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Tower Resources (LON:TRP) said Northland Capital Partners Ltd has raised US$4 million, or £2.59 million, before expenses through a placing with institutional and other investors of 103.7 million new shares at a price of 2.5 pence each.
The oil and gas exploration company with assets in Uganda and offshore Namibia said the placing is in line with comments it made with its interim results statement at the end of September to issue only the smallest amount of equity for the time being, consistent with working capital requirements, while the Uganda farm-out process continues.
In total, the directors of the company have subscribed £782,500 in the placing, of which £770,000 represents the conversion of US$1.2 million of director loans as detailed in the interim results.
Tower said the new funds will cover its working capital requirements until September 2012.
The placing shares represent 8.46 percent of the company's enlarged issued share capital.
Chairman Peter Kingston said: "We are pleased with the on-going support of our shareholder base in this placing, against a backdrop of challenging equity markets. Tower has exciting exploration prospects in both Uganda and Namibia and I look forward to updating the market as we progress."
Broker Westhouse said that although the placing solved the firm's near-term funding requirements, its longer-term future depended on its ability to farm out its Ugandan acreage and for its partner in Namibia - Arcadia - to farm down its position and secure a commitment well.
"Tower will undoubtedly benefit from positive news originating from the drill-bit, offshore Namibia, when Chariot Oil & Gas spuds its first well later this year (Tapir North). However, we retain our view that underfunded, pure explorers, who have yet to find an appropriate farm-in partner, will struggle to re-rate in the current risk-averse equity capital markets climate. We retain our 'buy' recommendation with a target price of 15.7 pence per share," said Westhouse in the note.
UPDATE: Tower Resources raises £2.59 mln in placing
Adds broker comments......
Quick facts: Tower Resources PLC
Price: 0.375 GBX
Market Cap: £4.14 m
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