Minerals 260 Ltd (ASX: MI6) shares are soaring on Monday.
At the time of writing, the ASX gold stock is up 33% to a 52-week high of 56 cents.
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Why is this ASX gold stock surging?
The catalyst for today's explosive move is the release of a major strategic funding agreement that significantly strengthens the company's balance sheet and accelerates development of its flagship gold project.
According to the release, the ASX gold stock has signed a $220 million strategic funding package with Canadian gold royalties and streaming giant Franco-Nevada Corp (NYSE: FNV) to accelerate and de-risk the development of the 4.5Moz Bullabulling gold project located 65km from Kalgoorlie in Western Australia.
Management notes that the funding has been secured on highly attractive terms, which it believes validates the quality of Bullabulling as one of Australia's leading gold development projects.
In exchange for $170 million, Franco-Nevada Corp will increase its total royalty over the project to 2.45%. This compares to a 1% royalty that currently exists over certain project tenements.
Franco-Nevada Corp will also invest $50 million by subscribing for approximately 111 million Minerals 260 shares at an issue price of 45 cents per new share. This was a 7% premium to its last closing price.
The gold giant will hold 4.9% of shares on issue following this investment.
Commenting on the funding package, the ASX gold stock's managing director, Luke McFadyen, said:
This is a fantastic outcome for Minerals 260 and our shareholders. Securing a $220 million funding package with the world's leading gold royalty company at this early stage of Bullabulling's development is a major endorsement of the project and a milestone that will allow us to accelerate the Project towards production, expand our exploration strategy and de-risk our funding pathway.
Franco-Nevada is an existing royalty holder and expanding our relationship with this financing is highly value accretive relative to other available funding options. Their extensive due diligence across all areas of the Project validates Bullabulling as one of the leading gold projects in Australia.
Franco-Nevada's president and chief executive officer, Paul Brink, added:
Bullabulling is a large and growing orebody and one of the most attractive gold development projects in Australia. After a full review by our team of the rapid and impressive progress made by Minerals 260, we are excited to increase our exposure to the Project.
