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

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

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plummeting gold share price

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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.

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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.

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