Arafura Rare Earths Limited Announces Major Capital Raising Initiative
ARU (ARU) Share Update July 2024 Wednesday 24th
Arafura Rare Earths Announces $20 Million Placement and $7 Million SPP
Arafura Rare Earths Limited (ASX: ARU) has announced a significant capital raising initiative to support the development of its Nolans Project. The company aims to raise up to A$27 million through a fully underwritten placement and a share purchase plan (SPP).
Instant Summary:
- Fully underwritten two-tranche placement to raise A$20 million.
- Share Purchase Plan (SPP) targeting to raise up to A$7 million, with the ability to accept oversubscriptions up to a further A$3 million.
- Substantial progress on financing the Nolans Project with credit approvals for debt-led funding strategy completed.
- Funds to support critical path activities, compliance, and improvement ideas.
- Nolans Project is shovel-ready, with construction to commence upon reaching FID.
Capital Raising Details
Arafura Rare Earths Limited has commenced a capital raising process targeting to raise A$20 – A$27 million to continue advancing towards the development of the Nolans Project. The capital raising will comprise a fully underwritten placement (across two tranches) of new fully paid ordinary shares to sophisticated and institutional investors to raise A$20 million before costs.
Additionally, the company is offering a share purchase plan (SPP) to eligible existing shareholders to raise an additional A$7 million, with the ability to accept oversubscriptions of up to a further A$3 million. The SPP is not underwritten.
Use of Funds
Proceeds from the placement are intended to be used for activities related to the Nolans Project, including detailed engineering, site overheads, ESG initiatives, technology and business development, exploration, corporate costs, and transaction costs. The capital raising, coupled with a significant reduction in the project spend rate, provides the company with a cash runway to focus on finalizing its strategic equity funding and offtake initiatives required for FID.
Project Readiness
The Nolans Project is shovel-ready, and the company will commence construction activities immediately upon reaching FID. The funds raised will also be utilized for activities necessary to support critical path activities, compliance, and progressing improvement ideas that reduce capital, schedule, and risk.
Investor Participation
The offer price under the SPP is A$0.16 per new share, the same as the offer price for the placement, representing a 15.8% discount to the last closing price of shares on 23 July 2024. The SPP will provide eligible shareholders with the opportunity to increase their holding without paying brokerage or transaction costs.
The capital raising initiative is a crucial step for Arafura Rare Earths Limited as it seeks to secure the necessary funding to advance the Nolans Project. The fully underwritten placement demonstrates strong support from sophisticated and institutional investors, which is a positive indicator for the company's future prospects. However, the discount on the offer price may lead to short-term volatility in the stock price.
Investor Reaction:
Analysts have noted the strong support for the Nolans Project, underpinned by updated robust project economics. Investor reaction has been cautiously optimistic, with many seeing the capital raising as a necessary step to ensure the project's success.
Conclusion:
Investors should keep an eye on the progress of the Nolans Project and the finalization of the strategic equity funding and offtake initiatives. The successful completion of the capital raising will be a significant milestone for Arafura Rare Earths Limited, potentially leading to long-term growth and value creation.