De Grey Mining (ASX:DEG) share price sinks 9% after raising $125m

This gold developer’s shares aren’t glittering today…

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The De Grey Mining Limited (ASX: DEG) share price has returned from its trading halt and is tumbling lower on Friday.

At the time of writing, the gold developer’s shares are 9% to $1.10.

Why is the De Grey Mining share price tumbling?

The De Grey Mining share price is under pressure today after announcing the successful completion of its fully underwritten $125 million institutional placement.

According to the release, the company has received firm commitments for the placement of approximately 113.6 million shares at a price of $1.10 per new share. This represents a 9% discount to its last close price.

Management advised that the placement bookbuild saw strong demand from domestic and offshore institutions. It feels this provides a strong endorsement of the company’s Mallina Gold Project and its strategic plan.

Unfortunately for retail shareholders, they were left out of this equity raising. There will be no share purchase plan accompanying the institutional placement.

Why is the company raising funds?

The release notes that the placement proceeds will be used primarily to fund the commencement and completion of the prefeasibility study of the Mallina Gold Project, resource extension and definition drilling at Hemi and the regional deposits, and regional exploration activities targeting new large-scale discoveries.

De Grey’s Managing Director, Glenn Jardine, commented: “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.”

Following today’s pullback, the De Grey Mining share price is now trading flat for the year. This compares to a gain of almost 11% for the S&P/ASX 200 Index (ASX: XJO) over the same period.

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Motley Fool contributor James Mickleboro 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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