Why the Ora Banda (ASX:OBM) share price is sinking 12% today

The gold miner's share are continuing to fall this year…

| More on:
plummeting gold share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Ora Banda Mining Ltd (ASX: OBM) share price is one of the worst performers on the ASX today. This comes after the gold miner announced an update on its capital raising efforts.

At the time of writing, Ora Banda shares are down 12.20% to 18 cents.

What's happening with the Ora Banda share price?

A major catalyst for the fall in today's Ora Banda share price is an impending share dilution.

According to today's announcement, Ora Banda has successfully completed a share placement.

The company received commitments from new and existing international and domestic institutions, raising $21 million before costs.

According to the placement, about 124 million shares will be issued at a price of 17 cents each. This represents a 17.1% discount to Ora Banda shares' last closing price of 20.5 cents on 3 June before they entered a trading halt.

Ora Banda will use its existing placement capacity to create the new shares. Under listing rule 7.1, this allows up to 15% of its total shares to be issued without shareholder approval. In addition, the company will issue another 588,236 shares ($100,000 worth) to the managing director, David Quinlivan. This, however, is conditional on shareholder approval, with the general meeting expected to be held around 19 July 2021.

The proceeds of the placement will be used for the development of its Davyhurst Gold Project. This includes resource definition and reserve replacement, maiden reserves work, regional exploration, ramp-up costs and working capital expenses.

Lastly, Ora Banda says it will launch a $4 million Share Purchase Plan with the same terms offered to eligible investors. Up to 23.5 million new shares will be created, with the monies being put towards corporate purposes and working capital.

Management commentary

Ora Banda managing director, David Quinlivan said:

FY 2021 has been an incredibly busy time for Ora Banda. It was the year in which the Company started three new mines, installed and commissioned a range of significant infrastructure on site including a new LNG power station, built a new camp, completed the planned process plant remedial works program on time and within budget and then recommissioned this plant.

All of this achieved during a year of significant global "Covid-19" disruptions. With three mines on line by the end of June, the Company has a solid and flexible production base as processing ramps up to nameplate capacity.

Funding to progress resource and reserve definition and advance high priority exploration targets ahead of when previously planned will further underpin the Company's long-term future.

The Ora Banda Energy share price is down by more than 30% since this time last year.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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.

More on Capital Raising

A man sits in a chair hunched over a laptop and covered head to toe in frozen icicles to represent Envirosuite's trading halt
Capital Raising

Up 102% in 2024, here's why this ASX All Ords stock is now frozen

Seize the day. This company is ready to cash in on its renewed image.

Read more »

A man slumps crankily over his morning coffee as it pours with rain outside.
Materials Shares

Why is this ASX 300 battery materials stock crashing 20% today?

Its shares are now down by 67% since this time last year.

Read more »

A man with a heavy facial hair growth and a comical look on his face holds his hands in a 'time out' gesture.
Energy Shares

Up 90% in a year, why is this ASX 300 uranium stock suddenly halted?

Here's why this high-flying stock is out of action today.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Mergers & Acquisitions

Why are Metcash shares tumbling today?

This wholesaler has just received a $300 million cash injection.

Read more »

A man sitting at a computer is blown away by what he's seeing on the screen, hair and tie whooshing back as he screams argh in panic.
Materials Shares

Why is the Arafura share price sinking 17% today?

It has been a tough session for this rare earths stock. But why?

Read more »

Two happy pharmacists standing together in a pharmacy.
Capital Raising

Own Sigma shares? Everything you need to know about the 'transformational' $8.8b merger with Chemist Warehouse

Here's what you need to know about this mega merger.

Read more »

Close up of a sad young woman reading about declining share price on her phone.
Energy Shares

Why is the Boss Energy share price sinking 5% today?

This uranium share is raising funds. But why?

Read more »

a man in a suit holds up a hand and a stop sign at a roadblock positioned over a bitumen road .
Capital Raising

Why are Boss Energy shares in a trading halt?

This uranium share is raising funds. But why?

Read more »