lappland Goldminers, which fell into administration in April 2014 after its Pahtavaara gold mine in Finland encountered significantly lower grades.

Moving forward, Dragon said consideration for Faboliden would be paid in a number of stages, with instalments mainly hinging on mining approvals.

The company said it would start activity at the new mine immediately, with diamond infill drilling targeting near-surface high-grade mineralisation.

An updated environmental permit application and a final feasibility study will also be completed, with the study examining processing ore through Dragon’s existing Svartliden production centre 25km away.

“Faboliden represents an advanced project that was previously explored as a large tonnage low grade gold project,” Dragon executive director Brett Smith said.

“Dragon, however, intends to focus on the identified narrower, near-surface higher-grade zones within the lower grade envelope that could be more amenable to open pit mining and processing at Svartliden.”

Early metallurgical test work has already confirmed the possibility of processing Faboliden ore at Svartliden, and Dragon said the link would bring a lower cost and smaller environmental impact for the mine.

A total of 333 mostly diamond core holes have been drilled at the project since 1993, with Lappland also carrying out test mining and processing in 2005.

A definitive feasibility study for a large tonnage low grade mining and processing operation was completed in 2012.

At a 0.4 grams per tonne gold cut-off, measured resources at Faboliden currently stand at 31.4 million tonnes at 1.06gpt gold and 2.64gpt silver for 1.07 million ounces of gold.

The indicated portion sits at 34.1Mt at 1.06gpt gold and 2.96gpt silver for a further 1.1Moz gold, while the inferred resource comes in at 27.5Mt at 1.03gpt gold and 3.3gpt silver for 914,000oz gold.

Dragon is initially targeting material over 2gpt, and said it would post an updated estimate once its new drilling was finished.

It said mineralisation at Faboliden was delineated over a 1300m strike length, was up to 50m wide and extended to a depth of at least 500m.

Dragon shares were up 8.7% to 12.5c this morning.