VHM share price plummets 11% following $30m IPO

The Aussie bourse welcomed a new rare earths stock today.

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Key points

  • ASX rare earths fans rejoice. A new critical mineral stock has hit the Australian market today
  • All eyes were likely on VHM shares as it floated at 12:30pm AEDT
  • However, shares in the market newbie plunged upon listing, falling to $1.20 apiece, 11% lower than its IPO's offer price

The VHM Limited (ASX: VHM) share price is tumbling as it floats on the Aussie bourse on Monday.

The rare earths and mineral sands developer's goal to become a global supplier of critical minerals caught the attention of many market watchers prior to its listing.

Also likely raising eyebrows is Aussie billionaire and Mineral Resources Ltd (ASX: MIN) boss Chris Ellison's majority holding. Ellison boasts a 9.14% stake at the time of listing.

Right now, excited investors can get their hands on VHM shares for $1.20 each. That's 11.1% lower than the company's initial public offering (IPO) offer price of $1.35 apiece.  

Let's take a closer look at the newest rare earths and minerals sands stock gracing the ASX.

VHM share price rockets as it hits the ASX after IPO

Those who got in on the VHM IPO will likely be disappointed this afternoon as the company's share price slumps 11% on its ASX float.

It raised approximately $30 million in an oversubscribed IPO, offering new shares for $1.35 apiece.

That left the company expecting a market capitalisation of $266 million at its offer price.

What does VHM do?

VHM is behind the Goschen rare earths and mineral sands project in Victoria – dubbed by chair Donald Runge a "fast-emerging tier one" asset. Runge continues, via the company's prospectus:

As the world continues to transition to renewable and environmentally friendly products like electric vehicles, the gap between increasing demand for rare earth and mineral sands and declining supply is anticipated to widen.

VHM is seeking to capitalise on these favourable market conditions and establish itself as a world-leading producer and supplier of critical minerals.

The project has a rare earth deposit of 413,107 tonnes of total rare earth oxide and an accompanying mineral sands resource.

Its definitive feasibility study was completed in March 2022.

The $30 million raised through the company's IPO will fund to a final investment decision for the project's first phase. That's expected in the second half of this year.

After that, its first production is targeted for early 2025.

VHM recently agreed to provide Chinese rare earths giant Shenghe with around 60% of the project's nominal production rate.

It's also working on tests for a hydrometallurgy circuit to further refine rare earths produced at the project.

Motley Fool contributor Brooke Cooper 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 Scott Phillips.

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