Red 5 (ASX:RED) reports that it has received firm commitments for a $60 million two-tranche placement to help fund the ramp-up of its King of the Hills (KOTH) gold mine in Western Australia.
The company notes the placement comprises the issue of 375 million new fully paid ordinary shares and has been ‘well supported’ by domestic and international institutional investors.
The shares will be issued at A$0.16 per share with tranche one to raise about $56.7 million via the issue of 354,324,632 new shares, and tranche two to raise approximately $3.3 million via the issue of 20,675,368 new shares subject to shareholder approval to be sought at a general meeting expected to be held in November.
The placement price of A$0.16 represents a 15.8% discount to the last traded price on 28 September 2022 of A$0.19, a 23.0% discount to the 5-day volume weighted average price of A$0.208, and 28.0% discount to the 10-day volume weighted average price of A$0.222.
The funds raised will primarily support the ramp-up of its King of the Hills gold mine in Western Australia – Australia’s newest major gold mine. Red 5 poured first gold from the project on 5 June 2022 after completing the project development on time and within budget and is now progressing the ramp-up with commercial production expected to be achieved in the December 2022 quarter.
Specifically, funds raised from the placement will be applied to expanding the mine’s process plant throughput to 5.5Mtpa in FY24; completing the process plant expansion Feasibility Study targeting further incremental throughput growth; and exploration and resource conversion drilling.
Petra Capital and Canaccord Genuity (Australia) are acting as joint lead managers and joint bookrunners to the placement, with Ord Minnett acting as co-manager.
In addition to the placement, Red 5 announces the offer of a share purchase plan (SPP) to raise a further $6 million. The company, however, reserves discretion regarding the final amount raised under the SPP.
Commenting on the capital raise, Red 5 Managing Director Mark Williams said: “We are delighted with the support received for the placement and the company is also pleased to offer existing eligible shareholders on the record date the opportunity to subscribe under a share purchase plan at the same price as the placement.
“KOTH was delivered within budget and first gold poured on schedule in June 2022. Commercial production and steady-state operations is expected to be achieved during the December quarter”
KOTH was delivered within budget and first gold poured on schedule in June 2022. Commercial production and steady-state operations is expected to be achieved during the December quarter.
The proceeds of this capital raise will strengthen our balance sheet and provide additional working capital to support the completion of the ramp-up of the KOTH plant. The funds will also allow us to pursue additional growth initiatives, including ongoing drilling and a KOTH Process Plant Expansion Feasibility Study to determine the optimum long-term plant capacity.”
Settlement of tranche one for the placement is on Friday 7 October 2022.
Red 5 is an Australian gold producer that operates the Darlot and King of the Hills (KOTH) gold mines in the Eastern Goldfields region of Western Australia.
Write to Adam Orlando at Mining.com.au
Images: Red 5 Limited