The S&P/ASX 200 Index (ASX: XJO) essentially finished flat today, it rose 0.03% to 5,945 points.

The Victorian COVID-19 outbreak is causing angst for some parts of the share market on fears that the infection resurgence could cause a delay for an opening of state borders. There was one particular industry that saw a selloff:

ASX travel shares decline

The share price of Corporate Travel Management Ltd (ASX: CTD) fell by 8% today.

Webjet Limited (ASX: WEB) saw its share price fall by 5%.

The Qantas Airways Limited (ASX: QAN) share price dropped by 4%.

Infrastructure business Sydney Airport Holdings Pty Ltd (ASX: SYD) suffered a 1.6% share price drop.

The Flight Centre Travel Group Ltd (ASX: FLT) share price fell 4.1%.

New Zealand travel shares also suffered today. The Auckland International Airport Limited (ASX: AIA) share price dropped 1.9%, the Air New Zealand Limited (ASX: AIZ) share price fell 3.2% and the Serko Ltd (ASX: SKO) share price fell 3.2%.  

Challenger Ltd (ASX: CGF) announces a capital raising

Challenger is looking to raise capital from the market. 

The institutional part of the capital raising will amount to $270 million. The second part is a non-underwritten share purchase plan (SPP) which is looking to raise up to $30 million.

The placement will be conducted at a fixed price of $4.89 per new share, which represents an 8.1% discount to the last traded price of $5.32.

The placement will mean 55 million new shares will be issued. This is approximately 9% of Challenger’s existing shares on issue.

According to reporting by the Australian Financial Review, the $270 million placement was covered by institutional investors by early afternoon.

The ASX 200 business said that investment grade fixed income asset risk premiums have widened significantly following the COVID-19 pandemic market sell-off. The annuity company thinks that there is a significant opportunity to generate pre-tax return on equity (ROE) returns of more than 20% on the capital backing the investments. The capital will be progressively deployed and expected to be ROE accretive once fully deployed.

The equity raise will strengthen Challenger Life’s capital position during this period of market uncertainty, with $300 million to be used as common equity tier 1 (CET1) regulatory capital.

Transurban Group (ASX: TCL) share price drops 4% on update

The ASX 200 toll road business announced an update today.

It announced a distribution of 16 cents per stapled security for the half-year to 30 June 2020. This brings the total FY20 distribution to 47 cents per stapled security. The FY21 distribution will be in line with free cash, excluding capital releases.

There has been a progressive traffic recovery in line with easing government restrictions. Australian markets are improving “significantly” from the peak impacts in April. The rate of recovery differs across different markets with the removal of restrictions.

GWA Express Lanes traffic is recovering slower, reflecting the government restrictions in the Greater Washington Area.

In the week of 7 June 2020, total Transurban traffic was down 23% compared to the prior corresponding period. In the week of 14 June 2020, total Transurban traffic was down 21%. There has been a clear and steady recovery of traffic since Easter.

Metcash Limited (ASX: MTS) report

Metcash has reported its result for the full year to 30 April 2020.

The ASX 200 business saw its share price rise 1% in reaction to this news. 

Total revenue increased by 2.9% to $13 billion. Including charge through sales, there was 2% growth to $14.9 billion.

The food division delivered sales growth. It achieved growth even if the positive uplift in sales due to COVID-19 in March and April is excluded. This is the first time supermarkets wholesale sales (excluding tobacco) reported underlying sales growth since FY12.

The liquor division delivered its seventh consecutive years of sales growth despite closures.

The hardware segment returned to positive sales growth in the second half of FY20 with strong DIY sales.

Group underlying earnings before interest and tax (EBIT), before AASB16, was $324.2 million. Excluding the impact of the loss of the Drakes supply and a lower contribution from lease resolutions, this was an improvement of around $12 million on last year.

The statutory loss after tax, after AASB16, of $56.8 million includes the impairment to goodwill and other assets of $242.4 million.

The Metcash board has decided to pay a final dividend of 6.5 cents per share, which brings the total dividend to 12.5 cents per share.

More reading

• Afterpay and 2 more ASX 200 shares to watch this week
• The ASX stocks worst hit by second wave COVID-19 fears
• Apparently free brokerage is to blame…
• Top brokers are urging you to buy these 3 ASX stocks today
• Why Morgans is urging investors to buy ASX big bank stocks today

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Serko Ltd. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended Serko Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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Last week was another up and down week for ASX 200 shares as investors weighed up the possibility of a renewed coronavirus wave against government stimulus measures.

The S&P/ASX 200 Index (ASX: XJO) climbed 1.6% to 5,942.60 points as the recent bull run continued to push share valuations higher.

While many tech and consumer staple companies surged in value, ASX 200 travel and media shares were hit hard.

Last week I had Woodside Petroleum Limited (ASX: WPL), Scentre Group (ASX: SCG) and Newcrest Mining Limited (ASX: NCM) shares on my watchlist.

The Scentre share price slumped 3.5% last week while Newcrest and Woodside shares climbed 2.4% and 2.8% higher, respectively.

Below are the 3 ASX 200 companies on my watchlist for this week as we prepare for what could be another good Aussie share market week.

3 ASX 200 shares to watch this week

One of the top shares that I’m watching this week is Transurban Group (ASX: TCL). 

The Transurban share price climbed 3.1% higher last week to close at $15.16 per share. That means the Aussie infrastructure group’s shares have now surged 51.0% higher since 19 March.

I think Transurban could be a dark horse ahead of the August earnings season. The nature of COVID-19 could mean more people on toll roads rather than public transport in 2020 and 2021. 

That would be good news for the ASX 200 infrastructure group’s earnings and its share price this year.

I always like to look at the previous week’s biggest movers as well. That means Afterpay Ltd (ASX: APT) is on my watchlist for this week after landing in the winner’s column last week.

The Afterpay share price surged 13.2% higher last week and continues to hit new record highs. Afterpay’s market cap has now rocketed to $15.7 billion and could be heading even higher.

Strong stimulus measures have propped up the Aussie economy in 2020. Particularly in Afterpay’s core demographics of young people, stimulus measures could mean more spending in discretionary sectors like retail.

If bad debts remain low then Afterpay could increase its sales both in Australia and abroad in 2020. That could accelerate the ASX 200 buy now, pay later group’s share price growth heading into next year.

My final ASX 200 share to watch this week is Southern Cross Media Group Ltd (ASX: SXL). 

The Southern Cross share price jumped 2.6% higher on Friday to close the week the same as it started at $0.20 per share.

The Aussie media group has been one of the most volatile ASX shares since mid-February.

While I don’t know which way the Southern Cross share price is headed this week but it could be a good gauge of where investors think the media sector is headed in 2020.

More reading

• ASX 200 finishes flat, ASX travel shares drop
• The ASX stocks worst hit by second wave COVID-19 fears
• Apparently free brokerage is to blame…
• Top brokers are urging you to buy these 3 ASX stocks today
• Why Morgans is urging investors to buy ASX big bank stocks today

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO and Transurban Group. The Motley Fool Australia has recommended Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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Investors are torn between a pick-up in economic activity and fears of a second wave of COVID-19 cases.

The resurgence in the number of coronavirus cases in Victoria is adding to worries as the US continues to struggle to contain the outbreak.

While the S&P/ASX 200 Index (Index:^AXJO) swung between gains and losses to end flat on Monday, travel-related ASX stocks were the standout losers from today’s trade.

About to be hit by another wave?

It looks like state borders will be locked down for longer than most expected with Victoria reporting 16 new COVID-19 cases over the weekend, according to the Australian Financial Review.

What’s even more worrying is that the source of the virus is unknown in a number of these cases.

Adding to the gloom in the sector are predictions that international travel is off the agenda until sometime in 2021. It may be the later half of next year before we can travel overseas or welcome international tourists.

ASX stocks worst hit by second wave fears

Little wonder the Corporate Travel Management Ltd (ASX: CTD) share price is the second worst performer on the ASX 200 today with a 8% crash to $11.03.

But its peers aren’t far behind. The Webjet Limited (ASX: WEB) share price nosedived 5% to $3.78, the Qantas Airways Limited (ASX: QAN) share price dropped 4.1% to $4.19 and the Flight Centre Travel Group Ltd (ASX: FLT) share price declined by a similar amount to $13.05.

The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price didn’t escape the sell-off with JP Morgan warning that earnings may take longer than expected to recover.

No place to hide

The 97% plunge in passenger numbers going through our nation’s largest airport is only part of the problem.

The airport is likely to have to provide rent relief to its retail tenants while the fees it gets from its lucrative car parks will be nearly non-existent too.

Don’t count on Sydney Airport paying a dividend this year either, according to the broker. JP Morgan is only tipping a dividend of 25 cents a share in 2021 and 37 cents the following year.

The broker reckons fair value for the stock is $5.10 and that’s well below Sydney Airport’s closing price of $5.95.

Foolish takeaway

There’s really no reason to be buying Sydney Airport in my view with no dividend and little scope for a re-rating in the nearer-term.

There are much better ASX shares to be looking at in this coronavirus-stricken market. The experts at the Motley Fool have picked a handful that are worth putting on your watchlist.

Find out what these stocks are for free by following the link below.

More reading

• Apparently free brokerage is to blame…
• Top brokers are urging you to buy these 3 ASX stocks today
• Why Morgans is urging investors to buy ASX big bank stocks today
• Why Altium, Australian Ethical, Flight Centre, & Transurban are dropping lower
• Here are 3 ASX 200 shares with dividend yields over 8%

Motley Fool contributor Brendon Lau owns shares of Webjet Ltd. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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The share prices of the 3 major ASX gold miners below were higher on Monday following a lift in the gold price. Additionally, they were boosted by reports that the wealthy have been buying up gold, which could suggest a strong rally is coming. Lately, the gold price has also been supported by the decision of the US federal reserve to continue its quantitative easing as the world economy works through the current recession. 

If your bullish on gold prices, gold mining companies are a great way to gain exposure. As the gold price moves higher they generally see an increase in sale prices of the precious metal. This boosts profits for shareholders.

Newcrest Mining Limited (ASX: NCM)  

The Newcrest Mining share price was up 3.69% on Monday. Newcrest has operations in Australia, Canada, Ecuador and Papua New Guinea. In Q3 of the 2020 financial year, Newcrest produced 519,000 ounces of gold. Its margin on this production was $742 per ounce. Since the end of March, the gold price has recovered more than 15%. This means that we can expect the margins that Newcrest receive to be significantly higher in the current period. 

The Newcrest mining share price has recovered almost 50% from its 52 week low of $20.70. It is up 3.25% since the beginning of the year. 

Saracen Mineral Holdings Limited (ASX: SAR)

The Saracen Mineral Holdings share price is up 8.47% on Monday. Saracen is a reliable gold producer and has an impressive 7-year track record of meeting or beating its production guidance. Its production guidance for the 2021 financial year is 600,000 ounces or more. If higher gold prices remain this will fetch over $1.5 billion in revenue for the miner. 

The Saracen Minerals share price is up 84% from its 52 week low of $2.81. Since June 2015, the Saracen Minerals share price has increased more than 10 fold from $0.45 cents to $5.17 on Monday. 

St Barbara Ltd (ASX: SBM)

The St Barbara share price was up 5.96% on Monday. This comes as investors rush into shares offering exposure to the precious metal. St Barbara has operations in Australia, Canada and Papua New Guinea. When St Barbara presented to analysts in May, it forecast that it would produce 385,000 ounces of gold in the 2020 financial year. This is lower than its usual production over the last 5 years and if the miner can boost production at a higher gold price, it could see significantly higher profits for shareholders.

 The St Barbara share price is up 98% from its 52 week low of $1.615. It has returned 17.2% since the beginning of January.

More reading

• A $73m boost sends the Austal share price to the top of the ASX 200 today
• ASX 200 Weekly Wrap: ASX back in the green
• 5 things to watch on the ASX 200 on Monday
• Where to invest for reliable dividend shares
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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If you’re looking for a source of income in this low interest rate environment, then I think the dividend shares listed below could be quality options.

Here’s why I think income investors ought to consider buying them:

Australia and New Zealand Banking GrpLtd (ASX: ANZ)

I think ANZ would be worth considering right now. At around 13x estimated FY 2021 earnings and 0.9% FY 2021 book value, I think the banking giant’s shares are trading at a very attractive level. Especially for income investors. I expect the bank to pay a partially franked dividend of $1.05 per share in FY 2021. If this proves accurate, it means that ANZ’s shares currently offer investors a very generous 5.5% yield at present.

SPDR S&P/ASX 200 Fund (ASX: STW)

This exchange traded fund (ETF) gives investors exposure to all of the 200 companies listed on the S&P/ASX 200 Index (ASX: XJO) through just a single investment. This diverse group of shares includes the likes of the big four banks, mining giants, and countless REITs. While predicting what the yield will be in FY 2021 is difficult because of dividend deferrals and cuts, traditionally it is around 4% to 4.5%. I think this makes it a good option for income investors that don’t have enough funds to maintain a truly diverse portfolio.

Wesfarmers Ltd (ASX: WES)

Another top dividend share to consider buying is this conglomerate. I’m a big fan of the conglomerate due to the quality and diversity of its portfolio of businesses. I feel the majority of these businesses are well-positioned to deliver solid long term earnings growth. Combined with potential earnings accretive acquisitions in the near term, I think Wesfarmers could grow its dividend materially over the next decade. For now, I estimate that its shares offer investors a fully franked ~3.6% FY 2021 dividend yield.

More reading

• Why Morgans is urging investors to buy ASX big bank stocks today
• Here are 3 Australian share market trends to watch this week
• ASX share price winners and losers of last week
• ASX 200 Weekly Wrap: ASX back in the green
• Which shares to buy if the ASX tumbles

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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Is the Challenger Ltd (ASX: CGF) share price a buy?

Investors were thrown a curve ball today after the annuity business announced a capital raising.

The capital raising part of the announcement

Here are the details of the raising. 

The first part of the raising comprises a fully underwritten institutional placement of $270 million. The second part is a non-underwritten share purchase plan (SPP) which is looking to raise up to $30 million.

The placement will be conducted at a fixed price of $4.89 per new share, which represents an 8.1% discount to the last traded price of $5.32 and a 5.7% discount to the volume weighted average price (VWAP) of Challenger shares traded on the ASX during the five days leading up to 19 June 2020.

The placement will mean 55 million new shares will be issued. This is approximately 9% of Challenger’s existing shares on issue.

Eligible retail shareholders can apply for up to $30,000 of new Challenger shares. The price will either be the Challenger placement share price of $4.89 or a 2% discount to the weighted average share price in the five days up to the closing date of the share purchase plan (being 21 July 2020).

According to reporting by the Australian Financial Review, the $270 million placement was covered by institutional investors by early afternoon.

MS&AD, Challenger’s major shareholder and strategic partner, has said that it won’t be participating in the capital raising. The investor said it supports the raising and remains committed to its strategic relationship and will remain a major shareholder.

I think it’s a shame this raising is being done at a much lower share price compared to a few months ago. This is the case for many businesses doing capital raisings during this period. 

The dividend part of the announcement

As part of the capital raising, Challenger said: “Given the uncertain economic conditions, investment market volatility and intention to maintain a strong capital position while optimising earnings, the board’s intention is that no final FY20 dividend will be paid by Challenger in September 2020.”

This is very disappointing. Of course, it wouldn’t make sense to do a capital raising and then pay out a large dividend a few months later. That would be dilutive for shareholders and the Challenger share price. 

However, before this announcement, Challenger had a reliable dividend record that went back further than the GFC with no cuts. This decision ends that streak. 

Challenger may well bring back a pleasing dividend in FY21. But I don’t think it can be called a reliable dividend share any more.

What will Challenger do with the raised capital?

The equity raise will strengthen Challenger Life’s capital position during this period of market uncertainty, with $300 million to be used as common equity tier 1 (CET1) regulatory capital.

Challenger said that investment grade fixed income asset risk premiums have widened significantly following the COVID-19 pandemic market sell-off. The annuity company thinks that there is a significant opportunity to generate pre-tax return on equity (ROE) returns of more than 20% on the capital backing the investments. The capital will be progressively deployed and expected to be ROE accretive once fully deployed.

Is Challenger a buy at this share price?

The company is expecting normalised profit before tax to be at the bottom end of its $500 million to $550 million guidance range. However, the statutory net profit after tax (NPAT) is expected to be impacted by the market sell-off. At the end of May 2020, it’s showing a loss of $483 million for FY20 to date.

I see why Challenger is doing the capital raising, particularly for boosting Challenger Life’s CET1 ratio. The prospect of earning strong ROE returns is also alluring.

The capital raising price does look attractive for eligible shareholders and Challenger may be cheap. But the cancellation of the final FY20 dividend makes Challenger less appealing to me now. Will a solid dividend return? Investors will have to hope that Challenger is able to utilise the new funds in a very effective manner to make up for the lost dividend income. The last couple of years have been disappointing for Challenger shareholders.

More reading

• Why Challenger is launching a $300 million equity raising
• 3 long-term ASX 200 shares I’d buy right now
• What are the best ASX shares for dividends?
• ASX 200 jumps almost 4%, Webjet share price soars
• 2 unloved ASX shares that could stage a big turnaround

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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The Austal Limited (ASX: ASB) share price has surged 9.52% today after the shipbuilder announced a US$50 million agreement with the US Government. The US Department of Defense has entered into an agreement with Austal to maintain and protect its domestic shipbuilding and maintenance capacity.  

What does Austal do?

Austal is a shipbuilder that designs, constructs, and supports defence and commercial vessels. The company produces high speed passenger ferries and passenger-vehicle ferries, as well as frigates, high speed military transport vessels and patrol boats. Austal operates from shipyards across the US, Western Australia, Vietnam, and the Philippines.

What does the new agreement mean?

The new agreement is part of the US Government’s national response to COVID-19 and aims to protect and expand critical domestic shipbuilding capacity. Austal intends to use the funds to invest in the development of additional capacity for steel naval vessel construction at its shipyard in Mobile, Alabama.

Austal says it is likely to match the US$50 million investment, bringing the total investment to around US$100 million. The company reports that this should benefit US Navy shipbuilding and accelerate pandemic recovery efforts in the Gulf Coast region.

How has Austal been performing?

The Austal share price was crunched in the March correction, falling 47% to $2.31 at its lowest. Since then the Austal share price has regained much of this ground, with shares currently trading at $3.68. The Austal share price was also boosted by upgraded guidance last month along with a US$43 million contract modification last week.

In May, Austal increased its FY20 earnings guidance to group revenue of approximately $2 billion and group earnings before interest and tax of no less than $125 million (up from $110 million). The upgraded guidance was issued as a result of COVID-19 having a more limited impact on performance than anticipated, along with the sustained strength of the US dollar, and the award of a new vessel construction contract announced in May.

Commenting on the upgraded guidance, Austal CEO David Singleton said: “Austal’s continued strong performance across our shipyards in the USA, Australia, Philippines, and Vietnam during the COVID-19 pandemic has provided confidence to increase the Company’s FY2020 earnings guidance.”

In 1H FY20, Austal reported a 22% increase in revenue which reached $1.04 billion. The shipbuilder made a net profit after tax of $40.8 million, up 72% on the prior corresponding period. Austal finished the half with net cash of $152.4 million.

More reading

• Why Austal, James Hardie, Northern Star, & Ramelius are storming higher
• ASX 200 flat: Altium update disappoints, Metcash posts full year loss
• A $73m boost sends the Austal share price to the top of the ASX 200 today
• Top fund manager reveals some of the best ASX shares to own
• ASX 200 falls 0.9%, Afterpay share price hits new record

Motley Fool contributor Kate O’Brien has no position in any of the shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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With the Australian share market home to a large number of quality growth shares, it can be hard to decide which ones to buy.

To narrow things down for you, I have picked out three top ASX growth shares which I think would be great buy and hold options. Here’s why I like them:

Kogan.com Ltd (ASX: KGN)

The first ASX growth share to consider buying and holding is this ecommerce company. Kogan’s shares have been on fire this year thanks to its explosive earnings and sales growth over the last few months. And while its shares are certainly not cheap, I believe they justify this premium because of its increasingly positive outlook thanks to the structural change that is happening in the retail industry. Another positive is that Kogan announced a $115 million capital raising earlier this month. It intends to use these funds to acquire businesses that add value and drive further growth.

ResMed Inc. (ASX: RMD)

Another growth share to consider buying is ResMed. It is a sleep treatment-focused medical device company which has delivered consistently strong earnings growth over the last decade. The good news is that I’m confident this positive form can continue over the next decade thanks to its high quality masks and software solutions and its growing market opportunity. Management has previously estimated that only ~20% of sleep apnoea sufferers have been diagnosed.

SEEK Limited (ASX: SEK)

A final growth share to look at buying and holding is SEEK. I think the job listings giant has the potential to grow materially in the future. This is largely due to its growing Zhaopin business in China. Given its massive opportunity in the lucrative market, I expect the Zhaopin business to be the key driver of growth over the next decade. Another positive is that earlier today the company released a trading update which showed that trading conditions are improving. This could make it an opportune time to invest.

More reading

• ASX 200 flat: Altium update disappoints, Metcash posts full year loss
• SEEK share price edges lower after trading update and impairment charge
• Why Kogan, Sezzle, & Splitit shares just hit record highs
• Which shares to buy if the ASX tumbles
• Brokers just upgraded these ASX 200 stocks to “buy” today

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia has recommended ResMed Inc. and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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The EHR Resources Ltd (ASX: EHX) share price closed 20% higher today at 12 cents on the back of a strongly supported capital raising.

EHR is a mineral resources exploration company with an increasing focus on diamond exploration and project development.

Just this month, the company announced an earn-in agreement over a diamond project in Nunavat, Canada, as well as an exploration alliance agreement with a privately-owned company focused on diamond exploration in Botswana. 

EHR Resources also owns 625 mineral claims located in northern Quebec through its wholly-owned subsidiary Nanuk Diamonds, and an 18% interest in the La Victoria Gold-Silver Project in Peru.

Details of the capital raising

This morning, EHR announced it has received commitments for a $10 million institutional placement. New shares will be issued at 9.6 cents per share, which represents a 4% discount to EHR’s last closing price of 10 cents.

On top of the institutional placement, EHR will also conduct a share purchase plan (SPP) to raise up to an additional $2 million. New shares under the SPP will be issued at the same price as the placement.

The funds raised will be used to meet expenditures on existing projects, for potential incremental transactions in line with the company’s strategy, and for general working capital.

Commenting on the capital raising, managing director Peter Ravenscroft said:

“EHR has made very good progress since adding a focus on diamonds to its mineral resource project strategy, and the capital raising positions the Company to meaningfully progress the projects we have acquired.”

“Importantly, a raising of this size allows us to fully focus on adding value to our existing investments, while also strengthening the Company’s position with regards to other potential project acquisitions,” Mr Ravenscroft added.

Recent developments

At the beginning of the month on 2 June, EHR announced it had secured an option agreement with North Arrow Minerals to earn a 40% interest in the Nuajaat diamond project in Canada.

In return for the interest, EHR will fund a C$5.6 million preliminary bulk sample of 1,500 to 2,000 tonnes to be extracted in 2021. The project represents the largest underdeveloped diamond property in Canada not under the control of a major mining company.

EHR Resources followed up this announcement with another diamond-related ASX release on 9 June. It revealed it had entered into a diamond exploration agreement with Diamond Exploration Strategies, a privately-owned company with diamond licenses in Botswana.

Under the terms of the alliance, EHR will provide funding of US$1.5 million over three years to finance exploration activities. In return, EHR will earn 50% ownership of any discoveries made.

The alliance is initially over five areas that have existing prospecting licenses, but extends to cover other prospective areas of Botswana that may be identified.

The EHR Resources share price closed at 12 cents today, taking the company’s current market capitalisation to around $17 million. If you’d rather invest in much larger and more liquid companies, check out the top ASX growth shares in the free report below.

More reading

• ASX Stock of the Day: Austal share price surges 9% on US Government agreement
• 3 quality ASX growth shares to buy and hold
• 3 dividend shares I’d buy to boost my income
• Apparently free brokerage is to blame…
• Top brokers are urging you to buy these 3 ASX stocks today

Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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