Metals One PLC (AIM:MET1) shares tumbled 39% to 2.06p after the explorer unveiled a heavily discounted fundraise to support its planned South African gold venture with Lions Bay Resources.
The company said it had raised £4.4 million through the issue of 220 million new shares at 2p each, a steep markdown from Monday’s 3.4p closing price.
The new shares amount to roughly 26% of the existing share count, and the board said the placing had been increased to use its full headroom after “strong demand” from institutional and sophisticated investors.
Most of the cash will be earmarked for its transaction with Lions Bay, announced last month, and for general working capital.
Lions Bay is seeking loan funding from Metals One to refurbish a cogeneration plant in South Africa that it hopes to use in a gold roasting configuration.
A Competent Person’s Report is due in mid-December, after which the plant is expected to need about $4.5 million to restart steam and power production. Lions Bay is also assessing suitable mining assets nearby.
Oak Securities has been appointed joint broker alongside the placing. Admission of the new shares to AIM is expected on 11 December, taking Metals One’s enlarged share capital to just under 1.06 billion shares.
Daniel Maling, managing director, said it was “pleasing to see institutional investment support” for the strategy and that the extra capital would help during negotiations.