The deal would see assets "placed within each company's areas of interest", with Northern Star gaining tenements north and northwest of Kalgoorlie, and Horizon acquiring tenements around Kalgoorlie and Coolgardie.

The latter assets are contiguous with Focus Minerals' Coolgardie gold project, which Horizon is hoping to acquire.

It last week upped its offer for the project with a non-binding counter bid of A$55 million, comprising $12 million in shares and $43 million in cash, after Focus received a superior, competing non-binding proposal. 

Focus' board determined the counter proposal was no less favourable than the competing offer and the parties must now "use their reasonable endeavours" to agree formal binding documentation.

"Should the tenement swap transaction with Northern Star and the potential acquisition of the Coolgardie gold project both complete, Horizon will solely hold the key to developing 100% of the Rose Hill/Brilliant North gold project area where other parties cannot," Horizon said.

The Coolgardie project includes the Three Mile Hill processing plant.

Under the asset swap, Horizon would divest its Anthill, Blister Dam, New Mexico, White Flag and Kanowna North tenements and acquire a 100% interest in Northern Star's Rosehill, Brilliant North and Gunga West projects in Coolgardie and the Golden Ridge, Balagundi, Abattoir and Mt Monger projects in Kalgoorlie.

Horizon formed in June following the merger of Intermin Resources and MacPhersons Resources and is aiming to become Western Australia's next standalone gold producer.

It had $5.7 million in cash and investments as of late July.

The tenement exchange agreement is expected to be completed next quarter.

Horizon shares were up 12% or 1.5c in morning trade to 14c, capitalising it at $59.9 million.

Northern Star gained 7c or 0.7%, putting its value at $6.8 billion.