Pensana PLC (LSE:PRE) shares plunged 30% to 39.15p after the rare earths exploration and processing company published interim results that revealed a pressing need for more funding, with a current cash balance of US$0.2mln of cash and US$9.1m of outstanding creditors.
The group, which raised US$4mln from M&G PLC (LSE:MNG)’s investment arm in January, said it needs to secure more funding to settle its outstanding obligations in the immediate term and is dependent upon the continuing cooperation and forbearance of its suppliers until such funding is secured.
Pensana’s directors were said to be engaged with the major strategic mining house with which it has engaged during the current quarter, with “extensive due diligence” carried out and progressed to the point of investment committee review status, with a structure contemplated of an initial US$10.8mln that “looked to address the immediate-term liquidity requirements to settle current creditor balances, maintain project momentum whilst carrying out additional testwork”, to then be followed by a US$209mln final investment tranche “to initiate project construction at both sites subject to various conditions precedent”.
This process is still subject to final investment committee approval from the strategic mining house and completion of the transaction cannot be guaranteed, Pensana said.
It said if the first tranche of US$10.8mln is received in early April 2023 as planned it will be applied initially to the settlement of existing creditors and provision of short-term working capital.
“If the strategic transaction contemplated does not receive the necessary approval, the board will look to place shares to the value of approximately US$10mln with an African-based resource fund to address the immediate-term liquidity requirements and address the settlement of the existing creditors. The possibility of a second tranche of funding in the form of equity and/or a debt-for-equity convertible note is currently being considered.”