The Arafura Rare Earths Ltd (ASX: ARU) share price was having a good start to the session before being slammed into a trading halt.
The rare earths developer's shares were up 2.5% to 20 cents prior to the halt.
Why is the Arafura share price in a halt?
The company requested a trading halt this morning so that it could undertake a "material" capital raising.
Its request states the following:
The Company is seeking a trading halt pending an announcement to the market regarding a proposed capital raising that is material to the Company; […] The Company requests the trading halt remain in place until the earlier of the Company releasing an announcement in relation to the results of the capital raising or the commencement of trading on Friday 15 December 2023.
How much is the company raising?
As things stand, the company hasn't revealed how much it is seeking to raise from this capital raising.
However, it is worth noting that analysts have a fair idea of what may be required to fund the development of the Nolans rare earths project.
For example, according to a note out of Bell Potter from earlier this month, its analysts estimate that the company will require a total of $1.85 billion in financing.
But don't worry, not all of this needs to come from a capital raising. Nor will it all be required upfront. The broker estimates that 60% will be come from debt and 40% from equity. It said:
ARU have guided to end of CY26 for first production, 12 months beyond its initial guidance. This is contingent upon a completion of financing (BPe $1.85bn, 60/40 D/E) and binding offtake (~1,870ktpa NdPr remaining) over 2HFY24.
Its financial model indicates that $731.3 million will be raised through share issues in FY 2024.
Whether that is all through this capital raising, investors will have to wait and see on Friday when its shares return to trade. Though, one thing that is for sure, is that with a market capitalisation of approximately $415 million, it certainly will need to be a "material" raise.
