DSTO has signed an agreement with companies Tenix Defence and Metal Storm to develop the prototype of a new high-technology weapon for evaluation by the Australian Army.

The Advanced Individual Combat Weapon could combine the issue rifle with an advanced fire control system and a grenade launcher based on electrically fired, axially-stacked technology.

The fire control system will use a laser rangefinder and other sensors to provide soldiers with a corrected sight picture of the target, as well as improved target acquisition and engagement.

Tenix Defence CEO Robert Salteri said the investment of more than $3 million in the project reflected the potential future sales of the technology in Australia and overseas.

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