- Rare earth explorer Peak Resources (PEK) has received binding commitments for its $1.5 million placement, leaving some investors fuming at being left out
- The 100 million shares were snapped up by sophisticated, professional and other exempt investors at a price of 1.5 cents each
- That price represents a 40 per cent discount on the share price when trading was halted
- Those who took up the offer also received one option for every two shares purchased at a price of three cents a share, valid for 24 months
- The company is now awaiting a special mining licence from the Tanzanian government for its Ngualla rare earth project
- Cost-cutting measures, including deferred payment of director fees and executive remuneration, have also been put in place
- Peak says its now on a sound financial footing through to 2021
- Peak shares are steady today and are trading for 1.8 cents each
Rare earth explorer Peak Resources (PEK) has received binding commitments for its $1.5 million placement and some investors are fuming after being left out.
The 100 million shares were snapped up by sophisticated, professional and other exempt investors at a price of 1.5 cents each. The bargain price shares were unfortunately not available to many shareholders, which has left a bit of a sour taste for some. The share price accordingly dropped over 30 per cent after the trading halt was lifted, further compounding the pain for those sticking by the company.
However, the offer was oversubscribed, with strong interest from existing qualifying company shareholders. The placement is now expected to be completed on or around April 14.
Under the terms of the placement, participants will receive one attaching option for every two new shares issued. The options are exercisable within 24 months at three cents each. A further 38 million listed options will also be issued to brokers (or their nominees) who assisted with the placement. Peak will be seeking to have the options quoted on the ASX.
Peak Chairman Peter Meurer says the placement was necessary to ensure the company’s future operations.
“The board and management team has acted swiftly and decisively to secure a clear cash runway for the company into early 2021. The current equity market environment is extremely uncertain and volatile, and likely to be that way for some time,” he said.
“It was critical for the financial security of the company that we took these prudent measures now.”Peak Chairman Peter Meurer
The funds from the placement will be used to maintain the company’s financial position and assets, and to cover general operating expenses.
The bad news is, those shareholders left out of the deal will remain in limbo, waiting for the anticipated price bump when and if the company’s Ngualla project in Tanzania is granted the pending mining licence. And whatever gains do occur will now be substantially diluted by the placement.
Peak reports austerity measures have been put in place to navigate the tribulations of the COVID-19 pandemic. The company’s executive team has agreed to a 50 per cent pay deferment, while the directors of the company have postponed 100 per cent of their fees. The deferred monies will be settled in equity, subject to shareholder approval. Details are still being finalised, but Peak maintains it will try to make sure the interests of shareholders and its executive team and directors are “strongly aligned,” which is a nice thing to hope for in such a venture.
The company reports it’s exploring other cost-cutting measures and seeking out any government assistance that may be available as well. Peak is also attempting to maintain its operational capacity, even amid pandemic shutdowns and travel bans. On top of the placement, if Peak can win the trifecta of cost-cutting, salary deferments and operational continuity, it looks set to be on a quite sound financial footing heading into 2021.
The company says its focus is now on emerging from the pandemic crisis ready to be a world-beater in the rare earth market.
Peak CEO Rocky Smith says the outlook is sunny for team Peak.
“We appreciate our longstanding shareholders and their continued support for this project, and the Peak team. They share our vision for what the Ngualla project could become and they never fail to show their support,” Rocky started.
“We are determined to find partners that share our vision to establish an “Outside of China” rare earth separation facility,” he said.
“While the EV [electric vehicle] thematic has slowed for now, the long-range goals are still the same; meaning there will be a large push once the crisis is over, and we are determined to be at the forefront of the new rare earth producers,” he added.
Peak shares are steady today and are trading for 1.8 cents each at 12:30 pm AEST.