Upon shareholder approval, Eureka Mines, which currently holds diamond and base metals mining assets in the Northern Territory, would join Australian petroleum juniors Aurora Oil & Gas (20%) and Adelphi Energy (12.5%) in the project.

The Sugarloaf prospect is a robust four-way dip closure covering 80 square kilometres –one of the largest undrilled structures in the onshore US, according to Adelphi and Aurora.

Due to spud in July, the initial exploration well will target about 800 billion cubic feet of gas reserves at around 5200m depth in a deep growth fault structure.

The field has upside gas reserve potential of several trillion cubic feet, according to Aurora.

Eureka, which listed on the ASX in December, has proposed to earn its 12.5% interest in Sugarloaf by acquiring 100% of the issued capital in US-based partner Hosston Holdings in exchange for 14 million fully paid ordinary shares.

The miner has already paid $A400,000 to secure the equity, and will spend $1.35 million towards drilling the first well.

Hosston currently has $300,000 in cash, which Eureka will use for general working capital.

The acquisition is conditional on 100% of Eureka shareholders approving the offer at a general meeting on June 9.

If approval is granted, the company will have a 9% net revenue interest, once royalties are paid to landowners and third parties.

“The directors of Eureka consider this to be an outstanding opportunity to participate in a potentially company making project at a time of rising worldwide energy demand and prices,” Eureka chief executive Matthew Sheldrick said.