The Nickel Mines Ltd (ASX: NIC) share price is sliding today amid the company completing the first stage of a capital raise.
The company's shares are currently swapping hands for $1.44 apiece, a 1.03% fall on their previous close.
Let's take a look at what the company announced today.
What did Nickel Mines announce?
Nickel Mines informed the market it has successfully completed stage one of a US$225 million (A$314 million) capital raise. The capital raise is being conducted to fund an initial 30% stake in the Oracle nickel project (ONI) in Indonesia.
The institutional placement raised about A$148 million. A total of 108.1 million new ordinary shares were placed on the market at $1.37 per share.
Capital raises can cause share prices to fall due to share dilution. Earnings per share may drop given earnings are spread over a greater number of shares.
Commenting on the first phase of the capital raise, managing director Justin Werner said:
We are extremely pleased to have completed the first phase of this capital raise process.
The strong support from both new and existing institutional investors is a clear endorsement of the company's investment into the Oracle Nickel Project and the continuation of its track record for delivering value accretive transactions for its shareholders.
The second stage of the capital raise will involve a A$148 million non-underwritten placement to Shanghai Decent Investment or its nominee. Meanwhile, the third stage will involve a share purchase plan to raise A$18 million.
In December, Nickel Mines signed an agreement with Shanghai Decent to eventually acquire 70% interest in the ONI project. Shanghai Decent will be the lead design and construction partner in the project.
Werner added:
The ONI acquisition puts us on course to triple our nickel production profile from current levels by early 2023 and represents another important step in building Nickel Mines into a globally significant nickel producer.
Nickel Mines is a low-cost producer of nickel pig iron, used for the production of stainless steel.
Nickel Mines share price snap shot
The Nickel Mines share price has surged 22% over the past year. It is up 1.4% over the past month but down 2% over the past week.
For comparison, the S&P/ASX 200 Index (ASX: XJO) has returned 6% to investors in the past year.
This ASX share commands a market capitalisation of around $3 billion based on its current share price.
