That's because the team at Bell Potter believes this gold developer's shares could be cheap following a "landmark" moment.

Which ASX gold stock?

The stock that Bell Potter is bullish on is Minerals 260 Ltd (ASX: MI6).

It is a Perth-based exploration and development company led by non-executive chair Tim Goyder and managing director Luke McFadyen.

Last year, it agreed binding terms for the transformational acquisition of 100% of the Bullabulling Gold Project (BGP) from Norton Gold Fields. It has a mineral resource estimate of 4.5Moz at 1.0g/t Au.

But it may not stop there. Bell Potter highlights that the project sits within a 293km2 total tenement package of granted mining and exploration leases.

What was the landmark moment?

This week, the ASX gold stock announced that it 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 Bullabulling gold project.

This news went down well with Bell Potter. It commented:

In our view, the pricing of both tranches of the deal is at a material premium to market and represents a strong endorsement by one of the world's most capable and successful gold investment companies. The equity component, priced at $0.45/sh, was at a 7% premium to MI6's prior closing share price before the deal.

In assessing the royalty component, we have conservatively applied the 2.45% initial rate and 1.63% tail rate to the current 4.5Moz Resource. This equates to the effective purchase by FNV:CN of ~106koz for A$170m, or A$1,600/oz. This is a substantial (~8x) premium to the ~A$200/oz (Enterprise Value per Resource ounce) we estimate for ASX-listed gold exploration companies. The deal is, in fact, better than this for MI6 as a 1.0% royalty is already held by FNV:CN over some of the Bullabulling tenements, implying a higher EV/oz metric is actually being paid for the new royalty.

Big potential returns

According to the note, the broker has retained its speculative buy rating on the ASX gold stock with an improved price target of 90 cents (from 75 cents). Based on its last close price of 59.5 cents, this implies potential upside of just over 50% for investors.

Commenting on its recommendation, Bell Potter said:

Following this deal MI6 will have ~$250m cash. This should comfortably fund MI6 through the Definitive Feasibility Study (DFS) and to Final Investment Decision (FID) in early CY27, plus a meaningful portion of project CAPEX. We view this deal as a capital efficient funding mechanism and do not believe these terms would be available to many gold development companies.

The post This ASX gold stock could rise 50% after 'landmark' moment appeared first on The Motley Fool Australia.

At the time of writing, the ASX gold stock is up 33% to a 52-week high of 56 cents.

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.

The post Why is this ASX gold stock surging 33% today? appeared first on The Motley Fool Australia.