Here's why the Austral share price zoomed 30% higher today

The Austral share price surged 30% this morning following the company's announcement of a potential acquisition. We take a closer look.

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Shares in Austral Gold Limited (ASX: AGD) surged more than 30% higher this morning before being sold down to currently trade only marginally higher for the day. Shortly after the market's open, the Austral share price soared to 41 cents before dropping back to 32.5 cents at the time of writing. Austral's share price rally came following the company's announcement of a potential acquisition.    

What moved the Austral share price?

Investors drove up the Austral share price this morning after the company announced it has signed a non-binding letter of intent to acquire all the outstanding shares of Revelo Resources Corp.

The transaction would see Revelo shareholders receive 0.9184 common shares in Austral in exchange for each share. As such, the deal will result in Revelo shareholders having a 5.9% ownership in Austral.

In addition, Austral will also pay a cash consideration to Revelo shareholders.

Austral's management highlighted the strategic nature of the deal. Revelo is a Canadian company that holds interests in a substantial portfolio of gold, silver and copper projects in northern Chile.

According to the announcement, Revelo owns seven interesting assets, three of which are precious metals projects located in the Paleocene-Eocene belt, in the vicinity of Austral's flagship Guanaco/Amancaya site.

In addition, Revelo is pursuing an attractive transaction in West Pacific Ventures Corp that it believes will allow expansion of its portfolio and exploration assets.  

The announcement also noted that Austral shareholder approval would not be required for the acquisition.

In order to be completed, the transaction still requires a number of terms and conditions to be approved. These include approval from Revelo shareholders and completion of satisfactory due diligence by both parties. 

More about Austral Gold

Austral Gold is a growing gold and silver mining and exploration company. It has a portfolio of quality assets in Chile, the United States and Argentina. The company's flagship Guanaco/Amancaya project in Chile is a gold and silver producing mine.

Earlier this year, Austral's operations at its Guanaco and Amancaya mines were halted as a result of a workers strike. The outcome of the strike was the company renegotiating a 3-year collective labour agreement. Despite the disruptions associated with the strike, Austral's operations in Chile were not significantly impacted by the COVID-19 pandemic. 

Following today's announcement, shares in Austral soared more than 30% in early trade to record highs. At the time of writing, the Austral share price is trading 3.2% higher for the day. 

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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