Aeon Metals (ASX:AML) share price drops 11% on placement update

This small cap ASX share is seeking to strengthen its balance sheet.

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The Aeon Metals Ltd (ASX: AML) share price came out of a trading halt today following a successful placement.

The mineral exploration company's shares closed the day at 6.5 cents, down 10.96%.

What drove the Aeon Metals share price lower?

A catalyst for today's fall in Aeon Metals shares is that investors may be concerned about an impending share dilution.

According to its release, Aeon Metals advised that it has successfully received commitments to raise $9.5 million (before costs). The placement gathered support from sophisticated and professional investors, including the company's major shareholder OCP Asia. This comes after the 24-month OCP loan facility maturity extension announced last week.

In total OCP Asia subscribed for $4.4 million in the placement, representing almost half of the entire offer. Adding to the mix, all members of the Aeon board also submitted their interest, applying for $100,000 worth of shares.

The participation from OCP Asia and Aeon Metals board members is subject to shareholder approval at an upcoming general meeting.

Aeon Metals listed the issue price for its new ordinary shares at 5.8 cents apiece. This reflects a 20.6% discount to the last closing price of Aeon Metals shares on 14 July (at 7.3 cents).

The shares will be split across two separate tranches, with the first portion coming under the company's listing rule 7.1 and 7.1A. This allows them to issue approximately 86.2 million shares without shareholder approval.

The second portion of shares (roughly 77.5 million) will be subject to shareholder approval at a meeting in August.

Aeon will allocate the proceeds of the placement to a number of initiatives:

  • Ongoing Pre-Feasibility Study (PFS) activities on the Walford Creek Cu/Co Project (PFS scheduled for completion in Q1 CY2022)
  • Ongoing extensional and infill resource drilling at Walford Creek
  • New regional copper exploration activities
  • General working capital
  • Costs of the placement and SPP

Furthermore, the company will offer a share purchase plan (SPP) to retail investors to raise an additional $3 million. The SPP will be offered at the same price as the placement. The closing date of the SPP is 18 August.

What did the head of Aeon Metals say?

Managing director and CEO of Aeon Metals Dr Fred Hess commented:

Aeon is currently advancing both its site drilling campaign and metallurgical testwork to support the Walford Creek PFS, which is expected to be completed during Q1 CY2022.

We also intend to move quickly to commence a regional exploration program, primarily focused on our substantial tenement package to the east of Walford Creek, the Basin Edge Project, and our tenements to the west of Mt Isa, prospective for IOCG and sedimentary copper style targets.

About the Aeon Metals share price

It's been a tough ride for Aeon Metals shareholders, with the company's shares falling by more than 45% year to date. Looking at a longer time frame, the Aeon Metals share price is down more than 27% since this time last year.

Based on today's price, Aeon Metals presides a market capitalisation of around $49.46 million, with 677 million shares outstanding.

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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