Alkane Resources Ltd (ASX:ALK, OTCQX:ANLKY) will raise approximately $16 million through a pro-rata non-renounceable rights issue at a price of $0.20 per share.
The rights issue will entitle shareholders to one new share for every five existing shares held and the $0.20 per share price represents a 7.8% discount to the last traded price of $0.217.
The offer will be open to eligible Alkane shareholders with a registered holding as at 7.00pm Sydney time on 29 April, 2016.
Alkane's largest shareholder, Abbotsleigh with a circa 22.1% holding, has committed to subscribe for its pro-rata entitlement, provided that the number of new shares it has agreed to subscribe for does not exceed 25.1%.
The funds raised will be to progress the Dubbo Zirconia Project (DZP) through to receipt of project financing funds.
Any shortfall from the rights issue may be placed at the company’s discretion, at a price not less than the offer price, within 3 months of the closing date of the offer.
Use of funds
The proceeds will be used alongside existing cash reserves to meet anticipated expenditures to progress the DZP until the main financing process is scheduled to complete.
Anticipated expenditures include:
(a) Acquisitions of the remaining key parcels of land within the DZP project area;
(b) Perform DZP pilot plant runs to confirm work to date and produce product samples for potential off-take customers;
(c) Development of strategic partnerships to provide value enhancement to published project financials;
(d) Other DZP related expenditures; and
(e) General working capital requirements including fees associated with the offer.
Alkane is a multi-commodity company focused in the central west region of New South Wales. Currently Alkane has two advanced projects - the Tomingley Gold Operations (TGO) and the nearby DZP.
Tomingley commenced production early 2014 and cash flow from the TGO has provided the funding to maintain the project development pipeline and will assist with the preconstruction development of the DZP.
The DZP's mining lease was granted on 18 December 2015 and the Environment Protection Licence was approved on 14 March 2016.
Most recently, Alkane signed a Letter of Intent (LOI) with Vietnam Rare Earth JSC (VTRE) to toll process its rare earths concentrate from the DZP into individual rare earth products.
Financing of the DZP is currently in progress with production anticipated to commence in 2018.
TGO March quarter production
During the March quarter, Tomingley produced 14,512 ounces of gold at a AISC of A$1,358 per ounce.
Costs are forecast to be within an AISC range of A$1,250-1,350 per ounce.
Gold sales for the quarter totalled 15,000 ounces resulting in revenue of A$24.3 million at an average price of A$1,621 per ounce.
At 31 March, 2016 Alkane had hedged 27,000 ounces of forward gold sales at an average price of A$1,615 per ounce.
Gold production for FY16 through the first three quarter measured 49,748 ounces.
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