The De Grey Mining Limited (ASX: DEG) share price has returned from its trading halt and is tumbling lower today.
In early trade the gold-focused mineral exploration company's shares were down as much as 13% to $1.25.
They have since recovered from most of this decline but are currently still down 4% to $1.38.
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Why is the De Grey share price tumbling lower?
Investors have been selling De Grey's shares this morning after it announced a $100 million capital raising.
According to the release, the company has received commitments for a placement of approximately 83.4 million shares priced at $1.20 per share to raise $100 million before costs. This placement price represents a sizeable 16.4% discount to the last close price.
Management advised that the placement was in high demand and was more than three times overbid. It feels this provides a strong endorsement of its assets.
The company experienced high levels of institutional participation in the placement. This includes many Australian funds and global precious metals and other specialist resource funds from the Northern Hemisphere.
Major shareholder DGO Gold Ltd (ASX: DGO) has committed to invest a further $12 million. This will result in a holding of 15.8% at completion. The company's non-executive director, Peter Hood, has also committed to a further investment of $360,000. Though, these remain subject to shareholder approval.
Why is De Grey raising funds?
The proceeds of the placement will be used to fund a number of operational activities.
These include ongoing extension and definition drilling of the Hemi discovery, testing of mineralised intrusions close to Hemi, regional exploration of intrusion and shear-hosted targets, enhanced site infrastructure, and early stage project de-risking studies.
The company's Managing Director, Glenn Jardine, commented: "The Hemi discovery in the Mallina Basin is rapidly moving towards our goal of defining a Tier 1 project with true district-scale potential. Mineralisation in the Hemi area has been identified over an area spanning +2,500m north-south and +2,000m east-west, with depths of +400m in areas tested."
"We already have 2.2 million ounces of Mineral Resources from our shear hosted deposits and expect to add substantially to this through the delivery of a maiden Mineral Resource Estimate for the Hemi discovery by mid-2021," he added.
Before concluding: "De Grey has never been better placed to achieve our goal of realising a Tier 1 gold project at Hemi."
