Catalyst Metals Ltd (ASX: CYL) shares have returned from their trading halt with a bang on Thursday.
In afternoon trade, the ASX gold stock is up 7% to $6.26.
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Why is this ASX gold stock jumping?
Investors have been buying the gold miner's shares today after responding positively to an acquisition announcement.
According to the release, has signed an agreement to acquire the Old Highway Gold Project from Sandfire Resources Ltd (ASX: SFR) for $32.5 million.
Old Highway is a near-term gold development project lying within mining leases, 40km southwest of Plutonic's processing plant. Management notes that its close proximity to Plutonic allows Catalyst Metals to considerably lower the project's development costs.
It estimates that the project has a $280 million net present value with an all-in sustaining cost (AISC) of A$1,588 per ounce from an initial four-year mine plan via the Plutonic processing plant.
The project has a resource of 206,000 ounces at 3.0 g/t gold, which includes a higher-grade underground component of 140,000 ounces at 4.6 g/t gold. The ASX gold stock believes it represents another low capital intensity, satellite project with relatively low operating risk.
There is also potential for the mine life to be extended from exploration activities. The company's CEO, James Champion de Crespigny, said:
Old Highway is another satellite ore source for Plutonic's processing plant. The acquisition also comes with some interesting exploration which could extend its mine life. The Plutonic processing plant is underutilised. What it needs is more ore sources. As such, Catalyst has been investing a lot of money into exploration along the Plutonic Belt to expand the known deposits. It has also been starting up several undeveloped satellite gold projects lying on the belt.
In purchasing Old Highway, it becomes another satellite gold project to Plutonic. Catalyst consolidated the Plutonic Belt bringing together many new ore sources. The purchase of Old Highway brings another new ore source into the portfolio. Collectively, these ore sources, all of which are on mining leases, give Catalyst the opportunity to fill the processing plant in the near term.
The ASX gold stock is Catalyst is acquiring the Old Highway Gold Project for $32.5 million in cash. This will be funded through existing cash reserves and Henty sale proceeds.
Though, the company is also in discussions with a number of commercial banks to secure a flexible, covenant light corporate level facility. It believes that having such a facility available will provide additional balance sheet strength and further enhance available liquidity.
