Why is this ASX rare earths share sinking 13% today?

Lindian Resources Ltd (ASX: LIN) shares are on the slide on Wednesday.

At the time of writing, the ASX rare earths share is down 13% to 77.2 cents.

Why is this ASX rare earths share falling today?

The rare earths developer’s shares are under pressure today following the announcement of a large capital raising.

According to the release, Lindian has received firm commitments to raise approximately $100 million via a single tranche placement to institutional investors and strategic critical minerals funds.

The funds are being raised at 75 cents per new share, which represents a 15.25% discount to its last close price.

In total, approximately 133.3 million new shares will be issued as part of the placement.

What will the funds be used for?

The ASX rare earths share revealed that the capital raising is designed to accelerate development of its flagship Kangankunde rare earths project in Malawi.

Specifically, proceeds will be used to fund Stage 1 development through to first production and cash flow, as well as support Stage 2 expansion activities and the integration of the SARECO MREC downstream processing facility.

Importantly, the company notes that this funding provides a pathway to bring both the mine and processing facility into operation without the need for project debt.

Management believes this will reduce execution risk and allow the company to maintain a clean balance sheet as it transitions toward production.

Lindian is targeting first production from Stage 1 and the SARECO facility by the fourth quarter of 2026.

Beyond this, the company is advancing studies for a potential Stage 2 expansion, which could significantly increase production capacity over time.

Commenting on the news, Lindian Resources’ executive chair, Robert Martin, said:

We are very pleased with the strong level of institutional support received for this Placement, including significant participation from high quality existing and new investors, reflecting Lindian’s growing global profile and the strategic importance of Kangankunde as one of the next rare earths producers to supply emerging global supply chains.

Importantly, Stage 1 at Kangankunde and our SARECO MREC facility are both fully funded without the need for any debt drawdowns to reach first cash flows allowing us to be in production at both operations debt free and with a clean balance sheet. This capital also allows Lindian to accelerate Stage 2, bring forward key development activities and materially reduce execution risk, while advancing our downstream strategy through the SARECO MREC facility, which provides a clear and capital-efficient pathway to capture additional value beyond Rare Earths Monazite Concentrate production.

The post Why is this ASX rare earths share sinking 13% today? 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.