The gold sector is having a down day today, but Minerals 260 Ltd (ASX: MI6) is defying the trend, with its shares piling on more than 8% by early afternoon.
The project developer's shares were the second-best performer among S&P/ASX 200 Index (ASX: XJO) companies, while its peers such as Newmont Corporation (ASX: NEM) and Northern Star Resources Ltd (ASX: NST) were trading lower.
The reason is pretty clear. The company has just ticked off a major milestone towards bringing its Bullabulling project in Western Australia into production, by locking in the final funding needed to build it.
Major banks line up to fund new mine
Minerals 260 has signed an agreement with a syndicate of tier one banks for $335 million in project finance and another $75 million in working capital.
The banks involved include ANZ Group Holdings Ltd (ASX: ANZ), National Australia Bank Ltd (ASX: NAB), and Societe Generale.
The company will now forge on with completing its definitive feasibility study and then look at making a final investment decision in the first quarter of 2027.
Numbers looking good
It's not hard to see why investors are excited about this ASX gold company.
The prefeasibility study for the Bullabulling mine estimates an all-in sustaining cost of production of $2,627 per ounce of gold, compared with the current gold price in Australian dollars of $5,879.93 per ounce.
This is a very healthy margin and a very competitive cost of production when compared with other producers.
The mine is expected to cost $855 million to build and is expected to run for 19 years.
As well as the debt funding announced today, the company had $530 million in cash on hand at the end of the September quarter.
Minerals 260 has previously said Bullabulling is the largest undeveloped gold project in Australia which is not owned by an existing producer.
The funding package is a key step in "derisking" the project, which also has four of seven major approvals locked in, with the other three under assessment.
The company is also well advanced on the construction of the mine village on site, with that build starting in May.
ASX gold company's shares looking cheap
Minerals 260 shares, at 92 cents on Wednesday, up 8.2%, are not too far off their 12-month high of $1.
The analyst team at Bell Potter believes they're still undervalued, however.
In a research note released on 28 October, the broker said the company was heading into a "catalyst rich" period over the next six to nine months.
One of those catalysts has certainly been ticked off today.
Bell Potter's 12-month price target on Minerals 260 shares is $1.45, which would be a 57.6% return if achieved.
Foolish takeaway
If this company can execute the remaining steps in its development process, bring the mine into production on budget, then operate at the expected cost range, it will be on a winner.
The post Why is this ASX gold stock surging as its peers are on the slide? appeared first on The Motley Fool Australia.
Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Scott Phillips.
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