The De Grey Mining Limited (ASX: DEG) share price isn't going anywhere on Thursday.
That's because the ASX gold stock requested a trading halt this morning.
Image source: Getty Images
Why is De Grey stock frozen?
De Grey requested its trading halt this morning so it could undertake a capital raising.
According to the release, the company has launched a fully underwritten two tranche placement to raise $300 million before costs.
De Grey is raising the funds at an issue price of $1.05 per new share, which represents a discount of 5.8% to its last close price.
The proceeds from the placement will be used to finalise detailed engineering, update the Hemi Gold project execution plan, refine the contracting strategy, advance major project tenders and progress the approvals processes.
In addition, the company will be ordering long-lead major equipment items ahead of planned construction activities. Funds will also be put towards early works (where approvals allow) ahead of a financial investment decision, as well as continued exploration drilling.
Fellow gold miner Gold Road Resources Ltd (ASX: GOR) intends to subscribe to the placement. In fact, it plans to snap up approximately 19.9% of the new De Grey shares on offer. This is in line with its existing interest in the gold stock.
How is it raising funds at such a small discount?
You might have noticed that the discount that De Grey is offering for its capital raising is much smaller than usual.
That's because the company has also released its definitive feasibility study (DFS) which has got the market excited. So much so, that the 5.8% discount could prove to be very generous for investors.
The DFS confirms that the Hemi Gold Project is a globally significant tier 1 gold project and presents a commercially attractive development opportunity, with significant upside. Once in production, it will be a top five Australian gold mine and in the lowest cost quartile for large Australian gold mines.
It is expected to deliver an average annual production of 530,000 ounces over the first 10 years for a pre-tax free cash flow of $6.3 billion.
De Grey Managing Director, Glenn Jardine, commented:
Delivery of the Hemi DFS is a major milestone for the Company and sets a solid foundation from which the Company can proceed with confidence to the next stage of development of the Hemi Gold Project.
Physical and financial outcomes of the DFS reaffirm the quality and attractiveness of the Project and confirm its Tier 1 status. Alongside its spectacular gold endowment, the Project is also located in the major mining services centre of the Pilbara, with world class infrastructure at hand. These attributes – along with the quality of studies, testwork and the major milestones achieved – mean the Project has been significantly de-risked over the last three and a half years.
