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UPDATE - San Leon Energy to raise £29mln in major new equity funding

Last updated: 14:06 01 Jun 2015 BST, First published: 07:56 01 Jun 2015 BST

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Cash raised through the placing will support the Rawicz and Siekierki projects

--ADDS BROKER COMMENT--

San Leon Energy (LON:SLE) has unveiled plans for a major new equity funding, raising £29mln from existing and new shareholders.

Cash raised through the placing will support the Rawicz and Siekierki projects in Poland, and will pay for commitment wells at the Tarfaya licence onshore Morocco (where drilling starts in Q3).

It will also allow the group to retain a production royalty for the Barryroe project, offshore Ireland, and afford San Leon the possibility of new acquisitions.

The share placing, arranged by Brandon Hill Capital, will be accompanied by a new capital reorganisation which will see blocks of 100 existing shares covnverted into one new share.

A total of 36.25mln new shares issued in the placing at a price of 80p, equating to 0.8p in terms of the current capital structure. As a result of the share placing, which must be approved by shareholders, San Leon’s issued share capital will increase by around 140%.

Toscafund Asset Management, a major shareholder, is backing the proposed placing and will participate by providing some £16mln of the funds. Its stake as a result will increase to 41% from 22%.

"We are very grateful for the strong support of the existing and new investors in the placing,” said chief executive Oisin Fanning. “In particular, the proposed significant increase in Tosca's interest speaks volumes about their belief in the company's future and growth prospects.

“The funds will help transform San Leon into a cash-generating producer, and will bring other assets towards development.”

San Leon Energy said it will shortly call for an extraordinary general meeting for a shareholder vote on the proposed funding and capital reorganisation.

Westhouse Securities analyst Mark Henderson described the funding as “impressive”, given that such a significant amount of capital is being raised in what has been a challenging market for the sector.

“The funds should boost its ability to progress some of its assets (one of which, Rawicz in Poland, is close to production and cash flow) but the company now needs to actually deliver, having conspicuously failed to generate any meaningful economic value from its assets thus far,” he said in a note.

Elsewhere Zak Phillips, analyst at SP Angel, said he expects the proposed funding will clear the shareholder vote.

“While dilutive at point of raising, we see the money raised here, if invested in the manner described in the announcement, as being accretive to the underlying value of the business, and we believe that while it won’t be a “slamdunk,” it should be well supported,” Phillips said in a note.

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