Red 5 announced a $60 million capital raise on Thursday, but there was more to the story, with the gold miner also confirming it’s in deal talks with St Barbara.
The capital raise will take place across two tranches, with tranche one to raise approximately $57 million and tranche two to raise $3 million, the latter of which will be subject to shareholder approval.
The placement will be priced at $0.16 per share, which represents a 15.8 per cent discount to Red 5’s closing share price of $0.19 on September 28.
Red 5 said the placement proceeds would be used to support the continued ramp up of its King of the Hills operation in the Leonora region of Western Australia. It will also support future growth of King of the Hills’ processing plant and the operation’s mineral resources.
The emerging gold miner is also launching a $6 million share purchase plan (SPP) to eligible Red 5 shareholders, up to $30,000 per existing shareholder. The SPP offer price will be $0.16 per share.
In its capital raise presentation, Red 5 also revealed it is carrying out “strategic consolidation discussions” with St Barbara regarding potential “operational synergies” in the Leonora region.
Red 5 highlighted the “low-cost, expandable milling capacity” of King of the Hills supported by 16 years of base load feed from the operation’s open pit.
The two companies have combined ore reserves of 4.9 million ounces across King of the Hills and St Barbara’s Gwalia mine.
Red 5 said “a lower cost base offers the potential to optimise the Gwalia underground and unlock open pit opportunities” and highlighted the potential of St Barbara’s Tower Hill deposit.
Potential consolidation also “provides greater flexibility around capital initiatives and future expansion opportunities”, Red 5 said.
While revealing that deal talks were taking place, Red 5 affirmed that there is no assurance that these discussions would materialise into a transaction.
Leonora has become a hotbed for merger and acquisition (M&A) talks, with St Barbara and Genesis Minerals having also been in discussions regarding regional consolidation.
Genesis recently purchased the struggling Dacian Gold to revive its Leonora assets.