Alkane Resources Limited (ASX:ALK) is undertaking a capital raising of up to $54.8 million to fund an accelerated exploration and development program along the Tomingley Gold Corridor in NSW during 2020.
The capital raising at 55 cents per share comprises an institutional placement to raise $20 million and a non-underwritten 1 for 8 pro rata non-renounceable rights issue to raise up to a further $34.8 million.
Binding commitments have been received for the placement which has been well supported by existing shareholders and includes a number of new international and domestic institutional investors.
Alkane's managing director Nic Earner said: “We welcome our new shareholders to the Alkane register, who join at a very exciting time for the company.
“The accelerated development timetable for the Tomingley Corridor positions Alkane to return to full mill utilisation at Tomingley as quickly as possible to deliver increasing cash flow.
“With the continued strength of gold prices, in Australian dollar terms, and processing infrastructure already in place, ongoing operating cash flow generated at Tomingley will be excellent support for the balance of the business.”
The majority of new shares to be issued pursuant to the placement, which was conducted under Alkane’s ASX Listing Rule 7.1 capacity, are scheduled to settle on Wednesday, December 4, 2019.
Abbotsleigh Pty Ltd, an existing substantial holder and company associated with Alkane's chairman Ian Gandel, has agreed to subscribe for new shares under the placement, representing subscription funds of approximately $4.73 million.
This Abbotsleigh subscription is due to settle following shareholder approval being obtained at a general meeting to be held in early January 2020.
The rights issue is not underwritten, however, all directors of Alkane and several major shareholders, including Abbotsleigh, representing around 26% of current shares on issue in Alkane, have committed to taking up their entitlements for a combined subscription of $9 million.
Application of funds
Funds raised are intended to be applied to:
- Accelerated resource drilling across the Tomingley Corridor ahead of underground mining at Roswell and San Antonio;
- Development of an underground exploration decline (approvals expected no later than January 2020) to drive underground from the existing Wyoming One underground mine to Roswell and San Antonio, also testing several underground exploration targets between Tomingley and Roswell. This decline will be suitable for mining operations once all underground mining approvals are in place (targeted Q2 2021);
- The purchase of land over a section of the Tomingley Corridor currently under option which will be suitable for a ventilation rise to support the underground decline;
- Accelerated regional exploration including step-out drilling at Boda and exploration of other porphyry targets across Alkane’s North Molong Porphyry Project; and
- Remaining funds to be applied to general working capital requirements, costs related to the offer and contingent corporate purposes.
“Considerable potential” at Boda
Earner said, “The continued exploration at Boda, where step-out drilling is underway, has considerable potential to create value for Alkane shareholders.
“Alkane’s 2020 program aims not only to assess Boda and surrounding mineralisation, but also to test other Boda-style targets across our licences.
“This equity raising ensures Alkane continues its history of balance sheet strength as it heads into a very active 2020, putting the company in a strong strategic position.”
Hartleys Limited and Petra Capital Pty Ltd are acting as joint lead managers and bookrunners to the capital raising.