The sale was conditional on applicable regulatory approvals including from China's Ministry of Commerce for Glencore's merger with Xstrata.
Following completion of the transaction on August 25, PanAust will have an 80% interest in the project, with Highlands Pacific holding 20%.
The PNG government has a right to acquire up to a 30% interest which, if exercised to its full extent, will reduce PanAust's stake to 55%.
Under the agreement with Glencore, PanAust will pay an initial consideration of $US25 million ($A27 million) on transaction completion and reimburse Glencore for its expenditures on the project since November 2013.
A further payment of $50 million is scheduled to be paid to Glencore in December 2015.
Glencore will also receive a 2% net smelter return royalty on PanAust's interest in the project upon successful mining at the site.
The royalty component of the payment scheme will aggregate to $50 million.
PanAust will be responsible for all costs incurred by the joint venture with Highlands in finalising the definitive feasibility study.
It will also sole fund the costs of maintaining the project and its community relations programs up to the time of lodgement of the mining lease or special mining lease application.
Xstrata's feasibility study, delivered in December 2012, envisaged throughput of up to 64 million tonnes per annum but PanAust had since confirmed it would pursue a smaller-scale project.
Mill feed of 430Mt at 0.54% copper and 0.3 grams per tonne gold was assumed for average annual production of more than 100,000 tonnes of copper and 160,000 ounces of gold in concentrate at cash costs of about $1.25 per pound over an 18-year mine life.
Required development capital has been estimated in the range of $1.5-1.8 billion.
PanAust is aiming to complete the feasibility study in mid-late 2015.
The company said the project had significant scope for expansion, noting the site's Nena area, which boasts measured and indicated resources of 33Mt at 2.81% copper and 0.65gpt gold.
Frieda River is on the border of the Sandaun and East Sepik provinces and is touted as one of the world's largest undeveloped copper-gold deposits.
PanAust described its move to acquire the project as part of a strategy to ensure growth beyond the life of the Phu Kham operation in Laos.
Last month, the company said it expected to hit the upper end of its guidance for copper and gold production in fiscal 2014, with Phu Kham producing 16,500t of copper in concentrate and 13,463oz gold in the June quarter.
Shares in PanAust last closed at $A2.27.