The West African Resources Ltd (ASX: WAF) share price has come out of a trading halt to record heavy falls today. This follows the gold resource company's update in regards to its recent share placement.
During afternoon trade, West African Resources shares are down a sizeable 7.89% to $1.285 apiece.
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What's dragging West African Resources shares lower?
Investors are scrambling to sell West African Resources shares as the company prepares to dilute existing shareholder value.
According to its release, West African Resources advised it has received strong support to raise $126 million through a share placement.
The offer was presented to both institutional and sophisticated investors at an issue price of $1.25 per share. This equates to roughly 101 million new ordinary shares being added to the company's registry.
The shares will be a part of the first tranche of the placement, falling under the company's listing rule 7.1. This allows up to 15% of West African Resources shares to be issued without shareholder approval.
The second tranche of shares involves the issuance of $140,000 of new shares to the company's directors. However, this will be subject to shareholder approval at a General Meeting sometime around mid-December 2021.
The funds collected from the placement will be used for a variety of objectives, primarily funding the Taurus principal repayment. In addition, the company will also allocate some money towards the Kiaka payment and the final cash payment of the Toega acquisition. The remaining funds will be distributed across exploration programs and general working capital.
Furthermore, the company will offer a Share Purchase Plan (SPP) to retail investors to raise an additional $10 million. The SPP will be offered at the same price as the placement. The closing date of the SPP is on 22 November 2021.
About the West African Resources share price
In 2021, West African Resources shares have moved mostly in circles before accelerating on an upwards trajectory since late September. The company's share price is up by more than 20% over the last 11 months.
West African Resources has a market capitalisation of roughly $1.15 billion, with almost 884 million shares on its books.
