WA Kaolin Rights Offer Priced at $0.04 to Raise $7 Million with Attaching Options

Capital Raising Overview

WA Kaolin Limited (ASX: WAK), a Western Australian kaolin producer, has launched a fully underwritten pro-rata accelerated non-renounceable rights offer to raise up to approximately $7 million before costs. The offer invites eligible shareholders to subscribe for one new share for every three shares held at an issue price of $0.04, accompanied by one free attaching option for every two new shares issued. The options carry an exercise price of $0.09 and expire on 30 June 2027.

The offer is structured in two tranches: an institutional component targeting approximately $2.6 million and a retail component aiming to raise about $4.4 million. The institutional offer has already seen key shareholders such as Ken Hall, Century Horse Limited, and Boneyard Investments commit to full subscription. The retail offer closes on 5 March 2025.

Strategic Use of Proceeds

According to Chairman Dr John White, the capital raised will primarily support the company’s working capital needs, including sales ramp-up and inventory build at the Wickepin operations. A portion of funds will also be allocated to plant safety and minor improvements, all aimed at driving the company towards positive free cash flow. The offer price represents a significant discount of 42.9% to the last closing price, reflecting the company’s intent to incentivize shareholder participation.

Shareholder Participation and Underwriting

Substantial shareholders have demonstrated strong support, with Scientific Management Associates (SMA) committing to its full retail entitlement of approximately $0.9 million. Additionally, Ken Hall and Boneyard Investments have agreed to sub-underwrite a combined $2.2 million of the retail offer, while co-managers Leeuwin Wealth and JP Equity Partners have each sub-underwritten $0.5 million. Canaccord Genuity (Australia) Limited acts as lead manager and underwriter, ensuring the offer is fully underwritten.

Capital Structure and Dilution

Upon completion, the company’s share capital will increase from approximately 523.6 million shares to nearly 698.2 million shares, with total options on issue rising to over 153 million. Shareholders who do not participate risk dilution of about 25%. The offer’s non-renounceable nature means entitlements cannot be traded or transferred, emphasizing the importance of shareholder engagement to maintain their proportional ownership.

Risks and Market Context

The company highlights several risks, including operational ramp-up challenges, potential delays in achieving positive cash flow, and the need for additional capital beyond this raise. Market risks such as kaolin price volatility, foreign exchange fluctuations, and regulatory factors also remain pertinent. WA Kaolin’s management underscores the speculative nature of the investment and advises shareholders to consider these risks carefully.

Overall, this capital raising initiative represents a critical step for WA Kaolin as it seeks to transition from development to operational cash flow generation. The involvement of key shareholders and underwriters signals confidence, but the success of the offer and subsequent operational execution will be pivotal.