Goodrich Resources will acquire Gem Diamonds Ellendale mine, which produces around half of the world's supply of yellow diamonds.
Gem Diamonds last month announced that it was considering its options for its underperforming Ellendale mine.
At the time it stated that "the Company is currently reviewing the resources and mine plan at Ellendale, and in light of the short remaining life of mine and the current economic environment, even with the improvement in prices for the Tiffany quality goods".
New Goodrich has confirmed it will buy the operation.
Under the agreement Goodrich will acquire 100% of Gem Diamonds Australia Holdings, which operates the mine through the Kimberley Diamond Company.
The sale sees Goodrich pay $3.1 million upfront with $11.2 million to be paid in installments over 12 months.
In addition, Gem Diamonds will receive cash reimbursements for surplus working capital and agreed capital expenditure incurred between the signing of the sale agreement and 31 December.
Goodrich will fund the Ellendale purchase through a capital raising later this week.
The transaction is scheduled for completion next month.
Alex Alexander, Goodrich's chairman, stated that "the Ellendale Diamond Project present an excellent opportunity for [the company] and a significant value to our shareholders.
"We intend to complement the existing mining operation with an aggressive exploration program on Ellendale's prospective ground, aimed to increase the reserves and the life of the mine."
The mine itself is located in Western Australia's Kimberley region, which has seen a 500% spike in mining activity since 2003.
The hive of activity has been attributed to onshore oil and gas activity in the Canning Basin along with an increased interest in resources like uranium, bauxite and copper, although the area is historically known for its world class diamond operations, such as Rio Tinto's Argyle mine.