Metals One Shares Plunge on Heavily Discounted Placing for South African Gold Project

Metals One PLC has experienced a sharp decline in its share price following the announcement of a substantial capital raising at a significant discount to market value. The AIM-listed explorer revealed plans to raise £4.4 million through a placing that has resulted in considerable dilution for existing shareholders.

The company’s shares fell 39% to 2.06 pence following the disclosure that it had issued 220 million new shares priced at 2 pence each. This represents a substantial markdown from the 3.4 pence closing price recorded on Monday, underscoring the scale of the discount required to secure the funding.

The new share issuance represents approximately 26% of the existing share count, a level of dilution that has clearly concerned investors. Management indicated that the placing size had been increased to utilise the company’s full available headroom, citing strong demand from institutional and sophisticated investors.

The majority of the proceeds will be allocated towards Metals One’s recently announced transaction with Lions Bay Resources, which centres on a South African gold venture. The remaining funds will be deployed for general working capital purposes.

Under the agreement with Lions Bay, Metals One is expected to provide loan funding to support the refurbishment of a cogeneration plant in South Africa. Lions Bay intends to configure the facility for gold roasting operations. A Competent Person’s Report is scheduled for release in mid-December, which should provide further clarity on the project’s technical and economic parameters.

The cogeneration plant is anticipated to require approximately $4.5 million to restart steam and power production once the assessment is complete. Lions Bay is concurrently evaluating potential mining assets in the vicinity of the facility.

As part of the funding arrangements, Oak Securities has been appointed as joint broker alongside the existing broker. Admission of the newly issued shares to AIM is expected on 11 December, which will bring Metals One’s enlarged share capital to just under 1.06 billion shares.

Managing director Daniel Maling characterised the institutional support as pleasing and suggested the additional capital would prove beneficial during ongoing negotiations. However, the market’s reaction suggests investors remain concerned about the steep discount and dilutive nature of the transaction.

The heavy discount to the prevailing market price raises questions about the company’s negotiating position and the urgency with which it needed to secure funding. Whilst management has pointed to strong demand, the 41% discount to the previous closing price indicates investors required substantial incentive to participate.

The transaction highlights the challenges faced by junior explorers in securing development capital, particularly for projects in emerging markets that may carry higher perceived risk profiles.