Rainbow Rare Earths Ltd (LON:RBW) told investors that it has received an exercise notice from The Lind Partners LLC for the conversion of a US$900,000 loan facility.
It means that the company will be required to issue 26,290,251 new shares to Lind, giving an effective conversion price of 2.69p (versus Friday’s closing share price of 7.07p).
The company will however have to publish a prospectus in order to issue all the conversion shares. In the interim it is able to initially issue 8.44mln new shares to Lind.
A prospectus is expected to be ready by July, and the balance of 17.84mln shares will subsequently be issued.
Last month, the company secured a new funding agreement with its major shareholder, Pella Ventures.
Pella has given Rainbow an unsecured 12-month 15% loan of US$700,000 to support the rare earth element mining company’s development and operations.
The company said it expects to achieve cash-flow break-even in the second quarter of the next financial year, which runs to June 2020.
As market interest in non-Chinese sources of rare earths has risen substantially in recent weeks - amid Donald Trump’s escalating ‘trade war’ with China – the price of Rainbow Rare Earths shares have increased by around 180%, from 2.5p in mid-May to above 7p on Friday.
In Monday’s early deals Rainbow Rare Earths' shares were down 6.29% changing hands at 6.7p.