Why is the Element 25 (ASX:E25) share price tumbling 8% today?

The Element 25 (ASX: E25) share price is down 7.8% in morning trade. We look at why investors are selling the ASX resource explorer.

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The Element 25 Ltd (ASX: E25) share price is firmly in the red this morning. At the time of writing, shares were down 8.6% at $2.45

This comes after the ASX resource explorer emerges from a 2-day trading halt it requested pending today’s capital raising announcement.

Below, we take a look at the details of Element 25’s capital raising.

What did Element 25 report today?

The Element 25 share price is moving lower this morning. Consequently, this comes after the company reported it had received commitments from investors for a $35.5 million capital raising.

The placement of 16,136,364 shares, which Element 25 said received strong support from “a leading Swiss ESG fund”, was made at $2.20 per share. That’s 8% above Element 25’s 30-day weighted average share price before the placement. However, it’s 18% below yesterday’s closing price of $2.68 per share.

Additionally, as the lead broker in the capital raising, Blackwood Capital will receive a fee of 5% of the raised funds.

How will the funds be used?

Element 25 said it intends to use the new capital to fund the stage 2 expansion of manganese concentrate production. This will occur at its 100% owned Butcherbird Manganese Project in Western Australia.

The company also intends to speed up its plans to produce Lithium-Ion battery-grade manganese sulphate from the project. It stated that:

Manganese is emerging as an increasingly important ingredient for EV batteries, with potential supply constraints for nickel and cobalt forcing battery manufacturers to look to high manganese cathodes to produce the vast amount of cathode material required by the EV industry in coming years.

The recent announcement by Volkswagen reinforces this transition to high manganese content on these cathode materials.

Furthermore, the company said the placement shares would be issued without shareholder approval.

Element 25 share price snapshot

Despite this morning’s decline, Element 25 shares are up a jaw-dropping 2,360% over the past 12 months. To put that in some perspective, the All Ordinaries Index (ASX: XAO) is up 47% over that same time.

Year-to-date, the Element 25 share price is up 57%.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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