Why the Magnum (ASX:MGU) share price soared 16% today

The Magnum Mining and Exploration Limited (ASX: MGU) share price is up with news the company will power its facility with hydrogen.

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The Magnum Mining and Exploration Ltd. (ASX: MGU) share price is rocketing today, after news the company will have a green hydrogen plant built at its Nevada facility. It has also signed a new marketing agreement.

At its intraday high, the Magnum share price was up by a whopping 16%.

At the time of writing, shares in the company have dropped to 19 cents, which is still a gain of 8.5% on yesterday's closing price.

Let's take a closer look at the news out of the mining and exploration company.

Magnum's green hydrogen future

Today, Magnum shared the news it has signed an exclusive green hydrogen supply agreement with AVF Energy.

The agreement will see AVF Energy building and funding a green hydrogen plant at Magnum's Nevada steelmaking facility. The hydrogen is deemed 'green' as it will be produced from waste products.

The agreement will allow Magnum to purchase green hydrogen from AVF Energy for 10% less than the market rate.

As a result, Magnum will be able to market its hot briquetted iron (HBI) and high purity iron (HPI) products to the US steel market and battery industry as 'green friendly'.

A clause of the agreement is, if AVF Energy is unable to provide the quantities of hydrogen power needed to run Magnum's facility, Magnum can seek out other suppliers.

A new marketing agreement for Magnum

Magnum has also signed a non-exclusive sales and marketing agreement with M Resources Trading Pty Ltd.

The agreement will see M Resources acting as Magnum's sales agent for its magnetite, HBI, HPI, pig iron, and steel products in the US.

As part of the arrangement, Magnum will pay M Resources between 1% and 1.5% of the sales revenue.

Magnum will also issue M Resources with 20 million stock options. These will have a strike price of 20 cents and a 3-year duration.

Commentary from management

Magnum's managing director Dano Chan commented on the news the company released today:

The agreements with AVF Energy allow Magnum to fast track its mining and green steel development for the local domestic market in the United States. The Company is also well positioned to take advantage of the Biden Administration infrastructure stimulus and to service the growing demand for green friendly infrastructure particularly from California.

Magnum share price snapshot

The Magnum share price is having a great year on the ASX, with today's news giving it its latest boost.

Currently, the Magnum share price is up 280% year to date. It's also up by 375% over the last 12 months.

Magnum has a market capitalisation of around $74 million, with approximately 425 million shares outstanding.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned.

The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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