PNG Gold Corp. said Friday it is considering an all-stock deal to buy New Guinea Gold Corp., with which it has signed a letter of intent regarding merger discussions.

Terms being considered entail issuing to New Guinea Gold shareholders one common share of PNG Gold for each 5.714 common shares of New Guinea Gold.

PNG Gold and New Guinea Gold, both of which are based in Vancouver, operate in Papua New Guinea.

The companies said in a jointly issued statement that the deal will afford a secure and expedient development path for New Guinea Gold's production and exploration licenses on New Britain Island in Papua New Guinea. PNG Gold's shareholders will benefit from the transaction by the acquisition and recapitalization of the Sinivit Mine.