Why the Australian Mines Limited share price is going nuts

What’s behind the incredible rise of Australian Mines Limited (ASX:AUZ)?

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The Australian Mines Limited (ASX: AUZ) share price has ballooned 44% higher today after the WA-based copper and nickel prospector bagged $20 million from investors to fund exploration of its tenements across NSW and Queensland.

The miner has issued 235,294,138 new shares at an issue price of 8.5 cents to institutional investors, although today the share price climbed 4.3 cents or 44.3% from 10 cents to 14 cents.

The miner will now get to work on its flagship Sconi Cobalt-Nickel-Scandium project in north Queensland and investors have high expectations judging by today’s share price action. Notably, the company is still at an exploration stage and has a large valuation relative to its amount of runs on the board.

For the quarter ending September 30 2017 it burned through $2.4 million in cash mainly to fund its mining exploration activities as it seeks to deliver a return on invested capital. Given its current cash flows it looks a high-risk bet not for the feint hearted.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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