Energy Resources Australia (ERA) hopes to raise $500 million in a discounted new share sale to fund exploration at its Ranger uranium mine to extend the project’s life.
ERA, of which Rio Tinto owns the majority, will offer eligible shareholders 12 new shares for every seven shares held at a price of $1.53 per share.
That is a 29.8 per cent discount to the theoretical share price post-offer, ERA said.
ERA shares were placed in a trading halt on Wednesday ahead of the announcement and were last traded at $3.29.
The company’s shares have been on a downwards spiral since late 2009 when they were worth more than $26 each.
ERA has been plagued by woes at its maturing Northern Territory mine, where grades have declined faster than expected.
This year, production was halted for almost six months after a heavy wet season filled the tailings dam to near capacity, forcing ERA to source uranium from other parties in order to meet its contractual obligations.
The company has also taken longer than expected to advance a plan to shift focus from the existing open pit to the underground Ranger 3 Deeps resource, which it hopes to develop into a mine.
ERA recently pledged to develop an exploration decline to access Ranger 3 Deeps in May next year, but the announcement was overshadowed by the company almost halving its uranium reserves estimate and deciding not to continue with a planned heap leach facility.
The miner on Wednesday said $120 million from the entitlement offer would be used for construction of the Ranger 3 Deeps decline and associated exploration drilling.
A further $55 million would be spent on studies to evaluate whether Ranger 3 Deeps can be developed as a mine, while $40 million would go towards an expanded exploration program within the broader Ranger project area.
The biggest spend will be a $220 million brine concentrator and $52 million worth of other water management measures.
Chief executive Rob Atkinson said in a statement that these were very important projects for ERA.
Mr Atkinson said a final decision on Ranger 3 Deeps was expected by 2014.
Rio Tinto, which holds a 68.4 per cent stake in ERA, has committed to subscribe to its full entitlement.
ERA also on Wednesday reported year-to-date uranium production of 1,611 tonnes, down 39 per cent on the previous corresponding period.
