Red River shareholders will be offered A1.5c for every one share held in Red River plus one fully paid share in Iron Mountain for every six Red River shares.

Based on back of the envelope calculations, the offer values Red River at about $1.8 million, a significant premium to its current market capitalisation of $971,000.

The proposed offer is subject to a number of conditions, with a minimum 50% acceptance condition set for the takeover to be successful.

Iron Mountain is currently in the process of preparing a formal bidders statement and will lodge the documentation shorty.

Shares in Red River soared 40% to A1.4c on the news while Iron Mountain gained 4.3% to 2.4c.

Iron Mountain has bauxite, iron ore and gold exploration assets around Australia while Red River is predominately focused on gold exploration but also has interests in copper, tin, lithium, iron ore, tantalite, nickel and platinum group metal tenements.

The partners are already locked in a joint venture agreement over the Miaree gold-iron project in Western Australia which comprises three exploration licences.

Under the agreement, Iron Mountain has the option to earn up to a 70% stake in the project after satisfying three earn-in stages.

As of March 2013, Iron Mountain had a 60.25% stake in Miaree.

Earlier this year, Iron Mountain kicked off a drilling program at the Golden Camel gold project in Victoria, which has a defined resource of 246,000 tonnes grading 2.5 grams per tonne gold.

The company also retains royalty payments over the Wandoo bauxite project and the Mount Richardson iron ore project.