Arafura Rare Earths Completes Fully Underwritten A$20 Million Institutional Placement
ARU (ARU) Share Update July 2024 Wednesday 24th
Arafura Rare Earths Completes A$20 Million Institutional Placement
Arafura Rare Earths Limited (ASX: ARU) has successfully completed a fully underwritten institutional placement, raising A$20 million to support its funding initiatives and critical activities.
Instant Summary:
- Arafura Rare Earths raises A$20 million through institutional placement.
- Placement price set at A$0.16 per share.
- Funds to support critical activities and general working capital.
- Placement divided into two tranches: Tranche 1 and Tranche 2.
- Tranche 1 settlement expected on 31 July 2024.
- Tranche 2 subject to shareholder approval, with settlement expected on 6 September 2024.
Placement Details
Arafura Rare Earths Limited (ASX: ARU) has announced the successful completion of its fully underwritten institutional placement, raising A$20 million at an offer price of A$0.16 per share. The placement received strong support from institutional investors both domestically and internationally.
The placement is divided into two tranches. Tranche 1 involves the issuance of 88,732,000 new shares, raising approximately A$14.2 million. This tranche will utilize the company's existing placement capacity under ASX Listing Rule 7.1 and does not require shareholder approval. Settlement for Tranche 1 is expected to occur on 31 July 2024.
Tranche 2 involves the issuance of 36,268,000 new shares, raising approximately A$5.8 million. This tranche is subject to shareholder approval, with settlement expected to occur on 6 September 2024, following an extraordinary general meeting (EGM) scheduled for 4 September 2024.
Use of Funds
The funds raised from the placement will be used to support the company's funding initiatives, critical path activities, compliance, and improvement ideas aimed at reducing capital, schedule, and risk. Additionally, the funds will be used for general working capital purposes.
Share Purchase Plan (SPP)
In addition to the institutional placement, Arafura is offering eligible existing shareholders the opportunity to participate in a Share Purchase Plan (SPP) to raise up to A$7 million, with the ability to accept oversubscriptions of up to A$3 million. The offer price under the SPP is the same as the placement price of A$0.16 per share. The SPP is subject to shareholder approval at the EGM.
The SPP will open on 2 August 2024, with the prospectus being lodged with ASIC and released to the ASX on the same day. The SPP will close on 9 September 2024, with the results announced on 11 September 2024.
The successful completion of the A$20 million institutional placement is a positive development for Arafura Rare Earths. The funds will enable the company to advance its critical activities and support its funding initiatives, which could enhance its operational capabilities and reduce risks. The strong support from institutional investors indicates confidence in the company's prospects.
However, the issuance of new shares will dilute existing shareholders' equity, which may impact the stock price in the short term. The market's reaction will depend on how effectively the company utilizes the raised funds to achieve its strategic goals.
Investor Reaction:
Analysts have generally reacted positively to the news, highlighting the strong institutional support as a vote of confidence in Arafura's future. Some investors have expressed concerns about the potential dilution of their shares, but many are optimistic about the company's ability to leverage the new funds for growth and risk reduction.
Conclusion:
Investors should monitor the progress of Arafura Rare Earths' initiatives funded by the placement and the outcome of the upcoming EGM. The company's ability to effectively utilize the raised funds will be crucial in maintaining investor confidence and driving long-term growth.