Gold minnow Red 5 has joined the ranks of Australian gold producers after purchasing the operating Darlot mine and King of the Hills project in Eastern Goldfields of Western Australia.

The stock (ASX: RED) finished yesterday 11 per cent higher at 4.9c after trading as low as 4.4c.

Red 5 now has a production and cash-flow base at Darlot and a significant growth pipeline in the region through the King of the Hill project, where underground mining is planned to begin next month.

A $6.5 million payment and issue of 130 million Red 5 shares was made to Gold Fields for Darlot while another $6.5 million payment and issue of 90 million Red 5 shares was made to Saracen Mineral Holdings for King of the Hill.

Gold Fields and Saracen have become cornerstone shareholders in Red 5 with interests of 19.92 per cent and 10.54 per cent respectively.

At Darlot, Red 5 has engaged mining consultants SRK Consulting to identify and rank targets for drilling and to potentially expand the open pit resource base.

Red 5 is seeking to appoint an underground mining contractor for King of the Hills with the aim of first production next month. Ore from King of the Hills will be processed at the Darlot processing facility.

Red 5 has a market cap of $50 million.