The Knights signed Ponga to a four-year deal this time last year but want to ensure the 20-year-old remains a key cog as they rise up the NRL ladder.
According to The Daily Telegraph, the Knights are planning to throw $7 million at the halves pair.
The deal will keep Ponga at Newcastle until 2026, potentially making him the highest paid player in club history.
Pearce could be offered a two-year extension on top of his current contract, which comes to an end following the 2021 season.
Newcastle are in the process of forming a squad strong enough to return to the finals for the first time since 2013.
Securing Ponga will cancel out any chance of the youngster switching to rugby union, after he previously spoke about his desire to play for the All Blacks.
The Knights see Ponga as the next star of the league and pairing him alongside Pearce will help convince fans they are on track to challenge for a premiership in the near future.
“We see Kalyn being the future face of not only the Knights, but the game,” Newcastle chief executive Phil Gardner told The Daily Telegraph.
“Not only is Kalyn an outstanding player he is also an outstanding young person. We would obviously like to have Kalyn with us as long as possible.”
Gardner believes their current captain has a lot more to offer and despite an injury-ridden 2018 campaign, they see Pearce as a potential 400-game player and want to reward him for his efforts.
“He is a good person, and to his credit, he is stepping up. Mitchell is a great player for us. He is showing all the hallmarks of leadership.”
Giving Pearce a million dollars a year deal will keep the faith in Newcastle’s long-term plan and help them remain a legitimate threat in years to come.
“For the first time in the history of this club, we are currently working on our roster for 2021,” Gardner said.
“This club has worked on the roster the year they are in effectively for the last 10 years.
“It’s a great position for the club to be in. We know where we’re going.”