Rainbow Rare Earths Ltd (LON:RBW) is looking to raise at least US$5mln (£4mln) of new cash to invest in increasing production growth at its Gakara rare earth project in Burundi.
The AIM-listed company, which will issue shares via an institutional placing at a price of 3p per share, wants US$1.6mln of the cash for mine development and exploration costs to bring additional mining areas into production, with another US$1.8mln to purchase a new mining fleet.
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The minimum targeted amount of US$5mln also includes US$1.6mln of working capital for operational and corporate purposes during the development period of the two new pits.
The placing was launched on Wednesday via an accelerated bookbuild process, though completion requires a shareholder vote at an extraordinary meeting that will be held on 19 July.
If more than the minimum is raised it will be used for additional drilling campaign focused on the larger-scale, lower grade Kiyenzi area and strengthening the balance sheet.
The placing price will also determine the conversion of the US$0.7mln loan for Rainbow's largest shareholder, Pella Ventures, in which its chairman Adonis Pouroulis has a beneficial interest.
Shares worth £145,789 will also be issued at the placing price to Rainbow's board and management to compensate for fees and deferred cash bonuses that were outstanding as of 30 June.