The De Grey Mining Ltd (ASX: DEG) share price won't be going anywhere on Wednesday after the company initiated a $125 million capital raising.
Capital raising overview
The gold explorer is conducting a fully underwritten institutional placement to raise $125 million comprised of 113.6 million new shares representing 8.8% of existing shares on issue.
The offer price of $1.10 will represent a 9% discount to its last traded price of $1.21 on Tuesday, 19 October.
The De Grey share price is expected to remain in a trading halt no later than Friday, 22 October.
What's the capital raising for?
The proceeds from the offer, together with existing cash, will be used to accelerate the development of De Grey's "globally significant" Mallina Gold Project.
According to the capital raising presentation, uses of funds include:
- $77 million — exploration, infill and other drilling
- $17 million — pre-feasibility studies
- $8 million — operations support and capital expenditure
- $11 million — corporate
- $6.5 million — general working capital
The placement follows the release of De Grey's Scoping Study for the Mallina Gold Project which highlighted average annual production of 473koz over the first five years and 427koz over 10 years. Average all-in-sustaining costs (AISC) are forecast at A$1,111/oz over the first five years and $1,224/oz over 10 years.
To add some perspective, Evolution Mining Ltd (ASX: EVN), which fetches a market capitalisation of about $6.8 billion, produced 680,788 ounces of gold in FY21 at an AISC of A$1,215/oz.
Management commentary
De Grey Managing Director Glenn Jardine commented on the placement:
De Grey is pleased to announce the launch of a fully underwritten Placement, which displays a high level of investor support for our growth strategy at the globally significant Mallina Gold Project.
The Placement provides De Grey with a significant capital runway to undertake exploration activities to expand the existing resource, and progress project development studies. De Grey will now have a significantly strengthened balance sheet which provides a strong platform to unlock further value at Mallina.
De Grey share price snapshot
The De Grey share price has had pretty smooth sailing this year given the weakness in gold prices.
It's up 9% year-to-date compared to large-cap peers such as Northern Star Resources Ltd (ASX: NST) and Evolution Mining that have both tumbled 28% in 2021.
