Arafura share price sinks 12% as Gina buys up big

The Arafura Rare Earths Ltd (ASX: ARU) share price has broken its trading halt this morning on news of a $121 million placement headed by mining magnate Gina Rinehart.

Rinehart’s Hancock Prospecting put forward $60 million for the capital raise. It’s expected to walk away with an approximate 10% stake in the ASX rare earths developer.

Right now, the Arafura share price is 38.7 cents, 12.05% lower than its previous close.

This morning marks the stock’s return to trade after it was frozen on Friday ahead of the announcement.

Let’s take a closer look at what’s going on with the ASX rare earths share on Monday.

Arafura share price plummets on placement

The Arafura share price is tumbling after the company announced a capital raise to help accelerate its Nolans Project’s development schedule.

It has received firm commitments for $121 million under the placement. The raise is offering new shares for 37 cents apiece.

Another $12 million is expected to be raised through a share purchase plan. That will allow existing shareholders to snap up new stocks for the placement price.

The 37-cent per share price tag represents a 15.9% discount to Arafura’s previous closing price.

Arafura managing director Gavin Lockyer commented in today’s release, saying:

We are extremely pleased with the number of new and significant Australian and offshore institutional investors joining our register including Hancock Prospecting, a company well experienced in large project developments.

The Nolans Project is well positioned to become a ground-breaking strategic development for Australia with its single site ore to oxide business model.

Construction at Nolans is set to kick off in the new year. Funds raised through the placement will go towards the early contractor involvement phase, orders for certain items, the start of notable constructions, design and financing activities, as well as general working capital.

Today’s tumble included, the Arafura share price is 83% higher than it was at the start of 2022. It has also more than doubled over the last 12 months.

Comparatively, the All Ordinaries Index (ASX: XAO) has fallen more than 3% year to date. The benchmark index is trading flat over the last 12 months.  

The post Arafura share price sinks 12% as Gina buys up big appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper 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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