Zanaga Iron Ore Company Ltd (LON:ZIOC) told investors it has entered a subscription agreement with Shard Merchant Capital, under which some 21mln shares will be issued in up to three tranches.
Each tranche will comprise up to 7mln shares and the third batch will be issued solely at the company’s discretion.
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The company noted that Shard agrees to use reasonable endeavours to place all subscription it receives within a three-month period from the date of issue.
"Following entry into of the subscription agreement, ZIOC is pleased that a financing structure has been put in place which will give the company access to funding through a relatively low cost structure which minimises dilution to shareholders,” said Clifford Elphick, ZOIC chairman.
“This transaction enables ZIOC to secure capital in the future as the project progresses and further milestones are achieved."
To illustrate how the subscription agreement works, Zanaga said if the average price at which Shard places the 14mln subscription shares in the first and second tranches was 6.27p, the closing price on Wednesday, the net proceeds received by the company would be roughly £0.9mln. Further, ZIOC has the discretion to elect to issue up to a further 7mln shares in a potential third tranche.