The deal covers the sale of its interests in West Africa, including the Chinguetti and Banda oil discoveries offshore Mauritania and licenses in Gabon, SADR and Guinea Bissau, but still leaves Fusion with overriding royalties and exploration upside.

"This is exactly in-line with our corporate strategy, to realise project value before development," said Fusion's Australian MD Alan Stein.

"It enables the company to deliver an aggressive forward exploration program, while at the same time maintaining direct exposure to future success in Mauritania without the need for further capital investment."

In the multi-facetted deal, Premier will acquire Fusion's 6% interest in PSC B (containing the Chinguetti discovery) and 3% interest in PSC A (containing the Banda discovery) for a cash consideration of $10 million and an overriding royalty.

The overriding royalty is payable out of production revenues from all developments on these PSC's, and is a production related payment on a sliding scale varying with oil prices. First oil is expected in 2005.

For Chinguetti, the value of the royalty is estimated at $5 million (net present value at 10% p.a.), or $8 million (undiscounted), at a constant real oil price of $20 per barrel.

In addition, Premier will, on approval of a development plan, pay a $2 million bonus to Fusion for each new discovery resulting in a 50 mmbbl development on PSC B (excluding the existing discovery at Chinguetti) and a $1 million bonus for each new discovery resulting in a 50 mmbbl development on PSC A (excluding the existing discovery at Banda).

A multi-well drilling program covering both PSC A and PSC B is expected to begin by late 2003.

In Gabon, Premier will acquire an 18% interest in the Iris Marin and Themis Marin offshore PSC's in return for funding its own costs and a further 18% of costs on Fusion's behalf through to the completion of the second well on each PSC.

These shallow water PSC's have multiple Gamba formation, pre-salt targets of approximately 20-40 mmbbls and are on trend with Premier's existing Dussafu block.

In Saharawi Arab Democratic Republic (SADR), Premier will acquire 35% of Fusion's rights under a Technical Cooperation Agreement with the government of the SADR in return for the funding of 35% of costs incurred up to any future license award.

In each license in which it chooses to participate (to a maximum of three), Premier will fund 70% of the initial exploration costs capped at $3 million and 35% thereafter. The area is virtually unexplored as it is currently under a dispute over sovereignty.

As part of this transaction, Premier has granted Fusion the right to receive a 5% interest from Premier's 100% interest in Block 2 and in Blocks 4A and 5A in Guinea Bissau.

Stein said the next step for Fusion is to basically 'drill a bucket load of wells.'

"We have a diverse program planned, most of which will be funded by farmouts allowing us to free carry some of the wells. The sale of the West African interests gives us the funds to take the next step in our plans."