Arafura (ASX:ARU) share price comes out of trading halt, sinks 20%

Arafura shares have had a shocker of a day upon returning from a trading halt…

| More on:
man bending over to look at red arrow crashing down through the ground

Image source: Getty Images

The Arafura Resources Limited (ASX: ARU) share price is deep in the red after coming out of a trading halt today.

At the time of writing, the mining outfit’s shares are down an astonishing 20.59% to 13.5 cents.

Let’s take a look at what Arafura released to the ASX this morning.

Arafura moves closer to production

Investors are dropping Arafura shares on news of the company’s latest capital raising.

According to its release, Arafura advised it has received firm commitments to raise $40 million through a share placement. The offer was presented to domestic and international institutional investors at an issue price of 12 cents per share. This equates to roughly 333.3 million new ordinary shares being added to the company’s registry.

The shares will be split across two separate tranches, with the first portion falling under the company’s listing rule 7.1. This allows up to 15% of its shares to be issued without shareholder approval.

The second portion of shares will be subject to shareholder approval at a meeting to be held in early August.

Proceeds of the placement will be used to commence Front End Engineering and Design (FEED) activities at the Nolans Project. In addition, the company will also set aside some funds for general working capital purposes.

Arafura managing director, Gavin Lockyer commented:

We are delighted with the support for the Placement, and welcome a number of Australian and offshore institutional investors to the register.

The Nolans Project is the only new shovel ready NdPr Oxide project in Australia capable of delivering advanced materials into the critical minerals supply chain.

Nolans has the potential to diversify rare earth supply chains whilst seeding new industry in Australia, one of the world’s safest and most secure jurisdictions.

In further news, Arafura will offer a Share Purchase Plan (SPP) to existing shareholders in hopes to raise $5 million. The funds will be allocated for the same purposes as mentioned above.

Arafura share price summary

The start of 2021 saw the Arafura share price accelerate to a multi-year high of 30 cents. However, after some serious profit-taking, the company’s shares have lost more than half their value in just 6 months.

Arafura has a market capitalisation of around $155 million, with more than 1.1 billion shares on its books.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

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 Resources Shares