Why is this ASX mining stock sinking 47% to a record low?

Genmin Ltd (ASX: GEN) shares have returned to trade on Tuesday after a seven-month suspension.

Unfortunately for its long-suffering shareholders, the return has not been a good one for this ASX mining stock.

In morning trade, the Africa-focused iron ore exploration and development company’s shares are down 47% to a record low of 9.8 cents.

Why is this ASX mining stock crashing?

This morning, the company’s shares returned to trade after it completed a $23.4 million capital raising.

This comprises a placement, which raised approximately $13.2 million, and an entitlement offer, which raised approximately $10.2 million.

The ASX mining stock advised that both its placement and entitlement offer were strongly supported by Genmin’s board, major shareholder Tembo Capital, and other sophisticated and institutional shareholders.

The company notes that it is now debt free and has received cash of approximately $13.2 million. This is after brokerage costs, repayment of the Tembo Capital loans, and other creditor offsets.

As a reminder, Genmin’s original suspension was requested pending further clarification of political circumstances in Gabon.

The good news is that businesses are now operating normally in Gabon with ongoing stability and a proactive new government actively promoting and streamlining timeframes for new economic development.

What now?

Its full focus now shifts to finalising project build financing and then develop the Baniaka operation in Gabon, with commencement of commercial production targeted for mid-2025.

The ASX mining stock plans to develop Baniaka at an initial production rate of 5 million iron ore tonnes per annum (Mtpa). Procurement of project build financing is the next major milestone that needs to be achieved. Genmin is engaged in discussions with several potential financing partners, including two of its Chinese offtake counterparties.

‘Delighted’

Genmin’s managing director and CEO, Joe Ariti, was very pleased that the company’s shares were finally returning to trade. He commented:

We are delighted our shares resumed trading on ASX today after a seven-month hiatus and also to have completed a $23.4 million fundraising. Today, we have the mining approvals needed to build and operate Baniaka, we have cleared all loan debt, and we have cash to support our operations whilst we concentrate on delivering the next major milestone of project financing to build Baniaka.

We deeply appreciate the patience of our existing shareholders whilst our shares were not trading, and welcome the new investors to Genmin and thank them, and our existing shareholders alike for their strong support in the fundraising. I also extend my thanks to Tembo Capital for providing working capital support when needed and my fellow board members and our team, who worked tirelessly to carefully navigate the external challenges we encountered during 2023.

The post Why is this ASX mining stock sinking 47% to a record low? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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