<a target=_blank href=http://www.arkane-studios.com/>Arkane Studios[/url], the creators of <A target=_blank href=http://www.arxfatalis-online.com/>Arx Fatalis[/url], have licensed Half Life 2's Source engine from Valve for their next PC game. Here's the official press release by Valve.

• "It is a very comfortable feeling for a developer to be able to concentrate on the content of its game and have access to a set of stunning features and capabilities," said Raphael Colantonio, CEO of Arkane Studios. "Source is solid, performant [sic] and extremely complete in terms of the amount of innovative features. But more important, it is also open and flexible enough to allow us to build creatively upon, without having to bare the technological risks. Working with Valve is not only a fan's dream, but also an excellent opportunity to be one of the fortunate developers in the world to benefit from the Source engine's most impressive features."
  
  Arkane Studios joins Troika Games as the second announced Source licensee. Source is designed for the creation of games and MODs from all genres, and contains a host of proprietary tools for level editing, character direction and more.

It is not yet sure if the project is Arx 2 or a different title.

Spotted at: RPGDot