Let's take a closer look at the company update.

Placement to fund Pedirka

It appears investors are selling Hexagon shares and heading for the hills as the company faces an impending share dilution.

In today's release, Hexagon Energy advised it has received $6.2 million in firm commitments by a way of placement. The offer was heavily subscribed by institutional and sophisticated investors at an issue price of 11 cents per share. The new fully-paid ordinary shares represent a 9.5% markdown to the 30-day volume-weighted average price (VWAP).

The company will alot more than 56.3 million shares using its 15% placement capacity under listing rule 7.1. This allows up to 15% of its shares to be issued without shareholder approval.

Settlement of the shares is expected to occur on or around 5 May 2021.

What's the plan?

The funds raised will be primarily used towards completing the pre-feasibility study (PFS) and accelerating the Pedirka Blue Hydrogen project. In addition, the company will allocate remaining monies to other project obligations and for working capital purposes.

Hexagon highlighted that it has conducted several meetings with Genesis regarding project planning and timing of the PFS. The discussions have proved positive, with "substantial cost savings for the PFS program from initial budget estimates" which the company said significantly lowered the amount of funding required to complete the study.

In what may be a possible catalyst affecting the Hexagon Energy share price, the company also noted that "incorrect media reports" have been circulating. Recently, Hexagon Energy announced it has selected Air Products to become a key technology provider for the Pedirka project. However, there was a misunderstanding that both companies were in a contract, partnership or financial arrangement.

Hexagon Energy reiterated that a formal engagement between the parties will come to fruition if the PFS progresses and becomes viable. It further explained that there are multiple options for technical providers in all aspects of the Pedirka project.

What did management say?

Hexagon Energy chair, Charles Whitfield touched on the successful capital raise, saying:

We were delighted at the very strong level of interest shown by both existing and new investors in this capital raise opportunity…

With this capital in place, the work on Pedirka can be accelerated and the team is exceptionally excited about the months ahead.

About the Hexagon Energy share price

Despite today's significant fall, the Hexagon Energy share price has jumped almost 100% in the past 12 months. Looking at year-to-date performance, the company's shares are sitting above a 130% gain.

Hexagon Energy commands a market capitalisation of roughly $50 million, with approximately 389.6 million shares on issue.

The post Why did the Hexagon Energy (ASX:HXG) share price sink 10% today? appeared first on The Motley Fool Australia.

The Hexagon Energy share price is up 40.9% at the time of writing, trading at 15.5 cents per share.

Hexagon Energy is a mineral exploration company focused on downstream graphite and rare earth processing. Its rare earths project includes RAPID SX, and graphite includes the McIntosh Graphite Project in the Kimberley region of Western Australia. Operations are also underway at the Halls Creek Gold & Base Metals Project in WA.

The Hexagon share price has been a fast mover in recent days after the company acquired Ebony Energy on 23 April. This has enabled Hexagon Energy to start the development timeline for Ebony's Pedirka Blue Hydrogen Project, which will spearhead the company's shift towards renewable energy production.

Quarterly activities and cash flow report

In the report, Hexagon Energy outlined its plans following the acquisition of Ebony Energy. The acquisition means Hexagon now has full control of the Pedirka Blue Hydrogen Project in the Northern Territory. 

It plans to immediately start a pre-feasibility study for Pedirka, which is slated for completion this year. Hexagon is also gearing up for a drill program at Halls Creek and has secured an electromagnetic survey. It's also in ongoing discussions to "create shareholder value" at its McIntosh and Alabama projects.

The Pedirka project covers an area of just under 800km. Hexagon said the acquisition was timely, given the Australian government's commitment to provide $275.5 million in funding to develop four regional clean hydrogen hubs and $263.7 million for carbon capture and storage technology in its upcoming budget.

Hexagon proposes that the project host a surface gasification plant producing "blue" hydrogen to supply domestic and export markets from coal feedstocks with zero carbon emissions.

In addition to being clean, hydrogen is a versatile energy source with applications across the transport, electricity, industrial and heating sectors. Hexagon is working with government and private sector entities to secure agreements that will accelerate the project's pathway to production of hydrogen to meet the growth in demand in the Asia Pacific region.

What Hexagon Energy management said

Hexagon chair Charles Whitfield said the company had big ambitions in hydrogen production.

We are very excited to have finalised our acquisition of the Pedirka project. We strongly believe that Pedirka has the potential to become a regionally important producer of hydrogen that will help meet the increasing demand for carbon-neutral energy solutions in the Asia-Pacific region.

The acquisition of Pedirka is consistent with our focus on clean energy solutions and will hopefully support the conversion to hydrogen economies in the years ahead. We look forward to rapidly advancing the Pedirka Pre-Feasibility Study while also progressing our mineral assets.

Hexagon Energy share price snapshot

The Hexagon Energy share price has been one of today's biggest movers on the ASX, but has also been rising strongly for some time.

Since the beginning of 2021, it's nearly tripled from just over five cents per share. Overall, it's up 52% this past week and 163% in 2021 to date.

The post The Hexagon Energy (ASX:HXG) share price powers up 41% today appeared first on The Motley Fool Australia.