Magnum Mining and Exploration Limited (ASX:MGU) has tapped the US green hydrogen market for its Nevada-based iron ore project.

The company has signed a supply deal with AVF Energy Inc, which will build a green hydrogen plant on site at Magnum’s US facility.

Investors liked what they saw, sending MGU shares more than 15 per cent higher to around 20c. That stock is up more by around 300pc so far this year.

Magnum Mining green hydrogen play

Magnum owns about three quarters of the Gravelotte Project in the Limpopo province of South Africa, known for its emerald mineralisation.

But last October, it acquired the Buena Vista magnetite iron ore project in Nevada, in a ~$7m deal with most of that consideration based on the achievement of project milestones.

Shares in the company traded in a range below 5c through to the end of last year, but in 2021 the stock has found significant momentum.

Magnum doesn’t need any skin in the game to secure its Buena Vista hydrogen plant, with AVF Energy agreeing to both build and fund the project.

At that point, AVF will supply hydrogen energy to Magnum at a discount of 10 per cent to market rates.

The hydrogen energy source will be used in the production of Hot Briquetted Iron (HBI) and High Purity Iron (HPI) products “for supply to the US domestic steel market and battery industry”, MGU said.

Magnum managing director Dano Chan said the supply deal with AVF will allow the company to “fast track its mining and green steel development” for the US market.

If AVF can’t meet its production targets, the deal also gives MGU the right to source hydrogen energy from other suppliers.

A timeline for the construction of the hydrogen plant wasn’t provided.

Magnum called AVF an “active player” in the US hydrogen market, noting the company recently signed a Memorandum of Understanding with $US60bn infrastructure company Dominion to work on a separate green hydrogen project.

Magnum also said its locked in a distribution partner to help sell its HBI and HPI products in the US market.

M Resources Trading Pty Ltd will act as sales agent, in return for a fee of between 1-1.5pc of monthly sales generated.

Magnum will also issue 20m stock options to M Resources, with a three-year expiry and a strike price of 20c.

Chan said that with the ongoing development of its US iron ore operations, Magnum is “well positioned to take advantage of the Biden Administration infrastructure stimulus and the growing demand for green friendly infrastructure — particularly from California”.