The Panoramic Resources Ltd (ASX: PAN) share price is having a very tough time on Thursday.
The ASX mining share crashed as much as 45% to a 52-week low of 5 cents this morning.
The base metals developer has recovered a touch since then but remains down by 37% at 5.8 cents.
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Why is this ASX mining share being sold off?
The catalyst for this share price weakness has been news that the company has completed an institutional placement.
According to the release, Panoramic has completed the bookbuild for a fully underwritten two-tranche placement of new fully-paid ordinary shares. This will see it raise $40 million (before costs) at a fixed offer price of $0.05 per new share.
That's a massive 45% discount from where the ASX mining share was trading prior to its halt.
Given this discount, it will come as no surprise to learn that the placement received strong support from both new and existing shareholders. This includes a number of new high-quality institutional investors joining the Panoramic share register. In addition, several Panoramic directors have committed to participate in tranche two of the placement.
Why is it raising funds?
The release explains that the proceeds from the placement will be used to strengthen the company's balance sheet and remove the short-term working capital pressure caused by the delay of revenue.
The latter has been caused by a filter press head plate failure and disruptions caused by a one-off, severe weather event. The broken filter press head plate has been replaced and was fully operational again on 9 July.
Panoramic Managing Director and CEO, Victor Rajasooriar, commented:
The new funding relieves the short-term pressure that was placed on our balance sheet and we're determined to repay the faith of shareholders by delivering to plan for the next 12 months and beyond. While we're disappointed to have needed additional equity funding at this time, we're also encouraged by the support of existing and new investors. We're also pleased that all of our eligible current shareholders can participate through the Share Purchase Plan.
